Payroll Definitions

“Back-pay” is pay received for actual or deemed employment in a prior tax year. Back-pay that is wages for covered employment is FICA taxable regardless of the year paid. Use the SS wage ceiling and percentage in effect in the year that the back-pay is distributed (not the year when the employee should have received it).



FICA-exempt payments include damages for personal injuries, interest, penalties, or legal fees. Because the SSA might treat back-pay given for different reasons in different ways (e.g., a court award for back-pay due to discrimination v. an out-of-court settlement), reporting different kinds of back-pay separately is important. Back-pay should be reported on the employee’s W-2 in the year paid.



“Special wages” are nonpayroll wages for services performed in a prior year—e.g., accumulated sick or vacation pay, bonuses, deferred compensation, sales commissions, and severance pay. If the employee or former employee now receives Social Security retirement benefits, these payments should be reported on the employee’s W-2 in the year they are received. Use Form SSA-131 to report special wage payments, such as nonqualified deferred compensation and §457 plan deferrals and payments earned in a year prior to the year of payment.

Year End

Now is a great time to review your profit & loss and balance sheet to see where you stand as the year end approaches. Clean up your books and consult your CPA to help you plan to close out your year on the right note.

2010 Summer Hiring Rules

Some federal regs you should know



Paid holidays. Under federal law, paying part-time and summer help for holidays is optional any time of year.



Paid vacation. No law requires paid vacation, but if you give paid vacation, some federal and state laws apply.



Benefits. Providing health insurance or other benefits to temporary and part-time employees is optional; if not available, it should be so stated in a written benefits plan.



Federal W-4. Obtain from all summer employees, even students working part-time and foreign students.



FIT. Withhold from all summer employees unless their W-4 results in no withholding.



FICA. Withhold from all workers, even those receiving Social Security benefits and high school students, unless under 18 working for sole-owner parents.



Overtime pay under federal law. Due for hours actually worked over 40 hours in the workweek, but not required for paid time-off (holidays and vacation days). Do not try to substitute paid nonwork hours for work hours to make all hours straight time, thus avoiding overtime pay.

Home Office Deductions

If you have a home office and misuse the rules on home-office deductions, you may be denied not only that write-off, but all home-office deductions.



Two people ran a partnership from their home. The partnership deducted the rent it paid the couple for office rent in the home. When the IRS denied all deductions related to business use of the home, the case ended up in court.



Finding no written rental agreement, the court held the rental deal to be simply tax planning because the terms were not arm's length, and there was evidence that the office was used for nonbusiness purposes. The court then denied utility, repair, maintenance, mortgage interest, property tax, and office depreciation expenses. [Chaney v. Commissioner, T.C. Memo. 2009-55]

excerpted from AIPB General Ledger

End of Year Crunch

I don't know about everybody else, but I'm swamped. Everybody is right on top of things this year and everyone wants their books done yesterday. Not that I'm complaining. I love the work. And I'm very happy to have everyone on the ball and not having to track them down myself. But whewee I am going to be burning the midnight oil for a while.
So get your books in shape now!

It's Almost Year End!

Oh no! December 31st is approaching! Rapidly! Are your books in order? Your accounts up to date? Are you realising that you should have been entering your financial info into some sort of software program all year long?
Grab that big brown bag of receipts and get a move on. It may be time to call in a professional bookkeeper to minimize your frustration and maximize the benefits. It will cost you a lot less than having your CPA work through it when he is trying to prepare your tax returns.

New Federal Withholding Tables

Thanks to the federal stimulus package that reduced federal withholding amounts for most of the year you will now be getting a smaller paycheck. The tables are again being readjusted to remedy errors in the original package. It may be too little to late though. Many taxpayers are expected to have reduced refunds or even worse - owe at the end of the year. Prepare yourself accordingly.