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Payroll
Editor's Note: Keep up to date with constantly changing payroll tax laws and trends!
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:
- Preparing paychecks, which involves calculating employees' gross salary and the amounts to be deducted and withheld from those earnings for federal, state, and local taxes, various health and welfare benefits and for involuntary and voluntary payroll withholdings;
- Determining the proper method(s) for paying employees, e.g., direct deposit, paper checks or payroll debit cards, based on federal and state wage payment laws;
- Periodic depositing and reporting of amounts withheld with various government agencies;
- Recordkeeping and retention;
- New hire reporting to state agencies; and
- Selecting, implementing and managing automated payroll systems.
Trends:
Health Care Reform Law Provisions Affect Payroll - The Affordable Care Act includes several new payroll related provisions that employers are required to comply with starting in January 2013 and beyond: Form W-2 reporting of the cost of employer-provided group health plan coverage, the additional Medicare tax on high earners, provisions on health care benefits for employee's children under age 27, and reduced health flexible spending arrangement deferral limits, among others.
Impact of the American Taxpayer Relief Act (ATRA) of 2012 - ATRA 2012 had a major impact on payroll by permanently extending certain expiring Bush-era tax provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, P.L. 107-16 (EGTRRA), temporarily extending other payroll related provisions that expired at the end of 2011 and 2012, increasing the top marginal income tax rate on the wealthiest one percent of Americans and the withholding rate on supplemental wages over $1 million. ATRA also allowed the employee portion of the Social Security tax rate to revert to 6.2 percent from 4.2 percent, causing most employees’ net pay to be lower in 2013.
Rena Pirsos, J.D., Legal Editor
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Taxation of Employee Benefits
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Depositing and Reporting Withheld Taxes
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About this topic
HR and legal considerations for employers regarding payroll.
Payroll: Key Items
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Payroll Overview for the HR Manager
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Health Care Reform Resource Center
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Impact of the American Taxpayer Relief Act of 2012 on Payroll
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IRS Issues Guidance on How to Apply the Retroactive Increase in Excludable Transit Benefits
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SSA and IRS Announce 2013 Cost-of-Living Increases and Inflation-Adjusted Amounts
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How to Report New Hires to a State Directory of New Hires