What is the difference between regular and supplemental wages? Is your payroll system set up to accurately track these? Attendees took a deep-dive into these issues and more at the American Payroll Association’s (APA) 36th Annual Congress workshop, “Supplemental Wages and Proper Taxation.”
Sally Thomson, CPP, an APA Director of Payroll Training, and Tori Worley, CPP, Payroll Manager at Kum & Go LC, led the workshop and answered questions. Topics covered included reduced tax rates under the tax reform law, how to accurately track supplemental wages, and how to manually calculate federal income tax withholding.
While most payroll calculations are automated, Thomson said it’s important for payroll professionals to be familiar with behind-the-scenes calculations and procedures in order to stay compliant.
“Our payroll systems today are so sophisticated, they do all the calculations for us,” Thomson told Congress Today prior to the presentation. “However, payroll processors should be able to explain to an employee how their taxes are calculated. If an employee questions their withholding, they won’t be satisfied with the answer, ‘Well, it must be correct because the system calculates it that way.’ The IRS gives us prescribed methods to use when calculating the withholding for income, social security, and Medicare taxes.”
Thomson told participants not to settle for the default method—there’s always a way to be a better, more efficient payroll professional.
“We are ultimately responsible for the proper withholding of taxes,” Thomson said. “You will learn how the proper setup of earnings and deductions codes in your system impacts tax withholding. Also, your system may offer options for withholding on supplemental wages you weren’t aware existed.”
This morning’s workshop reaffirmed for Elizabeth Burroughs, CPP, Payroll & Benefits Specialist at Allianz Worldwide Partners, that her organization is doing its due diligence in this area.
“It’s important to understand the differences in how the types of supplemental income that we present to our employees, including paycards, awards, and bonuses, are taxed,” she said.
In addition, the workshop’s discussion of relocation changes at the federal level piqued her interest in doing further research at the state level.
“I plan to look into the laws in the different states where have associates working,” she explained.
Additional reporting by Apryl Motley