Knowing when wages earned should be reported and paid can be a tricky topic. myPay Solutions can help you become an expert.
First, it’s important to decipher these two payroll terms: 1) paycheck date and 2) pay periods. Paycheck date, also known as pay day, is the date on which employees are paid and checks are distributed. The paycheck date is used to determine when payroll liabilities are due, based on deposit schedules. Pay periods are the beginning and ending dates that represent the period in which employees worked or earned wages.
For a more detailed example, please refer to the calendar above. Let’s say your bi-weekly pay period is December 21, 2014, to January 3, 2015. If your paycheck date is in January 2015, the wages should be reported in 2015. If your paycheck date is in December 2014, your wages should be reported in 2014.
Questions often arise at the end of the calendar year or at the beginning of a new year about the year in which the wages should be reported. IRS rules are based on paycheck date, not pay period, so any wages paid in January will be included in the new year's wages for tax deposit and reporting purposes, including annual W-2 forms.
If your employees want to work overtime for some extra holiday cash or if you’re planning on giving employees holiday bonuses, make sure the check date is for 2014. If you write checks dated 2015 for bonuses, commissions, or hours worked in 2014, they will need to be reported on 2015 payroll tax returns and W-2s.
It is important to plan accordingly for last-minute payments you may be paying out in December. It can take up to 72 hours to process and guarantee direct deposits. Your myPay Solutions payroll specialist can help if you have any further questions.
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