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?

Processing Blues

Today is the first time with this employer that I "confirmed" or "transmitted" payroll.  It was a HUGE eye opener for me.  Here's what I learned:

1.  There's a LOT of room for interpretation - the documentation or checklist if you will is written for someone who has been performing these tasks for quite some time.  It makes a lot of assumptions.

2.  There's way too many tasks - there are 3 pages of "run this job" or "run this report" or "print and save a copy of this".  Honestly!  The platform we use allows for the automation of many jobs to be scheduled and ran at a specific time.

3.  Terminology - what I call something is not the same thing that a seasoned department member may call it.  We need to all be on the same page with vernacular.

4.  Audits - what audits?  I looked a report that provided data for employees receiving net pays for >$5,000.  What good does that do me?  Nothing.  I had to research each and every employee..and for what?  I could only look at hours and earnings codes and assume that what was passed into the payroll system is accurate.  Talk about risk....

This process has taken me over 2 hours to complete.  For under 6,000 employees and 1 pay group that is not acceptable.  I heard earlier there was a delay due to errors by the processing team.  It sounds like further upstream we have some opportunities as well.  Part of the issue is there are so many damn manual processes with the pilot and flight attendant pay data that it creates so much extra manual work for our group.

Yep...lots of room for improvement.

Internal Control Test

The time has come for me to prepare my team to work on obtaining their professional payroll certifications.  I've considered a pop quiz style FPC mock exam to get things rolling.  My intuition tells me that the majority of the group will not do well.  I have a team of very smart and dedicated employees.  With that stated, they, like many others, view payroll as just a job, not a profession.  I want to change that.

I want to focus this group on internal controls and compliance.  I feel that this will open their eyes to why this profession is so critical to the success of an organization.  So what's the best way to do that?  At a prior organization, a senior analyst asked permission to conduct an experiment.  She submitted a fake garnishment.  She and another employee, along with our director, doctored up a garnishment and mailed it to our office to see if our internal controls would recognize the garnishment as a fake.  Not only did our team not ID the garnishment as a fake, but they set it up for processing, which would have deducted about $1000 from this willing employee's pay check.

This experiment was conducted without my knowledge.  Initially I was embarrassed and even a little mad when I learned about it.  How could the team not spot some signs of this fake garnishment?  No mailing address, sloppy looking letterhead.  Even some of the words were misspelled!

I don't want my quiz or any tests of our controls to embarrass anyone.  But I want to illustrate the need for strong controls as well as a sharp eye for details.

How do you emphasize controls and compliance with your teams?  I'd love to know so please share!

Oh Canada

How many of you payrollers have employees in Canada?  Raise your hand, don't be shy.  I tell my staff that Canada is like one giant state of California, but with better beer.  For those who may not be familiar with Canadian labour laws, they are very pro-employee.  And why wouldn't they be?  It's a socialist country (I'm not going into politics nor am I looking for arguments about medical care.  That's a statement of fact).

I've recently bumped into an issue that illustrated that our internal communications around maternity leave are flawed.  As a previous supervisor would say, "It's an OPPORTUNITY for improvement."  Yes. Yes it is.

I was desperate for a paper ROE so I could amend one we had already submitted (again, flawed internal process). Our company also does not have an ROE on the web account.  For those not in the Canadian-know, ROE stands for "Record of Employment".  If you have an employee who will be out of work for 7 days or more, you must complete an ROE and submit it to Service Canada (sort of like their DSHS/Unemployment Office).

There's only 1 way to get your hands on a paper ROE.  You MUST order them from Service Canada.  I called and asked if I could show up in a Service Canada office and grab a stack of ROEs.  The answer:  "We don't have paper ROEs in our offices.  They are housed in our main office and they all get mailed from there."  What?

Our US government is horribly flawed, and our various agencies don't always make the life of a payroll professional easy (do they make any one's life easy?).  But I can walk into an IRS office and grab a blank form.  I can walk into a DOL or DSHS office and get a blank form.  But I cannot obtain a blank ROE without ordering one and then waiting while it gets snail mailed from the great white north to me in Seattle. 

As a side note...one of my analysts did find an old stash of paper ROEs in our office.  Hurray.

Oh..and if you want to sign up for ROE on the web, you must download a paper application and then take it into a Service Canada office.  This way a rep can verify your ID in person, and then create an ROE on the web account for you...which will take approximatly 20 days to establish.  Nice.

Meetings have been scheduled with our Canadian benefits and medical leaves team. Just thought you'd like to know I'm on this pesky process!

Making Payroll Sexy Again!

That's right.  Wait...was it ever sexy?  I can't say for sure.  All I know is that our friends in HR and IT get all of the cool kids and payroll gets the old ladies.  We're kept locked away in a dark closet and data entry and push a button. 

Just kidding....

I'm not old and I don't sit in a dark closet. 

I have to admit, I never sought out to be a payroll professional.  Who does, really?  Like many payroll professionals before me I fell into payroll.  It was a collateral duty, and sometimes, it's still viewed as such.  No one needed experience in payroll; it's just a process.  You only had to be good with math and have a slight understanding of federal and state withholdings (if that).

I learned to deduct taxes using the IRS publications and used ledger books for accruals (ah...sweet memories for those of us born before 1980).  And direct deposit didn't exist. Simpler times.

Today's payroll professional has to be an expert in not only federal taxes, but state and local taxes, not to mention reciprocity issues.  We must have a solid understanding of state and federal DOL regs, FLSA, benefits issues such as DOMA and its impact to taxation, retirement issues and vacation policies.  We must understand finance, forecasting, budget variances and SOX.  We must understand technology, how it interfaces with employees, our business partners, and other technology our organization uses.

All of these areas of expertise are necessary to be a successful payroll professional. 

So why no sexy?  I cannot put my finger on it.  In my opinion it's the lack of awareness of what a payroll professional actually does.  We're not button pushers.  We're not data entry clerks.  Sure, in some roles within payroll there are transactional tasks, but you will find that within many professions (you hear me, I9 validator?!).

My goal as a payroll professional is to advocate change and bring awareness of the role.  I don't have a roadmap yet, but it's in process.  And it's gonna be sexy.

And if you are a people manager, like me, having the above expertise is not enough.  You then must deal with the bullsh*t of having direct reports.  That's another post.

Until then, my payrollers, keep your head up and your costs low.