Bonus pay

[whfpc]

I need a little help in payroll. I have an employee that Session approved a discretionary bonus for $1000.00, they want me to make the check $1000.00 take home. The employee has a manual amount of $400 per paycheck taken out for taxes and a number of deductions (eye wear, dental etc), will I need to delete all of his deductions and change the manual to married and then figure out how much the check needs to be before deductions to give me a total of $1000.00? And then of course change it all back?

[NeilZ]

I need a little help in payroll. I have an employee that Session approved a discretionary bonus for $1000.00, they want me to make the check $1000.00 take home. The employee has a manual amount of $400 per paycheck taken out for taxes and a number of deductions (eye wear, dental etc), will I need to delete all of his deductions and change the manual to married and then figure out how much the check needs to be before deductions to give me a total of $1000.00? And then of course change it all back?

You do NOT need to delete any of the existing pay items. That said, he WILL be taxed on this one way or another. I would check with the employee as to what he wants to do, as is considered taxable income by the IRS, as well as many state and local governments. If this employee is clergy, then it is subject to SECA taxes, which is a whole different issue.

IRS Pub 15 says in Chapter 5:

"Wages subject to federal employment taxes generally include all pay you give to an employee for services performed.
The pay may be in cash or in other forms. It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits. It doesn't matter how you measure or make the payments."

Session may want the employee to get a full $1,000, but its not going to happen. This has to be reported on the W2. Even if you try to add money to the check so that they get a full 1,000 on the check, that additional money is also taxable.

I'd also check with your state income tax official. This is not a gift from individual congregation members where it may not need to be reported, this is coming from the Session as the governing body and, is considered to be coming from the employer.

That said, you would add an Payroll Income Item Description (if you don't have one already) for the Bonus using the proper expense account, and mark it as taxable. Then go to the Maintain List of Employees, and head to the employee's record. Under the pay items, you'll add that Bonus, and the amount. Make sure it is checked at this time.

You'll then process payroll, and check the box to Suppress specific items ... , on the next window UNCHECK everyone but this employee. When you get to the Process Items screen which lists all the Pay Items the employee has setup, UNCHECK everything but the taxes that are applicable. The next screen should show the employee with all the gross amounts, check amount, etc.

Double click on the employee to verify that the check will turn out correctly. Then print the check.

[whfpc]

What will I use for the pay period? We pay 941 taxes every pay period, will this mess anything up on that?
We do not pay state taxes

[NeilZ]

What will I use for the pay period? We pay 941 taxes every pay period, will this mess anything up on that?
We do not pay state taxes

Obviously any pay period you have not yet made a FITW deposit.

[whfpc]

That's what I assumed but didn't want to have that issue to deal with. Thanks for your help!