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Payroll Processing Change: IRS Form W2 will include health insurance benefits

A CPA Wilmington NC offers QuickBooks payroll training and support.

Gary Bode, CPA: most companies can save money by keeping payroll in house. If you'd like a free initial consult with a Wilmington NC CPA firm, please call us at (910) 399-2705.

Payroll processing procedures don’t change that often. But starting in tax year 2011, employers will have to report the amount of health care benefits, paid on behalf of their employees, on the employee’s annual IRS Form W-2. The amounts aren’t taxable; this is just an informational phase of the 2010 Healthcare Act.

Our Hire Act of 2010 posts delineate these payroll tax savings and procedures to claim them.  If you missed out on the Hire Act despite qualifying, we can help claim a tax refund.

Starting in 2011, the employee portion of the Social Security tax drops to 4.2% from 6.2%.

So why do such modest changes in payroll processing requirements merit attention?  Simply because payroll processing changes are so rare.  One common theme in our posts is that most companies can handle their own payroll processing.  Now this may seem like a strange position for a Wilmington NC CPA firm to take.  Because we do offer full payroll services.  But our philosophy is to make clients as self sufficient as they care to be.  We prefer providing training and a safety net of CPA level support, if and when they need it.  We’re not implying that ADP, Paychex or even QuickBooks is inappropriate for payroll services.  But we are saying payroll processing lends itself to proscribed procedures that are well known and within the capabilities of most companies.

Are there some clients that just shouldn’t handle their own payroll processing and bookkeeping?  Of course. 

If you need an initial free consult with a Wilmington NC CPA firm that encourages self reliance, call us at (910) 399-2705.

IRS Payroll Tax Crackdowns: Usually for Dishonesty not just Payroll Errors

The IRS does occasionally crack down on a company over payroll tax issues, and then advertises it well.  The Wilmington Star News usually runs these stories in the Local section.  I’m not talking about simple Form 941 preparation errors.  Generally, these offenders are dishonest and pocketed their employee’s payroll deductions. And these employers then disregard the IRS for long periods of time too. So, while payroll tax problems can be serious, many publicized offenders have broken the law and then ignored numerous IRS attempt to help them resolve the underlying payroll issues.

Other Payroll Issues

  • Sometimes payroll issues are not even calculation or procedural related. In a recession, cash flow management is a vital skill.  The accountant or bookkeeper does the client a huge service with help in this area.  Payroll tax issues often resolve when cash flow improves.  Try to think of payroll taxes in terms of Gross Pay plus 10%, and not just in terms of Net Pay.
  • Organizational skills are important in payroll.  Payroll services chains like ADP or Paychex are really offering expertise and the ability to organize payroll.  Local accountants and bookkeepers offer the same skills, but might be able to help improve overall company efficiency while they organize payroll. 
  • Family members are sometimes placed in charge of areas, like payroll processing, that they don’t have the requisite training for, eventually leading to payroll tax problems.  If the willingness is there, these types of bookkeepers and managers can grow into their jobs with some gentle guidance from a CPA accountant.

I think my aversion to national payroll services came about when I was doing interim CFO-for-hire services in a Wilmington based telecommunications company. They used ADP.  Now ADP is a fine payroll service company, they just happened to be my introduction to the payroll tax industry.  Anyway, I was startled to see how high their fee structure was, especially when I did most of the bookkeeping work!  I had to aggregate all the payroll information, double check it, have it entered etc.  Plus, as due diligence, I had to run payroll cross checks.  Not that I ever found ADP in error.  Because the calculations were automatic once I plugged our data into the ADP payroll processing program.  Tight controls are important in payroll and bookkeeping processes. 

Payroll processing can be complex, but with some training and ongoing support, most companies can save money by keeping in house.

We’re a Wilmington NC CPA firm offering payroll processing services and support.  For a free initial consult, please consider calling us at (910) 399-2705.