QuickBooks Payroll Support. Payroll Resource center for those who want to learn more about what is required (with explanations and how to dos) to comply with the regulations on small business including business taxes and payroll plus payroll tax filings. Need payroll training or help? Call us.
   
 


Payroll regulations and payroll taxes, small business tax  

Starting a payroll
Understanding deductions ,    taxation of employee benefits,
   cafeteria plan administration,    workers compensation,
   tipped employees


Payroll and payroll tax regulations
Current year rates & limits,   W2 checklists,  W4, I-9,
   Reasonable Wages,  Union Reporting, Employee
   organizers


Independent Contractors
 
 Who gets a 1099, Workers compensation for contractors
    printing 1099's, W9

Payroll Services
What triggers a PR audit
Employee self evaluation
Tax for Individuals
Business Taxes

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Understanding Payroll deductions - the nuts and bolts of Payroll

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See also Employee & Human Resources for human resource/employee tools

Starting a payroll:
A payroll checklist that will help you identify what more you need to learn about preparing payroll. You need Adobe Acrobat Reader software view and download this document.  If you do not have Acrobat Reader installed, click here to access the software from Adobe. Top
New to payroll preparation?
First step is to let the IRS know you have a payroll by ordering form 8109 (tax deposit coupons).  Call the IRS at 800-829-1040.
Next is to let the State know you have a payroll by completing the registering form for your state:  
http://www.payroll.com/support/s_support_states_formlib.html
http://www.irs.ustreas.gov    download and read
Pub. 15: Circular E, Employer's Tax Guide
Pub. 15A: Employer's Supplemental Tax Guide
Pub. 15B: Employer's Tax Guide to Fringe Benefits
IRS Payroll Tax Filing Requirements
Research payroll taxes at http://payroll-taxes.com
Get answers on the internet - groups discussing payroll
http://bb.payroll-taxes.com
http://www.ioma.com/?qbalance
Google groups, misc taxes
            
http://www.americanpayroll.org/salc.html   online seminars    Top
State(s) payroll and sales tax websites: Find your State's website -  look up payroll tax rates, limits, regulations, filing requirements.
Minimum wage: For all 50 states. The rule is the employer must pay the  higher of federal or the state minimum wage.  Click here for federal minimum wage.              Top
Who Gets Overtime?:

 

Under the new FairPay rules, workers earning less than $23,660 per year  (or $455 per week) are guaranteed overtime protection. The effective date of the new regulations is August 23, 2004.
For a list of how an employee qualifies for an exemption from paying overtime rates, click here.  Anyone not falling under the exemptions below must be paid overtime rates for hours worked in excess of 40 hours.
  • executive exemption
  • administrative exemption
  • professional exemption
  • creative professional exemption
  • computer employee exemption
  • outside sales exemption
  • highly compensated exemption

Overtime - 1.5 or double time?

What is considered an overtime hour and what rate should be paid?

What records must be kept for tracking hours

W4 Form  - Fill in PDF Form:

 

 

Form W-4 Assistant:
Guides your employees through the completion of this form.

 

Verify Employees’ Social Security & Numbers and Names in Payroll Records with the Social Security Administration.  A free service that will save the payroll department hassles that come with filing incorrect information at year end. Verification can be requested on any worker for whom a W-2 will be prepared — a current employee, former employee, or new employee after a commitment to hire has been made.

Low volume requests can be made by phone 800-772-6270.  Higher volume requests can be sent on a paper list, diskette, or magnetic tape. In each case, SSA verifies the employer’s identity first, then compares four items from the employer’s records (employee name – SSN – date of birth – sex) with SSA’s master files.

******************************* 
Exempt W-4s expire once a year. Employers are legally required to notify affected employees about the pending expiration of their W-4s and to change the withholding status if a new, valid W-4 claiming exempt is not received.

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Form I-9: I9 form  Have each new hire complete an I9 form and keep with employee file. I 9 forms must be filled out for all employees, both US citizens and foreign born must complete.  The Employment Eligibility Verification Form for all new hires   
SIC Codes: Are you filling out a government form, here is a listing of SIC codes so frequently requested on government filings .Top
Understanding payroll deductions:

When you write a payroll check, payroll taxes must be paid. If  the company does not pay them, the IRS and the State can go after the personal assets of whomever signs the payroll tax returns (if filed) or the officers of the company. If cash flow is a problem in your company,  be sure to write payroll checks from a separate payroll account and transfer to the payroll account each payday an amount equal to the  gross salaries/wages plus 10% of the gross wages to cover the employer's share of payroll tax.  This will ensure enough is available to pay the taxman his due. 

Click here,  and when you arrive at the web page use their search window and type type "payroll tax" as the key word search term.  Lots of articles on payroll deductions & employees to give you enough background to ask  the right questions for your business.  Payroll rules do change regularly, so be sure to talk to your accountant to make sure the information you are reading applies to the latest tax regulations. 
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Health insurance -S Corp owners: Correct method of reporting health and fringe benefits in S Corp owners W-2 at year end:

IRS administrative guidelines plus
BONUS:How to set up using QuickBooks Payroll Items.

 

Garnishments: The amount you can garnish is limited to a % of the employee's disposable pay. To learn more about the limits and what the definition of disposable pay available to be garnished visit
http://www.dol.gov/esa/regs/compliance/whd/whdfs30.htm
Taxable Employee Benefits: Download publication15B from http://www.irs.ustreas.gov  Employers tax guide to fringe benefits.  Hint- in the IRS search box type "15B pdf" This publication describes what is included in W-2 as wages subject to income taxes and social security taxes. Common fringe benefits that must be considered for payroll tax purposes are:
Employee (and owner) use of company vehicle - be sure to scroll down on this page to the cents per mile versus lease value rules
Cafeteria plans - (also known as flex-plans) Good news for small business. For cafeteria plans, educational assistance programs, or an adoption assistance programs, no longer are required to file Form 5500 (unless you are required to file because of pension rules)  making these plan much more affordable (no more professional fees!)  and providing tax savings to both the employer and employee!  See instructions for form 5500 for details.
Cafeteria plans (flex plans) are a great way to save tax dollars for the employer and employee. Also see frequently asked questions about cafeteria plans.  Usually set up to Include pretax health insurance premiums, you will find other benefits included as well::
 
Dependent care assistance - dependent care plans

Group term life

Per Diem Expense reimbursements to employees- what amount must be included in the W2
 

Cafeteria Plan Administration - While the annual filing of form 5500 is no longer required, there are some documents that must be in place and some recordkeeping required. Learn about a  Do-It-Yourself Cafeteria Plan that is easy to implement -click on the image for FastFlex.

  how cafeteria administration works

Workers Compensation: If your business has a payroll (files payroll tax returns), it is required by law to have workers compensation insurance for all employees including the owner (if the owner gets a W-2). Reconcile Gross Wages from the Employment Tax Returns to the Workers' Compensation Wage Base.  To reduce workers compensation premiums,  provide the insurance auditor with a  reconciliation of the total gross wages for the policy year (from the 941's) adjusted for wage exclusions by type and employee involved.  Wage exclusions might exclude overtime pay, omitted wages above statutory maximums, excludible compensation, and contract labor charges. Call you insurance agent and ask what exclusions apply to your insurance policy and what are all the possible classifications (with rates) that could be possible in your industry..
Who is subject to OSHA regulations?: Your legal obligations to provide a safe work environment for your employees arise primarily from a federal law known as the Occupational Safety and Health Act (OSH Act). OSHA was enacted in 1970 to address the uneven patchwork of state laws regarding workplace safety, and to respond to the growing number of serious injuries and deaths occurring in the workplace. All businesses have a duty to comply with some general rules CCH Toolkit has several pages devoted to educating the Human Resource Newbie to what business is subject and what are OSHA regulations.

2007 FICA Tax Limit, 401K,
IRA, mileage & more:

 
Wage, pension, mileage and retiree social security  limits for 2007.
Tipped Employees: In many States you may pay a tipped employee less than the minimum wage. Your employees who receive tips of $20 or more in a calendar month, while working for you, are required to report to you the total amount of tips they receive. They must give you written reports by the tenth of the following month. Employees who receive tips of less than $20 in a calendar month are not required to report their tips. But keep in mind that you MUST report tips in the paycheck that at least equal minimum wage. If the employee does not receive enough tips to bring his/her wage up to minimum wage, the employer MUST fund the difference with a higher hourly rate.   Employees can use Form 4070A, Employee's Daily Record of Tips, to keep a daily record of their tips and Form 4070, Employee's Report of Tips to Employer, to report their tips to you. Both of these forms are in Publication 1244, Employee's Daily Record of Tips and Report to Employer.

If you operate a large food or beverage establishment where tipping is customary and you normally employ more than ten people on a typical business day, you must file Form 8027, Employer's Annual Information Return of Tips Income and Allocated Tips, each calendar year. If the total tips reported by all employees are less than 8 percent of your gross receipts, you must allocate the difference among the employees who received tips. The allocation may be based on each employee's share of gross receipts or share of total hours worked, or on a written agreement between you and your employees. Show the amount allocated in Box 8, Allocated Tips, of the employee's Form W–2. Do not withhold income, Social Security or Medicare taxes on allocated tips.

If you are required to allocate tips, your employees must continue to report all tips to you, and you must use the amounts they report to figure payroll taxes.

Sound like too much paperwork?  There is a simpler program available if in the prior year your gross receipts from sale of food or beverage at least 20% sales were paid for by Credit Card and these credit card sales reflected a tip which was also charged.  Credit card sales with charged tips will help you and the IRS determine the appropriate tipped  % to report. Learn more about how to participate in this program named " ATIP" Attributed Tip Income Program.
visit the IRS for More info

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Do-it-yourself 1120S, 1120, 1065, Schedule C
with QuickBooks & TurboTax business tax software

 

    Learn how to prepare payroll

The Payroll Toolkit
 
$ 27.96
Nuts and Bolts Techniques to Help You Better Understand and Manage Your Payroll
           by Timothy Carse, Jeffrey Slater

          
Quarterly Checklist FUTA
 
940 Checklist 2007  Use this form quarterly to determine the amount of your 940 payroll tax deposit. No more over or underpaying
You need Adobe Acrobat Reader software view and download this document.  If you do not have Acrobat Reader installed, click here to access the software from Adobe.   Top
File form 941 Quarterly Once registered with the IRS as an employer, you will receive in the mail form 941 which must be submitted by the 31st day of the month following the quarter end.  You may file the 941 by mail ( click here to download form 941)  or you may tele-file (over the phone) form 941 if you fall under the following qualifications:

Businesses that receive the special 941TeleFile Instructions and Tax Record as part of their Form 941 Tax Package and who meet the qualifications in the instructions.
  • Are a monthly schedule depositor for the entire quarter;
  • Have not changed your business name, address or Employer Identification Number (EIN) during the previous quarter;
  • Must have a break even, overpayment (to be applied to the next quarter), or balance due return (can be direct debit);
  • Are not a seasonal employer;
  • Have no schedules or attachments (if you are required to file a Schedule B you are not eligible to use 941TeleFile);
  • Only have fractions of cents adjustments; and
  • Want to claim Advance Earned Income Credit (AEIC) payments. (Optional)

It is now possible to E-file form 941 (but only through 3rd party providers) Is a $5.00 service fee worth the convenience of filing online?  If so, click here


Quarterly  Checklist
State unemployment
State Unemployment Worksheet.  For all states, if you have difficulty understanding how to calculate the amount of wage to include in the employer's quarterly tax report, try out this worksheet.  Includes helpful tips on creating a weeks worked report, adjustment of payroll liability check and set-up of unemployment tax rates in QuickBooks

NJ927 2007  ( NJ927 2008 )-For New Jersey Employers.  No more over or underpaying!  Complete this worksheet before completing the quarterly payroll tax filing (State unemployment form). 

You need Adobe Acrobat Reader software view and download this document.  If you do not have Acrobat Reader installed, click here to access the software from Adobe. Top

Year End Checklist W-2 Checklist  Complete this worksheet to spot errors ... before the IRS does!
More payroll checklists below

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QuickBooks
2005/
2006
2007/2008
Blank
W2

QuickBooks W2 Tax FormSave Money
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QuickBooks
W2
Compatible with
2005-2008
Editions of
QuickBooks

W2 Forms for QuickBooks


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W2 tax form sets here

 


W2 checklist -federal  YEAREND

Download our free W2 Checklist.  Eliminate IRS notices and penalties by making sure your quarterly  941 forms (payroll tax filing)  agree to the W 2 forms filed at year end. To be completed before printing the W2 forms and before filing the 4th quarter 941payroll tax filing.

W 2 state checklist  YEAREND

Complete this worksheet to insure accurate year end tax filing for  the W2 & W 3.

Guide to preparing W2 forms in QuickBooks

You need Adobe Acrobat Reader software view and download these documents.  If you do not have Acrobat Reader installed, click here to access the software from Adobe.

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Reasonable wages S Corporation (S corp) dividends (distributions),  officer loans,
and what is a reasonable wage for the owner , officer.
Union Benefit Reports and Certified Payroll Save time, increase accuracy!  A solution for reporting Certified Payroll Reports, EEOC/Work Utilization tracking reports, Benefit Reporting, AIA format billing, and the generation
See also QuickBooks Employee Organizer  
Payroll Services  
Considering a payroll service? The pros and cons of outsourcing payroll   Top
QuickBooks Payroll QuickBooks Enhanced Payroll

Understanding Payroll deductions - the nuts and bolts of Payroll
Want to learn about payroll and payroll tax preparation? See how we can help

Other Resources Become a member of Accountantsworld.com  to receive a daily e-mail full of tax and finance articles and an occasional Payroll article that is very good. State regulations regarding Direct Deposit of employees paycheck into a bank. Top
Payroll Deduction Calculator Get the correct deductions or gross up a net paycheck
See also QuickBooks Payroll Tips
See also Employee & Human Resources for human resource/employee tools
Simple, Sep Plans, & 401 K Plans Learn more about choosing, setting up pensions for small business employees  
Compensation limits for benefits valuation
Pension benefits-Highly compensated employee  $105,000 (2008)
Pension benefits - Key employee $150,000 (2008) 
more wage and pension limits
Dos and Don'ts- Employees
      with disabilities
Employment Checklist For Hiring Persons With Disabilities  (may not be a complete list)
Additional requirements when hiring a non resident alien or H-1B employee This may not be a complete list so be sure to check with your CPA
1. Withholding taxes and rules on Aliens employed in the USA
2. List of all fact sheets on H-1B requirements at the DOL
    Record keeping requirements for a H-1B employer

    Rules regarding an H-1B workers deductions from gross pay
    Benefits that should be offered to an H-1B worker
What are payroll cards? Direct deposit of paychecks into employees bank accounts saves large employers quite a bit on processing payroll checks, distributing payroll checks and handling uncleared or lost payroll checks. A payroll card is an alternative to Direct Deposit for employees who do not have a bank account.  The cost savings is about 1/2 the savings of a direct deposit check.  Click Here for a full article (21 pages of easy to read material describing all aspects of payroll cards)
Independent Contractors  - help to determine who gets a 1099
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Independent contractors

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QuickBooks 1099 form

QuickBooks laser 1099 Form


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The more common 1099-Misc payments are for business expense payments for services and and rents totaling over $600 per payee per year when the payee is operating as an unincorporated entity.  Take note that payments for products to unincorporated entities DO NOT require a 1099.  Examples of unincorporated entities are sole proprietorships, partnerships and LLCs.  Corporate entities are required to have the designator  Inc., Corp, PC, or PA follow the company name. By requesting a completed form W-9 (see below) from your vendor you will have all the information necessary to complete the 1099 at the end of the year. 

Examples of the types of expenses that require 1099's

  • Payments for rents for office space including amounts paid to you for home office space, storage space, and machine rental require a 1099 to be sent. 
  • Examples of services include subcontractors, commissions, consultants, cleaning services, professional fees, referral  fees, and temporary help.
  • Interest or dividends payments to unincorporated entities also require a 1099 but the reporting limit is reduced from $600 to $10 per payee per year. 
  • Take note that payments to owners of S Corporations are not dividends.  They are "distributions" and do not fall within the 1099 reporting guidelines. 

Exceptions- regardless of the amount and including incorporated entities all payments of the following are reportable on a 1099-misc

  • Payments to crew-members by owners or operators of fishing boats including payments of proceed from sale of catch.
  • Gross Proceeds paid to attorneys


There is no list available that you can go to in order to determine if you should treat a person as an independent contractor or an employee.

        IRS website - Who is an independent contractor vs. Employee
Pamphlet on Independent contractor vs employee

       Every case is unique and must be considered with its own list of circumstances.  You can research common law (case law that you can read to help make a determination¹) but the IRS has recently developed a form that you can complete and mail in for help making the correct determination. The Form SS-8 is a terrific tool to help you understand what the IRS will look at in making the determination.  In fact it is so thorough that you will most likely be able to make your own determination by the time you are through completing it.

Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding .can be completed and sent to the IRS . This form looks at who has financial control, behavioral control, and the relationship of the worker and the company.  There is also a section on service providers and salespersons which indicates that this is an area that the IRS believes is not  being handled correctly.  Every accounting department should download and read this form to gain a better understanding of how the IRS makes the determination.

Form 8919.  New form beginning in 2007 where a worker can alert the IRS that he/she was incorrectly treated as a 1099 consultant rather and as an employee.  This form will permit the worker to "NOT PAY" the employers share of social security and medicare tax.  This form will be reviewed by the IRS to determine if the worker made a correct assessment or if the employer should receive an employment tax audit. This could be the beginning of an increase in employer tax audits by the IRS. 

The introduction of the SS-8, Form 8919, new announcements by the IRS that 29 state workforce agencies have now entered into agreements to share the results of employment tax examinations, and increased IRS audit  budgets,   means that it would be prudent for all businesses to review their policies to determine if indeed, any current independent contractors should become employees.

For comprehensive training on who can be classified as an independent contractor, download the PDF training guide for Auditors used by the IRS to train their employees on who is an independent contractor vs employee

¹ Court cases:
Employment Tax case citations:
Common law employee:
Orion Contracting Trust v. Commissioner, T.C. Memo 2006-211.
Kumpel v. Commissioner, T.C. Memo 2003-265.
Ronald McLEan E. Video v. Commissioner, T.C. Memo 2003-13.
Weber v. Commissioner, 103 T.C. 378 (1994), aff’d, 60 F.3d 1104 (4th Cir. 1995).
Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992).
Corporate officer as employee:
Joseph M. Grey Public Accountant, P.C. v. Commissioner, 119 T.C. 121 (2002); aff’d in unpublished opinion, 93 Fed. Appx. 473, 93 AFTR2d 2004-1626 (3d Cir. 2004); cert. denied sub nom. Nu-Look, 125 S.Ct. 60 (2004).
Nu-Look Design, Inc. v. Commissioner, T.C. Memo 2003-52, aff’d, 356 F.3d 290 (3d Cir. 2004), cert. denied, 125 S.Ct. 60 (2004).
Spicer Accounting, Inc. v. United States, 918 F.2d 90 (9th Cir. 1990).

 IRS  brief article, facts to consider when classifying a person as an independent contractor & further resources to determine who gets a 1099. Below are some general guidelines be sure to clarify with your tax advisor

Workers Compensation audit and the independent contractor- read this for audit savings!

The States are also interested in employers correctly classifying workers as employees. They are looking to collect the proportionate share of unemployment taxes on these earnings.  Your state may use a different set of rules for classification. Take a look at New Jersey's 3 tests used to determine independent subcontractor status, it is easy to read and will shed more light in helping you come to the right conclusion.

 

More about how to prepare a 1099  using  QuickBooks

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Workers compensation premiums paid for subcontract work performed Insurance companies will bill your business additional workers compensation premiums for vendors/contractors that do not already have a workers compensation policy.

The premium is chargeable  on the labor portion only. If you do hire independent contractors that provide a service. Be sure the invoice from the independent contractor allocates the charge between material and labor.  Set up a policy to record these bills in  QuickBooks using subaccounts of the account "subcontractors"
Set-up an account " Labor-Subcontractors" -subaccount of Subcontractor
Set-up an account "Material-Subcontractors"- subaccount of Subcontractors

Allocate each bill that is from a subcontractor who cannot provide a certificate of insurance using the above accounts.  In the memo field describe the work completed.  This will provide the insurance auditor with the information to charge a premium based on the type of work performed rather than assigning your companies highest risk rate (the standard applicable rate to subcontractors)

Printing 1099 forms Prepare and print form 1099 in QuickBooks
W-9 W-9  Provide to your subcontractor to obtain Tax ID information.  Will speed the preparation of form 1099 at the end of the year.   Top

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