W2-C Goodness

Raise your hand if you dislike preparing W2-Cs.  Me.  My hand is WAY up!  I just left an organization where we ended up having to bring in a 3rd party to assist us because we had so many W2-Cs to produce.  Here's the back story:

A third party relocation vendor accidentally classed some expenses as non taxable for a prior year.  It wasn't until early in to the new year that they realized the error and contacted our organization.  The population was just around 1,000 employees, give or take a few hundred.  Without hesitation, a senior manager decided that the whole department would stop their work and prepare W2-Cs.  While this was a well intended order, there was very little training for the department of pretty green payroll professionals.

Needless to say, the mess grew until VPs realized it was out of control.  We had made more work for ourselves by not properly training our team on how to prepare a W2-C.  In theory, they seem pretty easy.  Truthfully, they are just math.  However, when folks do not really understand the dos and don'ts of W2-C preparation you can really mess up an employee's amended return.  

In case you yourself are not very savvy with preparing a W2-C, here's a few tips:

File a W-2c form to correct all errors. The exception: Most errors in Box 2, federal income tax withheld, aren’t correctable. If, due to a Box 2 error, employees were over withheld, they’ll get larger refunds; if they were under withheld, they’ll owe more tax.

Exception to the exception: Correct Box 2 errors if the errors are administrative (e.g., transposed numbers).  Important: Even if Box 2 isn’t corrected, correct related errors in Boxes 1, 3, 4, 5 and 6.

Do enter $0 in an appropriate box, if that’s the result of a dollar change.

Don’t zero-fill W-2c boxes you’re not correcting; leave them blank.

Do file Form 941-X by April 30 to report FICA under withholding and over withholding errors discovered on prior year W-2s.

Don’t file a W-2c with the SSA if you’re correcting only state/local information; send the form to the state/local agency.

When in doubt, connect with a tax expert, or call in the big guns like a Deloitte or PWC consultant.  

Data Security

I just realized I had not posted in a while....

Let's talk a little about protecting secure data.  Best practice dictates that if you need the access to perform your job, then you should have access.  I suppose where it gets tricky is there are those who think they need access, but they really don't.

I work for an organization where many employees have tenure well over 10 years.  In fact, I have a direct report with 25 years of tenure.  We hear a lot of "that's how we've always done it."  In the past, everyone shared and loved each other (professionally speaking) and many departments gave access to data to pretty much anyone who asked for it.

Times have changed....  While there is still a friendly atmosphere, best practices have evolved, as well as our internal processes and controls.  

It's a tough sell to an internal business partner when you cut off their access.  Fits.  Rage.  Angry words.  Yes, I got all of it.  I've outlined a new process, one with less steps and more control, and was still cursed at.  I tried my hardest to firmly and politely state that just because you send the Payroll department information does not mean you get full Payroll data base access.  And why would you?  "Because we've always had access."  That's a poor argument.  My reply, "What access do you really need?"  No answer.

So, this post is really just me griping about my internal discussion.  You get the access you NEED, not the access you WANT.  It's that simple.

Here's a great article that Chron posted on Payroll confidentiality:
http://smallbusiness.chron.com/confidentiality-payroll-information-40356.html

Year End

Another year is almost gone.  Yes, in the payroll world, we begin our year end planning in the summer, while we still have our sanity.

What does your year end check list look like?  At current, mine is 3 pages long of reminders, technology issues, check boxes and lessons learned from prior years.

If this will be your first year end with your department, or if you just want some free advice, here's a few tips:

Get in good with HR and IT.  They will be your best friends during the YE process.

Understand your payroll platform and your financial accounting system.  If you're fortunate, like me, to have an integrated system, various accruals and reversing entries could be made easier via the integration.  If the two systems are not integrated, make sure you have a strong understanding of what needs to happen from an accounting perspective for year end.

Delegate, delegate and delegate.  Don't tackle year end alone.  Even if you are the manager or supervisor, lean on your team. This gives them ownership and goals.  Put someone in charge of updating your company's intranet page, or have a team member liaise between payroll and HR on benefits.  It's a good way to help junior members gain more exposure, and it can alleviate items off of your plate.

Understand your external due dates, then give yourself and your department some wiggle room.

Taxes - are you in one of the Sixth Circuit jurisdictions where it was ruled that severance payments were FICA exempt?  If so, get on it and process refunds for any 2013 FICA that was withheld from severance.

Communicate and set realistic expectations - make sure everyone understands their role in the YE process.  Follow up, but don't micromanage the hell out of it.  Just make sure the tasks are getting done.

Be strong.  It only happens once a year.

Pay Stubs..ha ha "stubs"

When was the last time you looked at your pay stub?  I'll admit it, I don't typically look.  The most common response I receive when I ask someone "Did you look at your pay stub?" is "No, I'm salaried so I get the same every pay day."  But that's not the point.

Looking at your pay stub (payslip, pay advice) is a great way for employees to better budget their money.  Most employees have no idea if they are taking advantage of various tax savings opportunities.  I had one employee, a younger single gentleman, who opted to choose "married" thinking he would have a greater amount of Federal income tax deducted.

Did you set up a 2nd direct deposit account?  Check your pay stub for validation.  Enrolled in 401(k)?  Is the proper percentage being deducted?  Is it giving you the Federal tax relief you had hoped for?  Check your pay stub.

Looking at your pay stub also allows you the opportunity to see what types of work expenses are being deducted (uniforms and the like).  In some cases, these expenses could be itemized deductions on the employee's tax return.

Payroll is part of a larger process that relies on business partners and the employee to provide accurate information.  So please, if you notice an extra $10,000 in your bank account on pay day, check your pay stub.

401K Loan & LOA

How does your organization handle employee 401(k) loan payments while an employee is on non-military LOA?  I've recently learned how my org does it.  They have the employee mail us the check.  Our payroll team makes an entry within the payroll system, and then the loan payment data is recorded with all of the active employee deferral data on a weekly feed to Vanguard.

Does this seem strange to you?  A 401(k) loan repayment does not impact the W2.  Why is payroll doing this?

My proposal to our pension team includes these two options:

1.  Have the employee make the payment directly to Vanguard.
2.  Have the employee send the payment to them, and they can communicate to Vanguard that a payment was made.

Agree/disagree?

Certification Time!

How are you doing with maintaining your CPP credits?  Truth be told, I have not taken the CPP exam.  Ever.  I've taken plenty of mock exams but have just never taken the CPP.  I want this department to be certified (FPC or CPP) so I need to put my money where my mouth is and set an example.

I've started a review and study process for myself.  I'd like to sit for the CPP next month and I sure hope I can do it.  I've been involved in payroll as either a manager or senior analyst for over 15 years so I sure hope I can nail this.

What have you do to prepare for the exam?  What are some good study habits?

SMEs

Subject Matter Experts

Are you one?  Do you have identified SMEs in your department?  I've just hit the 6 week mark with my new team and it's pretty clear we lack in the SME arena.  There's a handful of people who understand the system very well, but outside of that, we don't have any real expertise.

I feel that this is the norm, however, in Payroll departments.  You will typically find SMEs in the HR field (recruiters, compensation, benefits, pension, etc.).  Why do you think that is?  I feel it all relates back to my first post:  payroll isn't sexy (yet!).

Relocation, state tax and reciprocity, deceased pay, severance, LOA....we have to have intimate knowledge about rules and regs and internal polices in order to execute appropriate payments.  Payroll departments have to have SMEs in order to ensure compliance.

Do you have SMEs in your department?