Payroll

USING OUR PAYROLL SERVICES

We offer full-service payroll in addition to our bookkeeping and tax services. This includes live checks and direct deposit as well as same-day payment of tax liabilities, filing of all government documents, and year-end W-2 services.

CLIENTS WITH AFTER-THE-FACT PAYROLL SERVICES

If you calculate and write your own payroll checks, you are an after-the-fact payroll client. Walton CPA PC does not provide after-the-fact payroll services.

OUTSIDE PAYROLL PROCESSORS

You are a client with a payroll processor if a payroll company, such as Paychex or ADP, calculates and writes your paychecks for you.

We will require duplicate payroll reports from your payroll processor to enter the payroll information into your general ledger. Your payroll processor will calculate all payroll tax deposits and prepare all payroll reports and W-2s. This is generally an inefficient process for both you and us because it takes almost as much time for us to record your payroll as it would to just do it.

TAXES WITHHELD

Never use the tax money withheld from employees for other business purposes, and always pay these taxes on time. Even if the business files for bankruptcy, you are still personally responsible and liable for these taxes – the IRS is merciless in collecting these taxes. You may want to avoid this hassle all together by utilizing our tax pay service, in which we pay these taxes for you.

“UNDER THE TABLE” PAYMENTS

Never pay anyone “under the table.” For one thing, you will not get a business deduction for the payment. This means you end up paying the federal, state and local income taxes, as well as social security tax. In essence, it ends up costing you up to 50% more! In addition, you are also setting yourself up for a lot of potential problems. Remember, the person you make this kind of deal with today may be the person who will report you tomorrow. It is just not worth it.

PAYROLL TAX DEPOSITS

DEPOSIT SCHEDULES

MONTHLY DEPOSIT SCHEDULE:

If you are a monthly depositor, payroll taxes must be deposited by the 15th day of the following month. For example, payroll taxes for the month ending July 31, 20xx are due on August 15, 20xx. Should the 15th day of the month fall on a weekend or bank holiday, the deposit will be considered timely if made by the close of the next banking day.

SEMI-WEEKLY DEPOSIT SCHEDULE:

Semi-weekly depositors will make payroll tax deposits based on the day their employees are paid. For paydays falling on Wednesday, Thursday and Friday, payroll tax deposits are due the following Wednesday. For paydays falling on Saturday, Sunday, Monday, or Tuesday, payroll tax deposits are due on Friday.

Payday Deposit due on following

Wednesday, Thursday or Friday Wednesday

Saturday, Sunday, Monday or Tuesday Friday

Should the due date fall on a bank holiday, the deposit will be considered timely if made by the end of the next banking day. In addition, you have at least three banking days from the end of a semi-weekly period to make a deposit. If a bank holiday falls during the three days after the end of the semi-weekly period, you will have on additional banking day to deposit. For example, your employees are paid on Friday and Monday is a bank holiday. Your deposit is not due until Thursday. This allows three banking days to make the deposit. However, if your payday is on Thursday and Monday is a banking holiday, your deposit will be due on its normal day, Wednesday.

$100,000 NEXT-DAY DEPOSIT RULE

If you accumulate a tax liability of $100,000 or more on any single day during a deposit period, you must deposit the appropriate tax by the next banking day. This is a requirement regardless of what deposit schedule you normally use.

In addition, if you are a monthly depositor and accumulate a $100,000 tax liability on any day during a month, you automatically become a semi-weekly depositor on the next day. You will remain a semi-weekly depositor for the remainder of the current year and also for the following year.

Note: If you are on our tax pay service, we will pay all of your taxes and you will not need to worry about depositing rules.

How Do I Make a Payroll Tax Deposit?

ELECTRONIC DEPOSIT REQUIREMENTS

If the total of all tax liabilities (such as employment tax, excise tax and corporate income tax) exceeded $200,000 during a previous fiscal year (7/1 – 6/30), you must make electronic deposits beginning with January 1st of the following year. The Electronic Federal Tax Payment System (EFTPS) must be used to make electronic deposits. If you are required to make electronic deposits and fail to do so, you may be subject to a 10% penalty. To enroll in EFTPS, call 1-800-555-4477 or visit the IRS website: www.irs.gov/elec_svs/eftps.

Deposits made electronically must be initiated at least one business day in advance of the due date. Deposits initiated on the day they are due are considered late.

Note: If you are on our tax pay service we will pay all of your taxes and you will not have to worry about making tax deposits.

Payroll Records

Records related to the payment of salaries and wages (including all deductions and adjustments from gross pay), records related to reporting hours worked and time sheets, original W-4, W-2 and I-9 forms, employment tax returns and payroll journals should be kept for seven years.

New Employees

Each new employee must fill out a “New Employee Packet” consisting of form W-4, state withholding form, form I-9 and state new hire forms. Call our office at any time to get a packet. Completed packets (except for form I-9) must be returned to us at least three days prior to the employee’s first pay day. If this is your first employee, you will need to contact your insurance agent and obtain worker’s compensation insurance. It is important that the new-hire form be filled in as completely as possible. We can fill in the identification numbers. It is extremely important that the employee fill out the I-9 and that you receive, review and copy the documents as required in section 2. Please keep the I-9 and copies of the documents in your employee file.

THE DIFFERENCE BETWEEN AN EMPLOYEE AND AN INDEPENDENT CONTRACTOR

An employee performs work for you under your direct or indirect supervision, during hours that you specify and conditions you control. You also withhold payroll taxes from the wages you pay him or her. As an employer, you pay certain taxes that are an expense to you on the employee’s behalf.

Independent contractors are individuals who perform a service for you, usually at a pre-arranged fee, and who also meet the following criteria:

1. They have a business card.
2. They submit an invoice to you for each occurrence of services rendered.
3. You have no control over the hours worked, or the tools used.
4. They perform similar services for others.
5. They do not have any major responsibilities within your organization, such as management or supervision of employees.
6. A contract or work order exists between you and the independent contractor.
7. They supply you with a business license number (issued to them by the city in which they work).
8. They may also show evidence of being licensed by the state; for example, doctors, lawyers, electricians, etc.

The above items are intended to be a quick guideline and are only a portion of what determines worker status.

Some examples of independent contractors include:

Janitors Plumbers Accountants

Lawyers Electricians Landlords

Painters Consultants Salespeople

It is important to properly classify the people you pay. If you pay someone as an independent contractor and he or she is in fact an employee, an audit by state and/or federal agencies may prove costly to you. Back taxes, which should have been withheld, could be assessed against you. Penalties for failure to report employee earnings could also be assessed, as well as penalties and interest for delinquent withholding payments.

Requirements for Independent Contractors

1. Have each independent contractor fill out a W-9 form prior to paying them. If the contractor will not fill out the form, or if for any other reason you cannot get his or her identification number, you are required to withhold 28% of each payment. This is called back-up withholding, and the money is forwarded to the IRS, just like payroll taxes. Once it is withheld from the payment, you do not refund it to the contractor or pay it back to him or her in any way.
2. Consider entering into a written agreement with your sub-contractor (see Appendix A-15 for an example). Please review the particulars of this agreement, and consult with your attorney regarding modifying the agreement to meet your specific requirements.Example:An electrician does some work for you and hands you an invoice for $800.00. You ask him to fill out a W-9. He says he doesn’t have the information he needs with him. At this point, you should offer the electrician a choice. He can either wait to collect his payment until the W-9 is supplied, or he can be paid $576.00 immediately, with $224 to be sent to the IRS.We recommend taking a firm stand that independent contractors must supply you with a W-9 before you make any payments to them. This will protect you from penalties at the end of the year when you are required to submit a 1099 to the IRS. There is a $50.00 penalty for each ID number missing from the 1099 and a $50.00 penalty for any 1099 not submitted.A Word on CorporationsYou are not required to report corporations on the 1099, but it’s in your best interest to have anyone claiming to be a corporation complete a W-9.What Information do we need?When you issue a sub-contractor’s first check we will need a copy of the W-9 form, including:
3. Name and address
4. Federal Identification Number or Social Security Number

Who Receives a 1099 at Year-end?

Any non-corporate service provider who receives $600.00 or more will be provided with a 1099. If you give us all the necessary information, we will prepare these 1099s for you.