10 Most Common Payroll Pitfalls
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10 Most Common Payroll Pitfalls
Tracie M. Sawade, CPPTechnical ConsultantUltimate Software
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Biography
Certified Payroll Professional since 1996
Former Member of APA’s National Speakers Bureau and Current Member Hotline Referral Committee
Former President of the Denver Chapter Payroll Association
Presented at APA’s Congress and Chapter Leadership Seminars, Rocky Mountain Regional and Texas Payroll Conference, Indiana Statewide and Chicago, Denver and Minneapolis Chapters
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Please Complete Your Evaluation at the End of the Workshop
Agenda
Mistakes Happen
Common Blunders
Minimizing Them
Let’s get started…
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Voids and Reversals
Voids
Impact• Quarter/year end• GL and bank accounts
Reversals and adjustments
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Voids/Reversals Recommendations
Process voids promptly
Track and compare
Supplemental payrolls• Posting transactions
Validate NO NEGATIVE WAGES
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Deductions and Earnings
Incorrect taxation
Impacts• Employee/Organization
Deductions
Earnings• Taxable Fringe Benefits
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Taxable Fringe Benefits
What is a taxable fringe benefit?• Examples
Imputed earnings• Group Term Life
Costs
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Deductions and Earnings - The Fix
Research proper taxation• FIT/SIT/FUTA• www.IRS.org• W-2 vs. 1099• What box?
oW-2 Instructions
• Publications 15 and 15-B
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The Fix Continued
Verify set up on system
Test, test, test
Process promptly
Save Your Company Money by Doing it Right the First Time
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State/Local Taxes
Employees who move• Did they forget to tell you?
Reciprocal agreements
Correct reporting
Costs• Audits and amendments
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State Taxes – What to do
Verify correct set up• APA’s Guide to State Payrolls• BNA, CCH, State sites
Employees who move• Timing/Checklist• Quarterly reminders
Validating with reports• SUI
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Wage and Tax Details
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Year-end Preparation
Waiting too long
No checklist
Compliance
Lack of testing
Not enough time for critical tasks
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Year-end - The Master Plan
Start early• Have you started yet?
Create a plan/checklist
Create a team
Where you can find help• APA’s Year-end course• Vendors/local chapters
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Year-end Reconciliation
Waiting compounds issues
W-2 totals <> 941 totals
Too much going on in Q4
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Reconciliation – The Key
Create spreadsheet• Taxable wages• Taxes that can be manually calculated
Collect data each payroll/month
Early detection
Pay attention to warning signs
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Compliance – It Matters!
Challenges• Healthcare Reform• Hard to interpret
Potential costs• Audits• Fines and penalties
Recommendations
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Intercompany Transfers
Multiple companies
Acquisitions/Successor
When do taxes start over?
Tracking/verifying YTD
Costs• W-2cs, amendments• Audits, penalties
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Things to Remember
Understand wages and taxes• SS/SUI/FUTA – start over
Tax details
Deductions - YTD
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System Improvements
ESS/MSS
Workflow – what is it?
Change management
Dos and don’ts
Potential savings
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Steps to Take
Recommendations• What do you do today?• Does it make sense?• Process maps
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Successful Implementation
Key to Success • Have a plan• Communication
Change management/training• Manager/employee training• Gaining user acceptance
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GL Reporting
Challenges• New earnings, deductions and taxes• Structural changes• Acquisitions
Costs• Time, corrections, labor allocations
Recommendations…
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Regular Rate and Overtime
Common misconceptions
Does it really make a difference?
Have to pay OT on extra earnings
For some companies makes no difference• But for others it does!
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Regular Rate and FLSA OT
Regular Rate of Pay
Based on what?
All earnings to be included• Regular, regular overtime, commission, non-discretionary bonuses, premiums
Add all earnings and divide by total hours
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Overtime Example
Reg. Rate = $10/hour/OT Rate = $15
Hours = 40 regular, 10 overtime
Other earnings = $500
40 * 10 = $400 + 10 * 15 = $150 + $500 = $1050
Right?
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FLSA OT – The Right Way
Rate = $10, 40 regular, 10 overtime, $500 other earnings
50 * 10 = $500 + $500 = $1000
$1000/50 hours = $20/hour (reg. rate) * .5 = $10/hour (OT rate); $10 * 10 = $100
$500 + $500 + $100 = $1100
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Wrapping It Up
Rolling the dice
Pay Now or Pay Later
Questions?
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For More Information
American Payroll Association (Links > State)
http:// www.americanpayroll.org
US Department of Labor http://www.dol.gov
Internal Revenue Service http://www.irs.gov
Social Security Administration http://www.ssa.org