Ariane « The Payroll Department

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Employer Obligations: Paying Taxes on Employees’ Tips

Posted by Ariane on January 26, 2016

Do you have employees who receive tips? Did you know, as an employer, you have certain obligations when it comes to the income on your employees’ tips? Do you – and your employees – know that they must report the total amount of taxable tips to you by the 10^th of the month following the month after receiving the tips? If your employees don’t know this, you need to educate them.

Generally, your employee’s tips are not taxable unless they make more than $20 per calendar month. If they do make over $20 in tips per month, you’re responsible for withholding income and FICA (Social Security and Medicare) taxes on the employee’s reported tips (all tips, including the initial $20) – even though you don’t have control over the amount of tips your employee receives.

Also, you’re required to pay the employer’s portion of FICA and FUTA (federal unemployment) taxes on these tips. Additionally, you must withhold the 0.9% FICA Medicare surtax, too, if the employee’s tips (in combination with the wages you pay them) exceed the $200,000 withholding threshold.

However, your obligation to pay your employee’s portion of the FICA and income taxes due is limited to the amount of non-tip wages you pay the employee. If your employee’s paycheck isn’t big enough to cover the withholding taxes, you should withhold taxes in this order:

The employee’s portion of the FICA tax due on the non-tip wage payment.
The income taxes you’re obligated to withhold on the non-tip wage payment.
The employee’s portion of the FICA tax due on the tip income.
The income taxes you’re obligated to withhold on the tip income.

However, if this process still leaves you with insufficient funds to collect your employee’s FICA tax, your obligation to withhold the uncollected portion ends. As for collecting outstanding income taxes, these payroll taxes should be withheld from the employee’s next paycheck.

It’s important to note, if your employee doesn’t report their tips of $20 or more per calendar quarter to you, you can only be held liable for your portion of FICA. This liability only arises when the IRS makes a written notice, demanding payment.

Managing restaurant payroll and the payroll taxes can be complicated, but it doesn’t have to be if you have a payroll services provider like The Payroll Department handling your payroll and taxes for you. We can take the hassle out of figuring out what taxes you owe on the income from your employees’ tips and make these payments for you. Contact us for more information on how we can help you.

-Ariane of The Payroll Department Blog Team

Tags: benefits of outsourcing, employee tips, employees, employers, payroll service, reporting employee tips, taxes on tips, The Payroll Department

Posted in: IRS and Tax forms, Operating a Small Business, Payroll, Payroll Processing, Payroll Taxes, Rules, Regulations and Laws

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What Is ‘At Will’ Employment?

Posted by Ariane on January 5, 2016

As a small business owner, you’ve probably heard that Indiana and other states are at will employment states. But do you really understand what that means you are allowed to do or not do when it comes to terminating employees? Even in this area of your payroll process, The Payroll Department can help with information you need.

Basically, at will employment means you can terminate an employee with or without cause, at any time, without adverse legal consequences. However, you cannot terminate an employee for illegal reasons. Additionally, you don’t have to provide advance notice of termination. For example, at-will employers can:

Promote and demote employees.
Make unannounced pay and benefits cuts. As long as the pay cut doesn’t take the employee’s wage below applicable federal or state minimum wage.
Reduce paid time off.
Change work schedules – limiting hours or requiring on-call work.
Set your own policies.

Alternatively, employees can leave a job at any time, with or without a reason, without legal recriminations, too.

However, there are state and federal exceptions to this law. You cannot terminate employment for any of the following reasons:

Discrimination or harassment based on race, gender, national origin, religion, age (40 and older) and disability. This discrimination may occur before, during or at the end of employee’s
Retaliation against employees who complain about discrimination or harassment toward themselves or others, or within the company, or who participate in an agency or court proceeding concerning discrimination or harassment.
Jury duty attendance.
Filing or threatening to file a worker’s compensation claim or claim for unpaid wages.
Refusing to perform an illegal act, such as refusing to drive a truck that exceeds legal weight limits, or reporting illegal activity.

Additionally, you cannot terminate an employee at will if:

The employee has an employment contract which states the employee is employed for a set time period, or outlines specific situations or employee actions that may lead to termination for cause. Reasons for-cause termination may include poor employee performance, employee misconduct or economic necessity.
The employee is covered by a collective bargaining agreement that specifies the employee can only be terminated for cause.
The employee gave up job protected status with their former employer to work for you.

As a small business owner, you’re probably more knowledgeable in the actual running of your company rather than every local, state and federal law concerning employment, payroll and taxes. Therefore, to avoid errors that can lead to substantial fines and penalties, consider hiring The Payroll Department. As an experienced payroll services provider, we can handle your payroll and payroll taxes for you, so you can get back to managing your business.

-Ariane of The Payroll Department blog team

Tags: at will employment, benefits of outsourcing, Brownsburg, employee termination, employees, small business, small business payroll, The Payroll Department

Posted in: Hiring and Firing, HR Rules, Regulations and Laws, Human Resources, Operating a Small Business, Payroll, Payroll Processing

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Tips and Service Charges: What’s the Difference?

Posted by Ariane on December 29, 2015

Do you own a service industry small business, such as a restaurant, hair salon or hotel? Then it’s important as an employer that you understand your payroll responsibilities when it comes to calculating wages, employee reporting and tax requirements. One factor that affects your business’s payroll tax obligations is when your employees receive gratuities for their services. Do you know the rules? (more…)

Tags: benefits of outsourcing, employee tips, employees, employers, payroll tax reporting, payroll taxes, service charges, small business and payroll taxes, small business payroll, The Payroll Department

Posted in: IRS and Tax forms, Operating a Small Business, Payroll, Payroll Processing, Payroll Taxes, Rules, Regulations and Laws

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Special IRS Tip Rules for Large Food and Beverage Establishments

Posted by Ariane on December 15, 2015

Do you own a food and beverage establishment? Maybe you think you have a small business, but you might be surprised to learn it’s actually large when it comes to the Internal Revenue Service and how you annually report your receipts and tips. (more…)

Tags: benefits of outsourcing, Brownsburg, employers, Indiana, IRS business classification, large food and beverage establishment, payroll service, payroll tax reporting, small business payroll, The Payroll Department

Posted in: IRS and Tax forms, Operating a Small Business, Payroll, Payroll Processing, Payroll Taxes, Rules, Regulations and Laws

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Paying Employees “Under the Table” – Is It Worth the Risk?

Posted by Ariane on November 17, 2015

Have you ever had an employee ask you to pay their wages in cash – unreported? Or, maybe you’ve thought about hiring employees and paying them “under the table” to simplify your bookkeeping. What does it really mean to pay employees in cash? And more importantly, what are the consequences? (more…)

Tags: employee classification, employees, employers, small business payroll, The Payroll Department, untaxed payroll, worker classification

Posted in: IRS and Tax forms, Operating a Small Business, Payroll, Payroll Processing, Rules, Regulations and Laws

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2015 Indiana Tax Amnesty Program: Is Your Business Eligible?

Posted by Ariane on October 6, 2015

Do you or your small business owe taxes to the state of Indiana? You may be in luck. Beginning September 15, 2015, Hoosier taxpayers can apply for Indiana’s 2015 Tax Amnesty program, which offers both individuals and businesses a limited-time opportunity to pay past-due taxes free of penalty, interest and collection fees. About 40 different tax types are eligible for tax amnesty, including individual and corporate income tax, sales and use tax, inventory tax, and withholding tax. (more…)

Tags: 2015 tax amnesty, Brownsburg, Indiana, payroll tax reporting, save on tax penalties, small business and payroll taxes, tax laws for payroll, The Payroll Department

Posted in: IRS and Tax forms, Operating a Small Business, Payroll, Payroll Taxes

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Paid vs. Unpaid Internships: What Are the Regulations?

Posted by Ariane on September 8, 2015

Internships can be beneficial to both the student and employers. The student gets the opportunity to explore a career interest, apply what they’ve learned in the classroom in a professional setting and develop new, transferable skills. Employers gain new, innovative perspectives to their small business, help with project work and increased productivity. However, the big question employers may have is, whether to pay or not to pay for internships. (more…)

Tags: benefits of outsourcing, Indiana, internships, paid interns, payroll service, Teresa Ray, The Payroll Department, unpaid interns, worker classification

Posted in: IRS and Tax forms, Payroll, Payroll Processing

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Do You Have Ghost Employees on Your Payroll?

Posted by Ariane on August 4, 2015

No, we’re not implying your business is haunted and you’re paying salaries to spirits that may be hanging about. But your business could possibly have ghost employees of a different sort that you may not even be aware of if you don’t diligently monitor your company’s payroll.

Last year, Iraq’s new government found out they had 50,000 ghost soldiers on their payroll. These were actual soldiers who paid their officers a portion of their salaries and then didn’t show up for duty. Not only did this practice make their commanders richer, but it also weakens the country’s military force, leading to the ISIS takeover of Mosul.

If you’re thinking, “Well, that was Iraq. Something like that doesn’t happen in businesses in the U.S.” Think again. Just this year, a man who worked at the Knox County, TN, Trustee’s Office was jailed for fraud after he collected roughly $200,000 – four years’ worth of paychecks that he didn’t actually work for and yet received.

Unfortunately, ghost employees can exist within your company:

A manager hires a nonexistent employee, then deposits the paychecks into a bank account he/she has set up.
A payroll clerk leaves a terminated employee on the payroll, then keeps the paychecks to cash for personal use.
An H.R. employee sets up personnel and payroll files using social security numbers of people who have died and collects the salaries.
A vice president hires a son who never or rarely shows up to work, but still pockets the paychecks.

However, you can safeguard your company against payroll fraud – saving your company thousands of dollars in damages. By hiring a payroll services provider, like The Payroll Department, to handle your payroll, we can provide your company with another check and balance to your payroll processing system. If an employee is stealing money through your payroll, it would become more difficult if The Payroll Department was monitoring your payroll.

In fact, The Payroll Department requires all the paperwork of your employees and makes all the deposits for your payroll. If more than one paycheck were deposited to the same checking account, The Payroll Department would catch it and make you aware of the potential problem. Also, The Payroll Department notes all the social security numbers of your employees when making tax payments, so they’re more likely to detect duplicate numbers.

If your business doesn’t have checks and balances in place for your payroll, you could be setting your company up to be the victim of fraud. But, by outsourcing your payroll services to a third party group, like The Payroll Department, you can eliminate the possibility of ghost employees haunting your payroll. Call us today for more information.

– Ariane of The Payroll Department blog team

Tags: benefits of outsourcing, Brownsburg, employee theft, ghost employees, payroll taxes, small business payroll, The Payroll Department

Posted in: Operating a Small Business, Payroll Processing

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Are Employee Achievement Awards Taxable or Not?

Posted by Ariane on July 7, 2015

Employees need to feel valued and appreciated by employers. When you give your employees achievement awards, celebrating specific milestones in safety or length of service, you’re recognizing their efforts, which, in turn, fosters your employees’ desire to excel in their jobs and continue working at your company. However, employers need to be careful in their award gift selections. (more…)

Tags: Brownsburg, employee awards, employees, Indiana, IRS rules on employee awards, payroll provider, small business and payroll taxes, taxes on employee awards, The Payroll Department

Posted in: Benefits and Health Care, Payroll, Payroll Processing, Rules, Regulations and Laws

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Do You Need a New Form W-4 Every Year?

Posted by Ariane on May 26, 2015

Possibly. A Form W-4 remains in effect until an employee gives you a new one – except when an employee claims to be exempt from income tax withholding. It can be confusing, which is why so many small business owners choose to outsource their payroll to payroll services. (more…)

Tags: benefits of outsourcing, Brownsburg, employee tax forms, exempt employees, IRS form W-4, payroll service, payroll tax reporting, The Payroll Department

Posted in: IRS and Tax forms, Payroll, Payroll Taxes

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