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20 th Annual IL Statewide APA Conference

20 th Annual IL Statewide APA Conference. August 23, 2013 Session 1. Hard Knocks of Payroll Calculations. Billy Meyerkorth , CPP Sr. Payroll Analyst bjm@americancentury.com 816-340-7109. The Chores. Regular Rate of Pay Overtime Tax Calculations Gross-up GTL Child Support

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20 th Annual IL Statewide APA Conference

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  1. 20th Annual IL Statewide APA Conference August 23, 2013 Session 1

  2. Hard Knocks of Payroll Calculations Billy Meyerkorth, CPP Sr. Payroll Analyst bjm@americancentury.com 816-340-7109

  3. The Chores • Regular Rate of Pay • Overtime • Tax Calculations • Gross-up • GTL • Child Support • Garnishments • Tax Levies 20th Annual IL Statewide APA Conference – August 22-23, 2013

  4. Regular Rate of Pay • What is it? What is it used for? • Complexities surrounding it • What is included • Base, shifts, nondiscretionary bonuses, retro, etc • Hours • Workweek • Payroll Conversions • 2080 hrs FT equivalent 20th Annual IL Statewide APA Conference – August 22-23, 2013

  5. Regular Rate of Pay • How do you calculate it? Total pay for the workweek Total hours worked 20th Annual IL Statewide APA Conference – August 22-23, 2013

  6. Regular Rate of Pay • Employee paid $12.00 per hour • Workweek Sunday-Saturday Works Mon-Wed – 8 hrs/day, Thurs 9 hrs & Fri 10 hrs Regular Pay = 12.00*43=516.00 516.00/43 = 12.00 RRP 20th Annual IL Statewide APA Conference – August 22-23, 2013

  7. Regular Rate of Pay • Employee paid $12.00 per hour • Workweek Sunday-Saturday Works Mon-Wed – 8 hrs/day, Thurs 9 hrs & Fri 10 hrs • Production Bonus = $500.00 for the week Regular Pay = 12.00*43=516.00 Bonus = 500.00 516.00+500.00=1016.00 1016.00/43 = 23.63 RRP 20th Annual IL Statewide APA Conference – August 22-23, 2013

  8. Regular Rate of Pay • Employee paid $12.00 per hour • Workweek is Sunday-Saturday Works Mon-Wed – 8 hrs/day, Thurs 9 hrs & Fri 10 hrs • Piecework Pay = $1.00 each item (100 made) Regular Pay = 12.00*43=516.00 Piecework = 1.00*100=100.00 516.00+100.00=616.00 616.00/43 = 14.33 RRP 20th Annual IL Statewide APA Conference – August 22-23, 2013

  9. Overtime Premium • Employee paid $12.00 per hour • Workweek Sunday-Saturday Works Mon-Wed – 8 hrs/day, Thurs 9 hrs & Fri 10 hrs Regular Pay = 12.00*43=516.00 516.00/43 = 12.00 RRP 12.00*0.5=6.00 Overtime Premium Rate 3 hrs *6.00=18.00 Overtime Premium Pay 20th Annual IL Statewide APA Conference – August 22-23, 2013

  10. Overtime Premium • Employee paid $12.00 per hour • Workweek Sunday-Saturday Works Mon-Wed – 8 hrs/day, Thurs 9 hrs & Fri 10 hrs • Production Bonus = $500.00 for the week Regular Pay = 12.00*43=516.00 Bonus = 500.00 516.00+500.00=1016.00 1016.00/43 = 23.63 RRP 23.63*0.5=11.82 OT Premium Rate 11.82*3=35.46 OT Premium Pay 20th Annual IL Statewide APA Conference – August 22-23, 2013

  11. Gross Pay • Employee paid $12.00 per hour • Workweek Sunday-Saturday Works Mon-Wed – 8 hrs/day, Thurs 9 hrs & Fri 10 hrs Regular Pay = 12.00*43=516.00 516.00/43 = 12.00 RRP 12.00*0.5 = 6.00 OT Premium Rate 6.00*3 = 18.00 OT Premium Pay 516.00+18.00=534.00 Gross Pay 20th Annual IL Statewide APA Conference – August 22-23, 2013

  12. Gross Pay • Employee paid $12.00 per hour • Workweek is Sunday-Saturday Works Mon-Wed – 8 hrs/day, Thurs 9 hrs & Fri 10 hrs • Production Bonus = $500.00 for the week Regular Pay = 12.00*43=516.00 Bonus = 500.00 516.00+500.00=1016.00 1016.00/43 = 23.63 RRP 23.63*0.5 = 11.82 OT Premium Rate 11.82*3 = 35.46 OT Premium Pay 1016.00+35.46 = 1051.46 Gross Pay 20th Annual IL Statewide APA Conference – August 22-23, 2013

  13. Regular RateOvertimeGross Pay • Other Sample Calculations • Review 20th Annual IL Statewide APA Conference – August 22-23, 2013

  14. Withholding Factors

  15. Withholding Factors

  16. Wage-Bracket Method • The quickest &easiest method • Publication 15 - Circular E • Generally, use the percentage method for wages in excess of table

  17. Marital Status Pay Frequency Number of Allowances Wages

  18. Percentage Method • The formula method • Most payroll systems use this • Publication 15 - Circular E • Little more work than wage-bracket method 20th Annual IL Statewide APA Conference – August 22-23, 2013

  19. Percentage Method • Based on Form W-4 information • Steps: • 1 – calculate taxable pay • 2 – calculate deductible value of allowances • 3 – formula to calculate tax withholding amount from Percentage Method tables 20th Annual IL Statewide APA Conference – August 22-23, 2013

  20. Pay Period Frequency Amount per Allowance

  21. Marital Status Pay Frequency Taxable Wages Amount of federal tax withholding

  22. Percentage Method Step 1: Value of allowances Step 2: Gross – allowances = Adjusted wages Step 3: Use Percentage Method table

  23. Percentage Method Step 4: Adjusted wages – threshold = excess amount Step 5: Amount of tax + (excess amount x percentage) = FITW

  24. Supplemental Wages • Regular wages • Tied to time defined under FLSA • Supplemental wages • Not tied to time – additional taxable items • Overtime & tips may be treated as regular

  25. Supplemental Methods • Optional Flat Rate Method • Aggregate Method • Mandatory Flat Rate Method

  26. Supplemental Methods • Optional flat rate - 25% • Multiply supplemental wages by optional rate

  27. Supplemental Methods • Aggregate • Combine with regular wages & tax the total • If paid separately, subtract tax already withheld from regular wages

  28. Supplemental Methods • Aggregate method • If no income tax withheld from regular wages during current year or preceding year

  29. Supplemental Methods • Mandatory flat rate – 39.6% • When year-to-date supplemental wages exceed $1,000,000 • May use for payments that cross the $1,000,000 threshold

  30. Social Security & Medicare • Medicare wages > $200,000 • Additional Medicare tax of 0.9%

  31. Tax Calculaions • Other sample tax calculations for practice

  32. Grossing-Up Desired Net Payment 100% - Total Tax Percentage

  33. Grossing-Up • Special circumstances • Gross-up causes year-to-date wages to cross the social security wage base

  34. Grossing-Up • Reasons for Gross-Up • Guarantee net pay • Paying taxes for employee on certain expenses • Did not withhold social security and Medicare taxes for group-term life insurance • Failed to withhold taxes from wages

  35. Gross-up • Employee receives $5,000.00 relocation (net) • YTD wages = $50,000.00 • No state income taxes • $5,000.00/(100%-(25%+6.2%+1.45%)) = $5,000.00/(100%-32.65%) = $5,000.00/0.6735 = $7,423.90 gross

  36. Gross-up The long way • $5,000.00*.3265 = $1,632.50 • $1,632.50*.3265 = $533.01 • $533.01*.3265 = $174.03 • $174.03*.3265 = $56.82 • $56.82*.3265 = $18.55 • $18.55*.3265 = $6.06 • $6.06*.3265 = $1.98 • $1.98*.3265 = $0.65 • $0.65*.3265 = $0.21 • $0.21*.3265 = .$0.07 • $0.07*.3265 = $0.02 $1,632.50+$533.01+$174.03+$56.82+$18.55+$6.03+$198+$.65+$.21+$.07+$.02=$2,423.90 $5,000.00 + $2,423.90 = $7,423.90 grossed-up amt

  37. Gross-up Crossing SS wage base • Determine social security tax needed for payment • Add tax % (except social security) • 100% - Total tax % = Net % • Add payment  SS tax together, divide by Net % = Gross earnings • Check by calculating gross to net pay

  38. Group Term Life • Taxability is based on: • Excess coverage amount over $50,000.00 • Based on age at end of year • Amount from Uniform Premium Coverage table • Amount EE pays with after tax dollars (if any)

  39. GTL

  40. GTL • Employee born Dec 6, 1946 • Value of GTL = $75,000.00 • $75,000.00 - $50,000.00 = $25,000.00 • Employee = 67 years old • GTL factor from table = $1.27 per $1,000.00 • $25,000.00/$1000.00 = 25 • 25*$1.27 = $31.75 per month

  41. GTL • Subtract the amount employee pays with after-tax dollars • Same Example: • Employee pays $5.00 per month • $31.75 - $5.00 = $26.75 per month taxable

  42. GTL • Dependent GTL • $2,000.00 – tax-free • Over $2,000.00 – entire amount taxed • Same calculation

  43. Child Support • Disposable Pay Gross Pay – deductions required by law (taxes) = Disposable Pay

  44. Child Support • Employee has following: • Regular pay $5,000.00 • FITW $500.00 • Social Security $302.56 • Medicare $70.76 • 401(k) 10% of Regular • Café health prem $100.00 • Dental $20.00

  45. Child Support • Gross Pay – deductions required by law = disposable pay • $5000.00-$500.00(FITW)-$302.56(SS)-$70.76=$4,126.68 Disposable Pay

  46. Child Support Limits * State limits may be lower

  47. Child Support • Same employee example but Child Support Order received • Employee–not more than 12 weeks in arrears • Employee-does not support another family • Order says to deduct $1,250.00 • Max we to deduct is 60%

  48. Child Support • Dispoable Pay = $4,126.68 • Max to deduct - $4,126.68 * 60% = $2,476.01 • Order less than max so we deduct order of $1,250.00

  49. Child Support • Net Pay = $5,000.00 (gross) - $500.00 (FITW) - $302.56 (SS) - $70.76 (medicare) - $500.00 (401(k)) - $100.00 (medical) - $20.00 (dental) - $1,250.00 (child support) = $2,256.69 Net

  50. Garnishments • Also uses disposable pay • Look at state rules • 25% max or 30 times minimum wage

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