FPC Payroll Fundementals 1.1 & 1.2
Functions of Payroll Department - ANS-Paying employees
Verifying the integrity of pay data
Collecting/inputting/auditing data
Inputting new hire information
Record keeping
Reporting payroll data
Distributing paychecks and pay stubs
Creating automated clearinghouse (ACH) files
Withholding, depositing and reporting taxes
Communicating with employee files
Reconciling payroll data
Processing deductions
Researching federal and state regulations
Employers withhold the following from employees pay; - ANS-federal income tax
social security tax
medicare tax
state income tax
local income tax
Independent Contractors - ANS-Tax withholding is not required by employer.
Designating Worker Status - ANS-Responsibility of the employer
Common Law & Reasonable Basis Tests - ANS-Tests an Employer uses to determine whether a
worker is an employee
Form SS-8 - ANS-Determination of Worker Status for Purposes of Federal Employment Taxes
and Income Tax withholding
Common Law - Employee - ANS-Required to comply with employer's instructions about when,
where and how to work.
Works exclusively for the employer
Hired by the employer
Subject to dismissal; can quit without liability
Has a continuing relationship with employer
Work done personally
Performs services under the company's name
Paid a salary; reimbursed for expenses; participates in company's fringe benefits programs
Furnished tools, equipment, materials and training
, If an outside salesperson:
company provides leads, sets terms and conditions for the sale, assigns a territory and controls
the sales process.
Common Law - Independent Contractor - ANS-Sets own hours; determines own sequence of
work
Can work for multiple employers; services available to the public
Is self employed
A contract governs how the relationship can be severed
Works by the job
Permitted to employ assistants
Performs services under the worker's business name
Payment by the job; opportunity for profit and loss
Furnishes own tools, equipment and training; substantial investment by the worker
Controls the sales process and terms
Reasonable Basis Test - ANS-Employers can classify certain workers as independent
contractors for employment tax purposes even though the workers meet the requirement of a
common law employee, if they have a reasonable basis for doing so.
Reasonable Basis Test - IRS' Requirements - ANS-Have consistently treated the worker or
similar workers as an independent contractor and have filed tax returns (Form 1099-MISC)
consistent with their treatment as independent contractors.
Have a longstanding, recognized practice in a significant segment of the employer's industry of
treating similar workers as independent contractors.
Have a judicial precedent (i.e., court decisions) for treating workers in similar circumstances as
independent contractors.
Be able to demonstrate that the IRS has ruled in a "published ruling" that the workers are
independent contractors and the facts relating to the workers are the same as the examples in
the "published ruling."
Have received a specific ruling from the IRS (e.g., a Private Letter Ruling) that the worker are
independent contractors.
Have has a past IRS employment tax audit of the employer that did not disallow the worker's
treatment as an independent contractor.
Have received guidance from an attorney or CPA that the worker is an independent contractor.
Temporary Service / Leased Employees - ANS-These individuals generally are employed by
orgranizations described as temporary service agencies, leasing companies, or Professional
Employer Organizations. These organizations bear the burdens of an employer;
Paying
Withholding
Reporting
Providing Benefits
Functions of Payroll Department - ANS-Paying employees
Verifying the integrity of pay data
Collecting/inputting/auditing data
Inputting new hire information
Record keeping
Reporting payroll data
Distributing paychecks and pay stubs
Creating automated clearinghouse (ACH) files
Withholding, depositing and reporting taxes
Communicating with employee files
Reconciling payroll data
Processing deductions
Researching federal and state regulations
Employers withhold the following from employees pay; - ANS-federal income tax
social security tax
medicare tax
state income tax
local income tax
Independent Contractors - ANS-Tax withholding is not required by employer.
Designating Worker Status - ANS-Responsibility of the employer
Common Law & Reasonable Basis Tests - ANS-Tests an Employer uses to determine whether a
worker is an employee
Form SS-8 - ANS-Determination of Worker Status for Purposes of Federal Employment Taxes
and Income Tax withholding
Common Law - Employee - ANS-Required to comply with employer's instructions about when,
where and how to work.
Works exclusively for the employer
Hired by the employer
Subject to dismissal; can quit without liability
Has a continuing relationship with employer
Work done personally
Performs services under the company's name
Paid a salary; reimbursed for expenses; participates in company's fringe benefits programs
Furnished tools, equipment, materials and training
, If an outside salesperson:
company provides leads, sets terms and conditions for the sale, assigns a territory and controls
the sales process.
Common Law - Independent Contractor - ANS-Sets own hours; determines own sequence of
work
Can work for multiple employers; services available to the public
Is self employed
A contract governs how the relationship can be severed
Works by the job
Permitted to employ assistants
Performs services under the worker's business name
Payment by the job; opportunity for profit and loss
Furnishes own tools, equipment and training; substantial investment by the worker
Controls the sales process and terms
Reasonable Basis Test - ANS-Employers can classify certain workers as independent
contractors for employment tax purposes even though the workers meet the requirement of a
common law employee, if they have a reasonable basis for doing so.
Reasonable Basis Test - IRS' Requirements - ANS-Have consistently treated the worker or
similar workers as an independent contractor and have filed tax returns (Form 1099-MISC)
consistent with their treatment as independent contractors.
Have a longstanding, recognized practice in a significant segment of the employer's industry of
treating similar workers as independent contractors.
Have a judicial precedent (i.e., court decisions) for treating workers in similar circumstances as
independent contractors.
Be able to demonstrate that the IRS has ruled in a "published ruling" that the workers are
independent contractors and the facts relating to the workers are the same as the examples in
the "published ruling."
Have received a specific ruling from the IRS (e.g., a Private Letter Ruling) that the worker are
independent contractors.
Have has a past IRS employment tax audit of the employer that did not disallow the worker's
treatment as an independent contractor.
Have received guidance from an attorney or CPA that the worker is an independent contractor.
Temporary Service / Leased Employees - ANS-These individuals generally are employed by
orgranizations described as temporary service agencies, leasing companies, or Professional
Employer Organizations. These organizations bear the burdens of an employer;
Paying
Withholding
Reporting
Providing Benefits
