Overview: A growing employer trend over the past several years has been to integrate payroll within the HR department. So, now more than ever, HR managers need to understand all the complex issues and requirements involved in payroll tax law compliance in order to effectively oversee payroll processing and ultimately avoid costly penalties. This involves managing the following tasks, among many others:
Trends: The following are just a few of the important issues that will have an impact on payroll in 2014!
Author: Rena Pirsos, JD, Legal Editor
The Illinois wage payment law has been amended to include a new section that officially permits employers to pay wages to employees using payroll debit cards (in addition to cash, check or direct deposit) starting January 1, 2015. An employer's payroll debit card program is subject to several requirements.
The federal Office of Child Support Enforcement has updated the standard Income Withholding For Support (IWO) form and instructions, which must be used whenever an employer is required to withhold child support from an employee's pay.
In Information Letter 2014-0012, the Internal Revenue Service has outlined two procedures that a same-sex married employee may use to claim an income tax refund if an employer included the value of his or her spouse's health insurance on the 2013 Form W-2.
Maine Form 941/C1-ME, Combined Filing for Income Tax Withholding and Unemployment Contributions, will be divided into separate forms effective for tax years beginning after January 1, 2014.
Courts in Colorado, Indiana and Virginia have held that state laws banning same-sex marriage are unconstitutional. However, each decision has been stayed and same-sex couples in these states currently cannot get married.
Independent contractors may present Social Security cards to employers to avoid backup withholding under revised IRS procedures.
Newly revised IRS procedures allow independent contractors to stop or prevent backup withholding on reportable employer payments by validating and presenting a Social Security card to an employer.
Employee benefits, such as health insurance, sick pay, disability pay, workers' compensation insurance and retirement savings plans, may be subject to withholding for federal income taxes (FIT), Social Security and Medicare (FICA) taxes or federal unemployment (FUTA) taxes. This section assists HR professionals in understanding how each particular type of benefit plan must be structured and how to properly tax and report contributions, reimbursements and distributions in order to ensure compliance with the Internal Revenue Code.
One of the most important payroll related tasks is ensuring that taxes withheld from employees' pay are deposited and reported properly and on time. This section reviews tax deposit schedules, the Electronic Federal Tax Payment System (EFTPS) and other electronic filing requirements, potential penalties for noncompliance, and important tax forms (e.g., 941, W-2, W-3, 1099).
To prevent identity theft, the IRS has issued final regulations permitting the use of Truncated Taxpayer Identification Numbers (TTINs) on certain federal tax-related payee statements, but not on Form W-2.
HR and legal considerations for employers regarding payroll.