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20 th Annual IL Statewide APA Conference

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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
  51. Garnishment Limitsbased on $7.25/hour effective July 24, 2009 Weekly Biweekly Disposable earnings are Disposable earnings are$217.50 or less: NONE $435.00 or less: NONE Disposable earnings are Disposable earnings aremore than $217.50 but more than $435.00 butless than $290.00: less than $580.00:AMOUNT ABOVE $217.50 AMOUNT ABOVE $435.00 Disposable earnings are Disposable earnings are$290.00 or more: $580.00 or more:MAXIMUM 25% MAXIMUM 25%
  52. Garnishment Same employee as child support Instead of child support - garnishment Disposable Pay = $4,126.68*0.25=$1,031.67 garnishment Disposable pay well above $580.00 biweekly so 25%
  53. Tax Levy Uses Take Home Pay Publication 1494 Dictates how much employee receives – everything else – goes to levy
  54. Tax Levy Employee claims Married filing jointly and 3 allowances on Form 668-W Employee is paid biweekly
  55. Tax Levy 919.23
  56. Tax Levy Based on all deductions in place at the time of levy, the employee gets to receive $919.23 Gross – all deductions in place = Take Home Pay Take home pay – amount from Pub 1494 = Levy amount
  57. Child SupportGarnishmentTax Levy Other examples
  58. Thank You for Attending! 20th Annual IL Statewide APA Conference – August 22-23, 2013