Payroll Calculations
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Created by:
Eplank1212 on February 25, 2012
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38 terms
Terms | Definitions |
|---|---|
 Regular Rate of Pay | (Pay Rate X Hours) + additional Pay/Hours Worked |
| Tip Pay | 2.13 per hour, if tips are not enough to raise the regular rate of pay to 7.25 for the workweek the ER must pay the difference |
| Piece Rate of Pay | Add the weekly piece rate earnings to any other earnings for the workweek then divide the total by the number of hours worked in the workweek |
| Commission Pay | Commissions paid to nonexempt employees are included in the regular rate of pay, the commission is allocated to the workweeks it was earned |
| Overtime Premium Pay | To calculate O/T premium pay, multiply one- half of the regular rate of pay by the number of hours over 40 in a workweek Payments excluded: gifts, paid time off, reimbursed expenses, discretionary bonuses (e.g. holiday bonus) and benefit plan contributions |
| Weighted Average | When an EE is compensated at more than one rate of pay in the workweek, the regular rate of pay must be at least the weighted average of all rates used in the week |
| Constructively Paid | "Actually Paid" EEs are actually paid if on payday they receive cash, are given a check that can be cashed on that day or receive a dir dep of their net pay into their acct |
| Imputed Income | Represents the value of the benefits employees receive from the ER and must be included in the EE's income. E.g. Group term life ins If ER delays imputing income until the end of the year, increased taxes from the calculation can leave the EE's net pay greatly reduced |
| Federal Taxable Wages | Federal income tax, Social Security,Medicare and FUTA |
| Federal Income Tax Withholding | 1. Wage-bracket 2. Percentage 3. Optional flat rate 4. Mandatory flat rate |
| Supplemental Wages | Payments that are not part of regular wages e.g. Bonuses, commissions, prize money, car allowance, nonaccountable plan reimbursement (tips can be treated as suppl or regular wages) |
| Optional Flat Rate | Supplemental wages less than $1M: 25% |
| Mandatory Flat Rate | Supplemental wages over $1M: 35% |
| Aggregate Method | Must be used when calculating FIT on supplemental wages when no FIT taxes were withheld from regular wages from the current or prior year Aggregate= sum or total |
| Social Security Tax | EE Rate: 4.2% ER Rate: 6.2% Wage base limit: $106,800 |
| Medicare Tax | EE Rate: 1.45% ER Rate: 1.45% Wage base limit: None |
| Grossing-Up | Desired net pay/100% - Total % all tax paid |
| Voluntary Deductions | Federal law requires the ER to get a written, signed authorization from each EE allowing wages to be deducted, once signed, cannot be revoked for one year |
| Involuntary Deductions | Withholding orders: Child support Federal tax levy Creditor garnishment Bankruptcy Student Loan |
| CS Withholding Guidelines | Maximum amount to withhold: 50% of disposable earnings if supporting another family 55% if at least 12 weeks in arrears 60% if not supporting another family 65% if in arrears |
| CCPA | Consumer Credit Protection Act: provides the legal framework around which state child support withholding laws are constructed |
| Fed requirement for Child Support | 1. Maximum amount to withhold 2. Priority of order: cs order takes priority over all other garnishments except tax levies 3. When order takes effect: 1st pay period that begins after 14 days from the mailing of the notice 4. Time to remit: 7 business days of paying wages 5. Combining payments: can combine pmts from several EE's to be sent to SDU 6. No discharge for withholding 7. Admin fees for ER 8. Notify agency OSCE (Office of Child Support Enforcement) when EE leaves employment 9. ER penalized for not withholding |
| Disposable Earnings | Gross wages - deductions required by law Required by law: Federal, State or local income tax, SS, Medicare tax, state unemployment or disability tax and mandated pmts by state EE retirement systems Not required by law: health & life ins premiums, union dues, retirement plan contributions are not deducted from gross wages to calc disposable earnings |
| Form 668-W | Notice of Levy on Wages, Salary and Other Income. (federal tax levy) |
| Form 668-D | Release of Levy/Release of Property from Levy Form will contain the final amount that is due from the EE, when paid EE is released from levy |
| Pmts Exempt from federal tax levies | 1. Unemployment compensation benefits 2. Workers compensation benefits 3. Annuity and pension pmts under Railroad Retirement Tax Act and certain armed services personnel 4. Certain armed service-connected disability pmts 5. Certain public assistance pmts (welfare & supplemental SS benefits) 6. Amounts ordered to be withheld under previously issued court order for child support |
| Creditor Garnishment | The Consumer Credit Protection Act (CCPA) sets the max amt that can be garnished as the lesser of: *25% of the EE's disposable earnings *the amt by which the EE's disposable earnings for the week exceed 30 times the federal min hrly wage then in effect If EE's wages are already subject to a garn withholding and constitutes at least 25% of EE's disposable earnings no amount can be withheld for the creditor garnishment |
| Bankruptcy Regulations | When ER receives bankruptcy order he must stop withholding on any other garnishment against the EE except for child support |
| Student Loan Garn | Maximum amount is the lesser of: 15% of EE's disposable earnings or the excess of the EE's disposable earnings over 30 times the federal min hrly rate |
| Priority of Withholding Orders | Federal Child support Bankruptcy Student loan State tax levy Local tax levy Creditor garnishment Employer deductions e.g. Benefit Employee voluntary deductions |
| Other Payments: Advances & Overpayments | Fit withheld: If EE repays advance/overpayment in same year the money was received the ER excludes amt from EE's income on W2, EE will receive excess as refund If EE repays in a later year the amount of repayment cannot be excluded from income SS & Medicare: If EE repays advance/overpayment after ER filed the 941 the ER must refund any over withheld SS/Medicare taxes to EE If EE repays in a later year the repayment will not reduce the EE's SS/Medicare wages for the year of repayment ER may be able to claim a refund of overpaid FUTA but only if after repayment the EE earned less than $7,000 during the year Note: the ER must take into account any applicable wage bases for these taxes for the year in which overpayment was made, if the EE's earnings exceed the applicable wage base even after repayment is taken into consideration, neither the EE nor the ER is due a refund |
| Bonuses | IRS has defined bonuses as supplemental wages Must be included in income subject to FIT, SS, Medicare and FUTA ER may choose to withhold FIT using the optional flat rate or aggregate method if less than $1M |
| Commissions | IRS defined as supplemental wages Subject to FIT, SS, Medicare and FUTA ER's may choose to withhold FIT using the optional flat rate or aggregate method if less than $1M |
| Jury Duty | Depends on ER policy: 1. If ER pays an EE their regular wages in addition to jury duty pay the wages are subject to FIT, SS, Medicare and FUTA 2. If ER pays an EE the difference between Ee's regular pay & jury duty, only the difference is subject to federal taxes 3. If ER pays an EE wages for time spent on jury duty but requires the EE to turn over the jury duty pay, only the difference between amt paid and amt turned over is subject to federal taxes If a juror is paid at least $600 by a state the amount is reported on form 1099-Misc in box 3 "Other Income" |
| Retroactive Pay | IRS defined as supplemental wages Treated as wages when they are made and subject to FIT, SS, Medicare & FUTA ERs may choose to withhold FIT using the optional flat rate or aggregate method if less than $1M |
| Taxable Tips | Generally tips or gratuities are taxable wages Service charges are NOT tips EE's report tips on Form 4070, Employees Report of Tips to Employer |
| Withholding on Tip Income | IRS defined Tips as supplemental wages but ER can treat as suppl or regular wages Subject to all federal taxes if EE reports more than $20 in tips for the month Where taxes to be withheld exceed wages available the ER should withhold as follows: *SS & Medicare taxes on reg wages *federal income tax on reg wages *SS & Medicare taxes on tips *federal income taxes on tips Uncollected SS & Medicare taxes must be reported on EE's W2 in box 12 code A and B |
| Employer Provided Loans | Repayment of ER loans is not limited by FLSA restrictions on ER deductions If at any time during the calendar year the value of the loans to EE exceeds $10,000 the ER may be required to impute income to the EE if the interest rate on the loan is less than the interest rate the ER would pay on outstanding taxes to the IRS |
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