Payroll 101
In its most simplistic format, payroll processing revolves around dates: when payroll is paid, when withholdings are paid, and when reports are due to federal and state agencies. Proper planning is the key to ensuring that no surprises arise when a pay period is due and the work has not yet started.
Employing personnel with the knowledge and experience in calculating and processing payroll can lessen the business official’s stress. That may not be as easy as it sounds. While accounting software packages ease the processing aspect of payroll, the experience and knowledge of the people in the office ensure a smooth and accurate process.
Payroll processing and related agency obligations include the following actions.
Ensuring that everyone is paid correctly. On the first payroll of the year, July for 12-month employees and September for 10-month employees, compare the staff on payroll base salary amount (on the software program) with an internal worksheet prepared independently. This comparison will sift out any discrepancies between the contractual salary and the information entered into the software. As a best practice, a similar comparison can be incorporated as part of the pay period processing checklist.
Signing off on payroll. If you do not process payroll, you should be signing off on the entire payroll folder. The folder should contain any information that relates to the pay period (day without pay docks, additional pay for stipends, overtime pay, changes to health benefits coverage, etc.) along with any ongoing payroll information (additional class pay, deductions, employees on leave).
If you process payroll, another administrator should sign off on your payroll calculations.
Cross-training employees. These post-COVID-19 pandemic years have stressed the importance of cross-training to create a seamless workspace. Although other responsibilities can sometimes be postponed, payroll processing should be completed at least 48 hours before the pay date. The absence of a key employee—without coverage—can be a potential issue. If your district does not have such a cross-training plan, now might be the time to create one.
Knowing payroll and agency-related filling deadlines and time lines is critical.
Knowing due dates and deadlines. Knowing payroll and agency-related filing deadlines and timelines is critical. For example, you should know
- The minimum amount of time needed for an automated clearinghouse transfer to employees’ accounts.
- Deadlines for paying federal taxes through the Electronic Federal Tax Payment System.
- Due dates for Form 941 (Employer’s Quarterly Federal Tax Return).
- Deadlines for submitting W-2s to the Social Security Administration.
- Deadlines for submitting 1099s (nonemployee income over $600), 1094/1095-B forms reporting to the Internal Revenue Service (IRS)individuals who have minimal essential coverage, and payroll agency withholdings.
Calculating end-of-quarter and end-of-year state and federal income tax withholding. The W-2 forms have a cover sheet (W-3) that summarizes the details on the W-2. The federal income, FICA (Federal Insurance Contribution Act), and Medicare withholdings should be tied out to the quarterly reports submitted.
Your payroll software may have a worksheet that allows for data entry of each quarterly report with a tie-out to the W-3. This procedure is the same for state W-2 filings. If there are differences, they should be reconciled before a final report is transmitted.
Disseminating reports. For W-2s, most payroll software programs have employee portals where the reports can be electronically transmitted. Regarding former employees, even if they have access to an employee portal, you should mail them a paper copy after confirming their address.
The 1095-B reports can be electronically transmitted through employee portals and mailings to former employees. The 1099s are mailed to the individual or company.
Keeping records. Per IRS information on employment tax recordkeeping, payroll forms should be kept for four years. A recommended best practice is to keep the files permanently.
Additionally, keep all quarterly reports and agency withholdings in either folders or binders with copies of agency checks and proper backup. Doing so will ease your annual audit.
Final Thoughts
Payroll may not have been part of your education on the path to becoming a business official; however, it is now part of your responsibility. Diving in and understanding the multiple parts of this complicated puzzle will make you a more effective school business official.