The Payroll Book

Table of Contents

• Introduction
• How to use this book
• Icons Used
• Part One: Payroll Setup
  • Chapter One – Business Entity
    • Corporation
    • Partnership
    • Sole Proprietorship
    • Limited Liability Company (LLC)
• • Chapter Two – Employees and Non-Employees
    • You
    • Family Members
    • Employees Versus Independent Contractors
    • Statutory Employees and Statutory Non-Employees
    • Children
    • Volunteers
    • Interns
    • Religious Workers
    • Chapter Three – Earnings
    • Salary
    • Executive exemption
    • Administrative exemption
    • Professional exemption
    • Highly compensated employees
    • Additional guidance
    • When an Employer May Make Deductions from Salary Payroll
    • Hourly
    • Basic Provisions/Requirements
    • Piecework
    • Training Wage
    • Subminimum Wage Provisions
    • Other payroll categories
• • Chapter Four – Deductions
    • Voluntary Deductions
    • Involuntary Deductions
    • Pre-Tax Deductions
• • Chapter Five – Taxes
    • Tax Numbers
    • Employee Taxes
• • Chapter Six -Tax Penalties/
  • • Penalties
• • Chapter Seven – Workweek, Pay Period, Payday
    • Workweek
    • Pay Frequency (Pay Period)
    • Payday
• • Chapter Eight – The Law
    • Federal
    • FMLA (Family Medical Leave Act)
    • Affordable Care Act
    • New Hire Reporting
    • Labor Posters
    • Davis Bacon & Walsh-Healy
    • The Equal Pay Act (EPA)
    • Part Two – Running a payroll
• • Chapter Nine – Collecting Time
    • Time Clocks
• • Chapter Ten – Calculating Payroll
    • Calculate Earnings Hourly
    • Overtime if a Staff Member Works Different Positions at Different Rates
    • Additions to Earnings
    • Reductions to Earnings
• • Chapter Eleven, Paying Your Employee
    • Method of Payment
    • State Rules
    • Pay Card
    • Wages for Deceased Employees
• • Chapter Twelve, Taxes Depositing and Filing
    • Part Three – Miscellaneous (But Important) Things
• • Chapter Thirteen – Record Keeping
    • Internal Revenue Service
    • Department of Labor
    • Family and Medical Leave Act (if you have 50 employees or more)
    • Title VII of the Civil Rights Act of 1964 and the Americans with Disability Act of 1990
    • The Age Discrimination in Employment Act of 1967
    • The Immigration Reform and Control Act
    • Payroll and Direct Deposit Records in General
    • Employee Handbook/Policy Manual
    • Medical Insurance
• • Chapter Fourteen – Workers’ Compensation Insurance
    • Workers Compensation
• • Chapter Fifteen – Payroll Security & Internal Controls
    • Manuals and Procedures
    • Hiring Who You Think
    • Internal Controls
    • Disaster Recovery
    • Form 944
• • Chapter Sixteen US Citizens Abroad, Resident and Non-Resident Aliens, Illegal Aliens
    • Non-Resident Alien Services Performed Outside the United States
    • Paying Non-Resident Aliens Inside the U.S.
    • Exceptions to Mandatory W/H of FIT on Nonresident Aliens
    • Paying Illegal Aliens
• • Chapter Seventeen – Other Issues
    • PEO
    • Human Resource Management or HR
    • Escheat
    • Technology / Outsourcing
    • Federal Laws Based on Number of Employees
    • The Employee Handbook/Policy Manual
• Conclusion
• Appendix
• Payroll Tax Calendar
• Glossary
• Index

Introduction

This book is the summation of 40 plus years of payroll experience mostly with small business. From a Controller to a business owner to owning a payroll service bureau, I have processed tens of thousands of payrolls for thousands of companies over the years. I have the professional qualifications to go with the experience that include being a Certified Public Accountant (CPA) for over 40 years and I am a United States Tax Court Practitioner which allows me to represent clients in U.S. Tax Court without being an attorney. As a member of the Internal Revenue Service Advisory Council I meet with the IRS to help provide real-life recommendations to IRS problems or concerns.

All the information presented in this book is general in nature and you need to have specific situations looked at by your trusted advisors.

Payroll is vital to Federal Government operations. Over 70% of all the revenue collected by the IRS comes through payroll either as withholding or payroll taxes.

In addition, the IRS issues over six billion dollars a year in employment tax penalties on businesses large and small. Forth percent of small businesses get penalized every year with the average penalty approaching $500. However more than half the penalties get abated, I will show you how in Chapter Six.

Payroll is an integral part of your business. Do it wrong and it can cost you everything. There are lots of complexity to payroll that I will step you through and try to keep you out of trouble with taxing authorities, and keep your employees happy as well.

How to use this book

First of all, this book is designed for the small or new business. By small I mean those basically with fifty or fewer employees. I am not going to assume that you have a dedicated Human Resources Department, a Payroll department or employees on staff that are specialists.

Everything here applies to larger business as well but a large business has additional problems and regulations that are not important to the small business owner. I include a section in the back (Chapter 17) that goes through the additional laws and regulations you will be subject to as you hit employee count milestones.

This book is broken into three parts.

Part One is the details in setting up a payroll. Some of this you will never need in your business and some will be absolutely critical. It is a truism in the payroll business that if a payroll client is setup right it runs like clockwork forever. If the client is set up poorly, it is a disaster, and the client soon leaves.

Part Two is running the payroll and reporting. If you don’t have time right now for setup, which at some point you really need to look at, Part Two will help you get a payroll done and out the door.

Part Three is a lot of miscellaneous information. Some, such as record retention, you need to know to keep yourself out of hot water next year or five years from now. Other items may or may not be important depending on your business and how it and you operate.

In addition to this book there are some resources that you may find useful. There are also links to reference page, some ours and some various governmental sites. They are subject to change and some vary lengthy making them hard to just put in a book. We keep the information in the links up to date and they are available to any who reads this book