Taxes! Exciting stuff, right? Summer’s starting, pool’s open, weather looks great…who has time to worry about employee payroll taxes? Let’s say you let your Summer Self call the shots and you forget to follow important rules for hiring and terminating employees. You’ll get hit with unwanted tax notices, and who wants those? Certainly not Summer Self!
Take our advice and follow these simple tax rules whenever you’re hiring or terminating employees. As always if you have questions please contact us at firstname.lastname@example.org.
- Verify the employee information (name, social security number) is correctly input in the system. We do not recommend using erroneous numbers as temporary “place holders” (ex. 111-11-1112). Often these are forgotten about and result in additional adjustment and fees to correct.
- Complete, accurate residential and work addresses are essential. Having incorrect or incomplete information can result in reporting corrections which could cost hundreds of dollars in fees and penalties.
- What location should you choose? Putting in a new work or residential location could have multiple options for the location coding based on the zip code. To ensure proper selection, confirm with the employee or feel free to contact Dominion Payroll for assistance. Many states have local taxes that are driven off this coding.
- Employee in a new state? Make sure to register for the state payroll tax accounts as soon as you can. Feel free to reach out to email@example.com for help with finding the registration links. During the registration process, you should be sure the effective date you choose is the first pay date for this new employee. Having an account effective date that is not aligned with their first pay date can cause issues.
- During Payroll Preview, be sure to check the “Exceptions” and “Payroll Summary” reports. It is good practice to verify all tax information (rates and state account numbers) is up to date and correct. Keep on the lookout for “The employee is located in a jurisdiction with (Insert State) Tax. This jurisdiction is not authorized and therefore the tax will not be withheld.” on the “Exceptions” report. This error indicates a tax code is new to your company. Just contact Dominion Payroll and we can get those codes added for you!
- Before the last payroll is processed for a terminated employee, double check their tax activity by using the “Payroll Accumulations” tool. If anything looks incorrect or odd, please contact Dominion Payroll to see if any corrections need to be made. Taxation errors found after the fact can result in a lot of fees and penalties, and, in some cases, the company paying employee taxes.
- We also recommend after the last payroll for an employee is processed to check the “Tax Register” report found under Reporting/Client Reports. Any state taxes applicable only to the terminated employee should have their accounts closed if there will be no further employees in the same location for the foreseeable future.
- Lastly, if a termed employee moves after leaving your company, they will provide a new address for W2 mailing purposes. The screen below is used to put in this new address. This ensures that the W2 address is updated but does not affect their taxability. For example, sometimes a termed employee will get their last paycheck and the payroll admin has already changed their resident address. In that scenario, the last paycheck would get taxed on that new address. And of course…be sure to check the box “Use for tax forms: W-2”