Presented By:
Genevieve Schulte & Kristal Hamm
Donna Denker & Associates
 An
obligation that comes into existence
as a result of past contractual
commitments or tax legislation
(Payroll Liabilities)
 Need
to make sure our obligations are
recorded properly.
 Need
to make sure they are recorded in
the right time frame.



When you process payroll a liability is automatically
created for taxes due to agencies (IRS, State, etc.)
These liabilities reside on the balance sheet.
Compare balances to a report from your payroll
module and identify any discrepancies.
• Examples:
 Balances for SUTA and FUTA accumulating
 Adjustments from prior quarters rolling forward
 Payroll check voided AFTER taxes are called in
(results in a Debit balances in the liability account)
Liability accounts for FICA and
FIT should “zero” out after
every pay period!
Garnishments and Deductions
These follow the same rules as payroll
taxes and should “zero” out each pay
period.
Quarterly Payroll Procedures
 Prepare
bank reconciliations for quarter.
 Are there any outstanding payroll
checks?
 How are you going to handle these
outstanding payroll checks
• Reissue
• Wait
• Void
 Ensure
updates are completed:
• Print a new circular E (Publication 15) – www.irs.gov
• Unemployment Rates
 SD Investment Rate is .53%
 SD Surcharge Rate is 0% for Quarters 1 & 2
 SUTA wage base is $11,000
 FUTA (Federal Unemployment Tax Act) wage base is
$7,000 – If Applicable
 FUTA rate is .8% for Quarters 1 & 2, and .6% for Quarters 3
&4
• FICA max ($106,800 Social Security)
 Check
 Did
tax deposit dates.
you make all of your deposits?
 Were
they made on time?
 Were
they applied to the correct quarter?
 Make
sure benefit and deduction codes
are set up properly with respect to pretax designation (See Publication 15,
Pages 10-14)
• Health Savings Accounts
• 401k Deductions
• Employer paid fringe benefits
 Health
Savings Accounts
• Employer contributions are not subject to Social
Security, Medicare, or FUTA
• As long as the amount is used for excludable
expenses
• Employee contributions
 Included in gross wages
 Unless made in a section 125 cafeteria plan
 401
K Liability (Employer Contributions)
• Excluded from the employer’s gross income
• Make sure the liability does NOT affect taxes
 401
K Deductions (Employee
Contributions)
• Pre-tax contributions excluded from Federal
Income Tax, but included for FICA
 Include contributions in Box 3 & 5 on W-2s
 Include contributions in lines 5a and 5c on Form 941
(4a and 4c of Form 944)
• Please See IRC Section 415 for more information
and Publication 15 B of Circular E
 Fringe
Benefits
• Vehicles used for commuting to and from work
• Cash payments
• Tickets to entertainment and sporting events
• NOT considered taxable fringe benefits:
 Services provided at no additional cost to the
company
 Expenses the employee can claim
 Obtain
new W-4:
 Prepare
Forms
 941
• If a biweekly depositor make sure line 10 equals
bottom line on Schedule B
• Schedule B is tax liability NOT taxes paid. This is
IRS’s cheat sheet.
• Use 941x for corrections
• Due Dates
 Monthly depositor is the 15th of the following month
 Semi – Weekly
 Pay date is Saturday through Tuesday, due on Friday
 Pay date is Wednesday through Friday, due on Wednesday
 Penalties
• 2% to 15% in penalties
• Will pay interest on balance due as well
• Separate deposit arrangements
 Deposit payroll taxes in separate bank account
 Will not be able to access
 Will be required to file a 941- M
 SUTA
Form 21
• Make sure rates are updated
• Make sure excess wages are correct
• State has updated online submission. Register
online at : sd.wagereport.com
• Rates:
 SD Investment Rate is .53%
 SD Surcharge Rate is 0% for Quarters 1 & 2
 SUTA wage base is $11,000
Year End Procedures
 Compile Following Payroll Reports:
• Form 941 – Previous 4 Quarters
• Unemployment Forms – All 4 Quarters
• Form 940 (If Applicable)
 Prepare
Bank Reconciliation for January
 Prepare Forms
• Prepare W-2’s and W-3
• Tie W-3 number to total of all 4 quarters of 941
 W-2
to Employee by January 31st, 2012
 W-2’s and W-3 to Social Security
Administration by:
• March 1, 2012 (Paper File)
• March 31, 2012 (Electronic File)
 State
Copies of W-2’s and W-3. (Check
with each individual state)
 941 and SUTA Reports
• January 31, 2012
 Include
in income in boxes 1, 3, 5, and 12
on form W-2
• And on Form 941 and SUTA
 Calculation
for every $1,000 over $50,000
of coverage you provide for employees
 Calculation
15B
table found in Publication
Group Term Life Insurance to Include on W-2
Face amount
Age at
Employee
Face Value of
over
DOB Year Born 12/31/2011 Life Insurance $50,000
Genevieve Schulte 4/17/1979
1979
32
100,000.00
50,000.00
Take Benefit Over 50,000 and
divide by 1,000 = 50
Taxable
Initial date of
Months Age Factor Addition to
Amount of
benefit
Policy if after 2011 cancel covered in From IRS
W-2
(This is a
FORMULA) January 1, 2011 date or n/a 2011
Tables
50,000.00
12
Multiply that by
the Months
Covered
0.08
Multiply that by Age
Factor from Publication
15B for a 32 year old.
50 * 12 * .08 = $48.00 on W-2
Cost Per $1,000 of Protection for 1 Month
Age
Under 25
25 through 29
30 through 34
35 through 39
40 through 44
45 through 49
50 through 54
55 through 59
60 through 64
65 through 69
70 and older
Cost
$
$
$
$
$
$
$
$
$
$
$
0.05
0.06
0.08
0.09
0.10
0.15
0.23
0.43
0.66
1.27
2.06
You figure the total cost to include in the employee's
wages by multiplying the monthly cost by the number of
full months' coverage at that cost
48.00
Facts that provide evidence of the degree of
control and independence fall into three
categories:
•Behavioral
•Financial
•Type of Relationship
 Behavioral
• Type of instructions given
• Degree of instruction
• Evaluation systems
• Training
• Set hours
 Financial
• Significant investment
• Un-reimbursed expenses
• Services available to the market
 Type
of Relationship: How the worker and
business perceive their relationship to
each other.
• Written contracts
• Employee benefits
• Permanency of the relationship
Are Board and Tribal Council
Members Employees?
•Tribal
Council-
Employees but not subject to FICA. FIT
voluntary
•Appointed
Board Members-
evidence method to determine status.
Use category of
Stipends
are taxable. Board Members should be
treated as employee’s not Independent
contractors.
IRS Publication 4268 “Employment Tax Desk
Guide for Indian Tribal Governments”

www.irs.gov
 Uncollected/unreconciled Travel
Advances for non-employees
 IF
the IRS audits and finds these
situations you will be assessed penalties
and interest for failure to issue 1099’s.
• Considered compensation to employees
• Should be included on W-2 and reported on 941,
SUTA, etc…
 Creates an increased expense for the organization
• Important to reconcile monthly or as frequently as
possible.
 IRS has indicated that amending returns might be
necessary.
• If you record an allowance for these, you should
probably have included it on the W-2.




SUTA rates will be issued in December
Health Insurance reporting on W-2 has been delayed
one year. Not reportable until 2012.
Social Security withholding decreased by 2% (from
6.2% to 4.2%) for employees – Employers still pay
6.2%
IRS will no longer be sending blank forms out. You must
retrieve them from the IRS website. www.irs.gov