Human Resources

Processing payroll in Kansas is less complicated than in some other states, like California. Kansas has only one state-specific payroll form and doesn't have local taxes. Its payroll laws mostly follow federal guidelines and should be a straightforward process. However, although doing payroll in Kansas isn’t as involved as other states, it can still be time-consuming and risky to process by hand. Payroll software like will withhold and file your payroll taxes as well as remit them to applicable tax agencies. If its reps ever make a mistake that results in a penalty or fine, QuickBooks Payroll will cover it. And it provides direct deposit at no additional cost. Sign up today and get 50% off for 3 months. Step-by-Step Guide to Running Payroll in Kansas Running payroll in Kansas requires your full attention to make sure you don’t miss any steps. Making even innocent mistakes can be costly. Here are your basic steps for running payroll in Kansas. Step 1: Set up your business as an employer. If your company is new, you may not have a Federal Employer Identification Number (FEIN). This is a simple process that can be completed online via the Electronic Federal Tax Payment System (EFTPS). Your FEIN is required to pay federal taxes. Step 2: Register with Kansas. If your business is new, you need to register on the Secretary of State’s Kansas Business Entity Formation website. Any company that pays employees in Kansas must register with the Kansas Department of Revenue. Kansas provides a Business One Stop website with information and links to help you move through the steps of registering your business in Kansas. Step 3: Create your payroll process. You’ll need to make key decisions, like how often you plan to pay your employees and what form of payment you intend to use. You’ll also need to designate when you’ll collect payroll forms and how payroll taxes will be managed. Overall, you can opt to process payroll by hand, making most of this manual and not recommended; set up an Excel payroll template, which will help ensure your calculations are accurate; or sign up for a payroll service to help you handle your Kansas payroll. Step 4: Have employees fill out relevant forms. When your company hires new employees, there are certain forms you must collect. Every employee must complete I-9 verification no later than their third day on the job. New employees must also have a completed W-4 on file. Kansas also requires employees to complete Kansas Form K-4. Step 5: Review and approve time sheets. Processing payroll often begins several days before your payroll deadline. Starting a few days early gives you the opportunity to spot and address any issues with employees’ timesheets. You can use paper time sheets or time and attendance software (there are free options); either way, you’ll need to review the time sheets for accuracy. Step 6: Calculate employee gross pay and taxes. You’ll need to make numerous payroll calculations, from total hours worked and gross pay to total income taxes and benefits deductions. Tax calculations tend to be the most complex for employers. Kansas has three tax brackets and no local taxes. Step 7: Pay employee wages, benefits, and taxes. The vast majority of companies and employees use direct deposit. But cash and paper checks are also options. Make sure that you are paying your employees at least the Kansas minimum wage, which is the same as the federal minimum wage, $7.25 per hour. You can pay your federal and Kansas state taxes online. If you use a benefits provider, it should work with you to make deductions simple, automatic, and electronic. Step 8: Save your payroll records. As with any business record, you want to make sure you have a copy for at least several years. Kansas law requires companies to keep the following information for at least three years: Each employee’s name and job title Each employee’s rate of pay, pay frequency, and time records Employee payroll records Step 9: File payroll taxes with the federal and state government. All Kansas state taxes need to be paid to the applicable state agency on the schedule provided, usually quarterly, which you can do online at the Kansas Department of Revenue website. To pay federal taxes, you can make those payments online using the EFTPS on one of the following two schedules: Monthly: When the IRS assigns you a monthly schedule, you need to deposit employment taxes on payments made during a calendar month by the 15th of the following month Semiweekly: When the IRS assigns you a semiweekly schedule, you must deposit employment taxes for payments made Wednesday, Thursday, and Friday by the following Wednesday, and for payments made Saturday, Sunday, Monday, and Tuesday by the following Friday Please note that reporting schedules and depositing employment taxes are different. Regardless of the payment schedule you are on, you only report taxes quarterly on Form 941 or annually on Form 944. Step 10: Complete year-end payroll reports. Every year, you will need to complete payroll reports, including all W-2 forms and 1099 forms. These forms need to be in the hands of employees and contractors no later than Jan. 31 of the following year. Kansas Payroll Laws, Taxes, and Regulations Kansas mirrors federal regulations. With few exceptions, most employers in the US must pay Federal Insurance Contributions Act (FICA) taxes. The current FICA tax rate for Social Security is 6.2% of employee earnings and 1.45% for Medicare. You’ll withhold this amount from employee paychecks and a matching amount from your business bank account. In addition, you’ll likely be responsible for unemployment taxes and workers’ compensation insurance. Kansas Taxes Beyond federal taxes, Kansas levies state taxes on businesses and employees. Making your job easier, Kansas does not levy local taxes on businesses. Employer Unemployment Taxes All businesses in Kansas must pay State Unemployment Tax Act (SUTA) taxes. The current wage base is $14,000 and rates range from 0.10% to 7.60%. New employers not in the construction industry have a standard rate of 2.70%. The construction industry's new business rate is 6.00%. Workers’ Compensation Kansas businesses must carry workers’ compensation insurance if they pay out $20,000 in payroll per year. It covers your company in the event that any employees become injured or sick on the job (or as a result of the job). However, if your business is in the agricultural industry, you do not need to carry it. Income Taxes Kansas charges income taxes, so you’ll need to withhold the correct amount of funds to remit to the state government. The three Tax rates are: 10%, 5.25%, and 5.70%. You’ll need to follow the Kansas Tax Withholding Guide if you’ll be manually calculating deduction amounts. Kansas Minimum Wage Kansas has a straightforward minimum wage that mirrors the federal minimum wage of $7.25 per hour. Businesses must pay tipped employees at least $2.13 per hour, provided that their tips get them to the hourly minimum wage. If it doesn’t, you’ll need to pay the difference. Calculating Overtime Kansas overtime follows the Fair Labor Standards Act (FLSA) requirements and mandates that all employers pay employees covered by the FLSA 1.5 times their regular hourly wage for hours worked over 40 in a workweek. Kansas law goes one step further, requiring employers to pay employees not subject to the FLSA 1.5 times their regular hourly wage for any hours worked over 46 in a workweek. Paying Employees Kansas law requires that employers pay employees at least once per calendar month and make payments on a regular basis. Kansas also provides several options for paying your employees: Cash Paper check Direct deposit Payroll card Pay Stub Laws There is no Kansas law that requires an employer to provide employees with a pay stub. However, if an employee requests one, the employer must provide an itemized statement of deductions for each pay period. Kansas Paycheck Deductions In Kansas, only certain deductions can be made from an employee’s paycheck. The only deductions allowed include: Those required by state or federal law Deductions for medical care Employee authorized deduction for a lawful purpose Retirement plan contributions The law also specifies that certain deductions cannot be made. These include: Cash shortages Damage or loss of employer’s property Uniforms Tools Other items necessary for employment Terminated Employee’s Final Paychecks Kansas provides for paying employees after the employment relationship ends. In every instance, you must pay the employee their final pay on the next regularly scheduled payday, regardless of whether or not they left voluntarily. Kansas HR Laws That Affect Payroll For the most part, Kansas HR laws are straightforward. But paying close attention to nuances will help make sure your company remains compliant. Kansas New Hire Reporting All employers must complete form K-CNS 436 to report new hires within 20 days of their first day of work. This is used to enforce child support orders and must include the employee’s name, address, and Social Security number. Meals and Breaks Kansas does not require employers to provide a meal break to employees. So the federal guidelines apply, requiring breaks of less than 20 minutes (if given) be paid; meal breaks of 30 minutes or more may be unpaid. Kansas Child Labor Laws Generally, children must be at least 14 to work in Kansas, although exceptions include paper routes, farm work, and acting. Both federal and Kansas child labor laws restrict children under 16 from working more than three hours on a school day and 18 hours in a school week. Children under 16 can also work up to eight hours on a nonschool day and 40 hours in a nonschool week. Work hours must be between 7 a.m. and 7 p.m., except from June 1 through Labor Day, when hours are extended to 7 a.m. to 9 p.m. Time Off and Leave Requirements Generally, Kansas has no state-specific leave requirements and follows federal law. Payroll Forms Payroll forms can vary from state to state, and some have their own W-4, like Kansas. Fortunately, that’s the only one. K-4: Employee withholding form Federal Payroll Forms Here is a complete list and location of all the federal payroll forms you should need. W-4 Form: Provides information on employee withholdings so you can properly calculate and withhold federal and state income taxes W-2 Form: Used to report total annual wages for each employee W-3 Form: Used to report total annual wages for all employees Form 940: To calculate and report unemployment taxes due to the IRS Form 941: Used to file quarterly income tax Form 944: Used to file annual income tax 1099 Forms: Provides information for non-employee contract work Kansas Payroll Tax Resources Kansas Department of Revenue provides many forms, information on the latest laws and regulations, and other employer-specific information. Setting up a new business can present unique challenges. Kansas Business One Stop provides a setup wizard to help you. For extensive information on how to get workers’ compensation coverage, Kansas’s Department of Labor offers guidance. Bottom Line Kansas payroll is more straightforward than many states and generally follows federal guidelines. There is only one state-specific form and no local payroll taxes.

Check out our free printable timesheet templates your team can use to manually track their time. We also offer alternatives if manual time entry isn’t the right fit.

Conducting a payroll audit helps ensure your payroll process complies with labor, accounting, and tax laws. Further, regular payroll audits reduce occurrences of fraud, embezzlement, and wage theft. To help strengthen your financial controls and address potential issues, you can use our free customizable payroll audit checklist that covers how to conduct a payroll audit. For step by step guidance and tips that may help you along the way, check out our How to Conduct a Payroll Audit video, part of our Payroll Video Library. 1. Determine the Timeframe and Process for Your Payroll Audit Set yourself up for success when planning your payroll audit by considering the who, what, and when. We recommend conducting a payroll audit annually, but if this is your first audit and you want to make sure your payroll and data controls are working, you should consider doing mini audits more frequently (such as quarterly or even monthly). You can use our Payroll Audit Checklist to come up with a plan for what you will be testing, when it should happen, and in what order. You may also want to note the names of individuals who can assist in the audit activity. This will help ensure the right team members are present when you need them, so the audit isn’t delayed or completed out of order. Click the button below to download our editable Payroll Audit Checklist spreadsheet for free. Payroll Audit Checklist 2. Develop a Spot Checking Strategy Instead of verifying data for all employees, look at the payroll data for 5% to 10% of your total workforce. You should also determine how you will randomly select employees, payroll periods, and payroll transactions. 3. Run Reports for Employee and Payroll Data If your business is using either a payroll software or service, note that these providers typically offer reports that help make payroll auditing easier. If you’re handling payroll yourself, then you need to create and manage your own reports. To help you review employee and payroll data, here’s a list of what you should verify for payroll audits. Verify Active Employees Some of the important items that you should look at include staff names, jobs, and start dates. You should also check if terminated employees are still on the payroll or if there are employee names that you’ve never heard of. The presence of either one indicates that there might be a problem. If you are a small business owner, you can check the staff list yourself as you’ll likely know the names of all your workers. However, if your company is a midsized business or large firm, you can ask help from your managers to ensure all their employees are listed correctly. For businesses using various employee-related systems (like HR, timekeeping, and payroll solutions), you may want to verify whether the staff data matches between these software programs. Also, double-check contract worker information as their payment details may be stored in your accounting software instead of in your payroll system. Verify Employee Pay Rates Match the pay rates showing in the employee file to the amounts on your payroll reports. If you’re using either an HR software or a payroll system, or both, these solutions typically have reports that list your employees’ names, start dates, and pay rates. You ultimately want to see that no one is getting paid more or less than they should. Verify Pay Periods Worked If you have both a timekeeping and payroll system, you can compare data for a specific time frame (like a random pay period). You’ll need to check that the pay periods line up and that data (such as actual hours worked) from one system matches what the employees got paid in that timeframe. You also want to make sure that employees are receiving their pay on the designated day. If funds are being transferred too early, you may experience cash flow shortages that could impact inventory or supply purchases. If they’re being remitted too late, you could face a labor law violation. Certain states have minimum pay frequency laws governing how your pay periods should flow. 4. Compare Hours Worked Against Timecard Data Once you’ve taken a look at the big picture data—such as employees, pay rates, pay periods—it’s good to do a deeper dive. You can check timekeeping records to ensure employees are being paid correctly for hours worked, including overtime for nonexempt employees. Here are some of the essential data points you should check. Make Sure Employee Hours Worked Match Amounts Paid Whether you’re using paper time sheets, punch cards, or an employee time clock app, you can look at historical time card details and compare these to payroll data of the same time frame. If an employee’s time sheet shows they worked 35 hours from Sept. 2 through Sept. 9, the payroll data (i.e., on the pay stub) should reflect the same information. Be sure you’re comparing data that covers the same pay periods, and then list any differences or discrepancies between the two data sources. Ensure Overtime Hours Are Calculated and Paid Correctly A common payroll issue many employers experience is not paying workers overtime correctly. Most states require overtime to be calculated at time and a half, meaning that for every hour an employee works past 40 hours in a pay period, they get paid 1.5 times their regular rate. Note, however, that state overtime laws vary (i.e., California requires any employee working over 12 hours per day to be paid double their regular hourly rate). Check to make sure you’ve calculated and paid overtime correctly per your state requirements. To verify that you’ve paid out the right amount to employees, you may need to recompute some payroll transactions. If there are differences, you need to backtrack and figure out what the problem is. Incorrectly paying overtime could subject you to fines and penalties, plus you may end up owing more money in taxes. Verify Tips, Bonuses, and Commissions If your business is in the restaurant, services, and sales industries, you need to verify that additional payments are being tracked and managed correctly. These include bonuses, commissions, and tips to staff. You should track these amounts as they’re earned and paid, and ensure the resulting employee pay matches on pay stubs. If you’re using HR or payroll software, check to see if it can create tip reports; they enable you to view employee tip data, amounts, and dates paid. Bonus payouts should be classified as what they are instead of tagging them as regular pay. You should also have documentation in your files to support the payout. Plus, it should be clear what the bonus is for (such as performance and holiday bonus) and who approved for it to be paid. As for verifying commission payments, dig a little deeper to find paperwork that shows how the commission payment was calculated. You should know how many sales the employees made and which products they sold to earn money. 5. Run a General Ledger Report Your general ledger (GL) shows every transaction that occurred within your company, making it an essential data source for conducting effective payroll audits. For payroll, you typically have expense and payable accounts. The expense accounts show what expenses your business incurred (like wage expense), while the payable accounts show the amounts that your business owes others (such as Social Security, Medicare, and FICA taxes). You’ll need to verify whether the amounts in your payroll records match what’s on the books—the accountant’s term for GL. If there are any amounts in your payroll records that you cannot trace back to the GL, you need to do some research. Note that these records won’t reflect work hours paid but rather amounts paid. You need to trace the payroll transactions you choose to analyze for the audit throughout the entire process—from timekeeping system and payroll records to GL. You can start by choosing random transactions in the general ledger and work back to check that they align with your other records. Verify Federal and State Tax Payments and Deductions It’s important to review the taxes you’ve paid on behalf of your business in addition to the taxes you’ve withheld from your employees’ paychecks to remit to the IRS. As you start reviewing your payroll tax general ledger accounts, spot-check a few W-4 forms to ensure you’re withholding the correct tax amounts for those employees and paying the right amount of taxes. Note also that regardless of whether you remit your payroll taxes quarterly or annually, there will be a delay from the time the expense and liability show up on your books until they are paid. You have to trace some of these transactions to ensure they are being handled correctly. For example, when you pay quarterly taxes, the monies held from January to March shouldn’t still be sitting in the taxes payable account in September. The amounts will enter your taxes payable accounts as credits on each payday and then clear as debits when you pay the IRS. If the amounts in your tax payable accounts are steadily increasing throughout the year, even at the end of the quarters after payments should have been made, then there’s a problem. If your payroll tax accounts don’t seem to be clearing properly, and you’re sure you’ve been paying the IRS, check the cash GL account. The best way to search is by dates. Find all transactions that are posted on and around the date you believe you paid the taxes—pull a receipt or some other tax documentation to help you pinpoint. Look for the amount of the payment in the GL account, and once you find it, you should be able to see the other side of the transaction. If the other part of the transaction doesn’t show your tax payable account, that would explain why your accounts aren’t clearing. You’ll need to see where the charges are going and make some corrections to your books. This is essentially payroll accounting, so you may need to solicit help from your bookkeeper or certified public accountant (CPA). Verify Non-Tax Deductions Are in the Correct Accounts Most employers deduct monies from an employee’s paycheck for benefits, uniforms, or court-ordered judgments (like child support). You should verify if your payroll deductions are being booked properly by following a similar process to how we suggested you trace your payroll tax transactions—from beginning to end. This will confirm your end-to-end payroll deductions are functioning properly and whether you need to conduct further investigation into potential data discrepancies. Look at the funds withheld on a payday and follow through to ensure those funds were credited to the correct account for holding and then immediately debited in the proper time frame. For example, 401(k) contributions and health insurance premiums can be sent to the provider every payday or at month’s end. You should also look at a few pay stubs to check that benefits premiums that your employees are responsible for paying are coming out of their paychecks. Here are some of the employee deductions you should verify. Health insurance: Aside from checking whether health insurance deductions have been deducted from the correct employees’ payroll, you should verify that these are being placed in the right insurance payable account and timely payments are being made to the insurance carrier. Garnishments: What you’re looking for is whether garnishments are being tracked and that deductions are being made against the employees’ paycheck. You should also check if the withheld amounts are paid to the requesting agency on time and from a garnishments payable account. Retirement: Verify that the 401(k) employee and employer contributions are being sent to the bank at the end of each pay period and if the employer contribution amounts or percentages are correct. Verify If Payroll Account Data Matches Bank Account Data By looking at bank account statements and comparing them to your payroll cash GL account, you can see whether there are amounts being paid out of the cash account that doesn’t belong. You can also find if some employees haven’t cashed their final checks or a payroll amount was paid twice to the same worker. These are issues you’ll want to address. If you have terminated employees whose unclaimed final paychecks have gone stale, then you have to void and reissue the checks. To avoid this situation, we recommend reaching out to these employees a reasonable number of times. If you’re unable to reach them, you need to send their checks to the state as unclaimed funds. 6. Look for and Document Any Atypical Transactions This is where you’re doing a gut check and looking for anything that’s out of the norm. If you see an employee is paid $2,600 every pay period for three months and, all of a sudden, they receive a $5,000 paycheck, you should research it. If you notice a garnishment payment that seemingly starts all of a sudden, and you have no knowledge of it, dig deeper. Here are some atypical transactions to look for and monitor. Retro Pay: This is typically a line item that’s added to an employee’s paycheck when you’re paying them after a payroll mistake has been made in a prior pay period. Maybe they got a raise, but it wasn’t processed on time, or perhaps they forgot to tell you they worked six hours on a Saturday. The applicable retro pay amounts are then added to their current paycheck. However, these transactions should be infrequent. Back Pay: Back pay is due when you’re ordered by a government agency to pay a person for prior pay periods items—such as miscalculated overtime pay, having paid a worker below minimum wage, and docking an employee’s pay illegally. In cases of wrongful termination, back pay may be ordered by the court as part of the judgment. If you find yourself being ordered to pay back pay often, then it indicates that you have an HR or payroll compliance problem in your business that you have to fix going forward. Garnishments: Garnishments (like child-support) are managed differently in different states, plus the IRS may also garnish a person’s wages for back taxes. You should ensure that the correct amounts are being deducted and paid, and that garnishment documentation is on file for payroll record-keeping purposes. Freelancer Pay: Review 1099 Form and W-9 Form copies. In addition, you should ensure that your business is not expensing payroll taxes on the amounts paid to freelancers and that your freelancers are classified correctly to avoid tax penalties. 7. Reconcile Payroll Accounts with Bank Account Aside from reviewing what’s in your GL, you should take a look at the specific bank accounts you have set up to manage payroll (like employee paychecks and direct deposit transactions) and payroll tax payments. Here are data items that you should verify. Make Sure the Numbers Match There are times when banks make mistakes, such as issuing paper checks when you have all your employees signed up on direct deposit and fees or reversals on your bank statement that don’t look right. Compare what’s in your GL accounts versus the balances and transactions in your bank accounts used for payroll processing—make sure that the data they reflect line up. Look for Any Uncashed Checks Checks that have gone uncashed for a year or more need to be managed according to your state’s escheat laws, commonly known as unclaimed property laws. The check amount belongs to the employee, but how you handle it varies by state. Check your state’s regulations on how to turn over unclaimed funds to a state agency. Confirm Tax Payments Are Made Correctly and Timely Compare your bank statement to the tax agency due dates so you can determine whether or not tax payments are being made on time. Even if you’re working with a third-party payroll software or service that manages your tax payments, you should still check these transactions since mistakes can happen. Note that in those cases, you—not the payroll processor—are typically liable for late tax payment penalties. Why You Need a Payroll Audit Payroll audits can help you check the accuracy of your company’s payroll processes. It works as a risk-avoidance tactic to prevent you from making mistakes that may end up being costly to your company and business reputation. For payroll audits, you typically examine and verify data across various software systems and tools that manage your staff data, such as pay rate, overtime rules, pay type (like salary vs hourly), and employee job classification (exempt vs nonexempt). Auditing also helps you uncover payroll-related fraudulent activity and innocent mistakes. For example, a staff member may have switched to part-time but is still being paid a full-time salary. On the more nefarious side, a staffer with access to payroll and bank accounts can deduct money from one account to pay herself extra. Your payroll audit will likely catch that. One of the best practices to avoiding potential fraudulent payroll activities is to have separate individuals managing employees, timekeeping, and payroll data. If HR can add a new hire, they shouldn’t be allowed to also make payroll changes. Instead, you need segregation of duties to eliminate any temptation for staffers to steal from you. Payroll audits then verify that your processes are being followed. Bottom Line You don’t have to wait until year-end to do a payroll audit. Listen to your gut. If something looks or feels off in your accounting system or payroll bank account, it’s time to investigate. After all, it’s your money at risk and your business reputation at stake if payroll violations that you aren’t aware of crop up. By doing regular payroll audits, you can avoid getting fined for late taxes or sued for unfair pay practices.

Employers have options when it comes to compensating their workers. In addition to the most common payment methods (direct deposit, pay cards, paper checks, and cash), there are some more creative options to choose from, such as stock compensation. In some states, you have to offer a minimum of two different ways to pay employees or you can be fined. Each payment option has pros and cons and must be managed differently. Be sure that you follow best practices for the payment types you choose. 1. Direct Deposit Direct deposit is the most common way to pay employees, with over 93% of US workers electing to be paid this way. Direct deposit is also one of the easiest ways to pay employees if you’re using payroll software. Payroll processing is all electronic—the money moves from your bank account to your employees’—and you don’t have to do anything but review and approve it. And, as a bonus, it is usually a service that’s included at no additional cost. Some providers, like , even offer on-demand pay, meaning you can deposit part of an employee’s paycheck that they’ve earned early if they need funds before payday. If you’re not using payroll software, you can still reap the benefits of direct deposit. You’ll just need to go through your bank to set it up. There is usually a monthly and per-check fee associated with making these direct payments, but some banks, like Wells Fargo, won’t charge you the check fee if the employee has a bank account there. Monthly fees can range from $10 to $30 or more, and check fees are usually between 50 cents to $3 each. Some banks, like Bank of America and SunTrust Bank, are now selling full payroll services. Be sure to inquire about the payroll provider they are using so you can do your own research beforehand. They tend to use popular services like that you can sign up for on your own. Pros & Cons of Paying Employees With Direct Deposit If you’re interested in learning more about setting up direct deposit for your employees, check out our guide. 2. Pay Card Pay cards are a newer way employers are sending paychecks to employees. They are prepaid debit cards you can use to deposit payroll. It’s a great option to use when you have employees without bank accounts. It allows you and your workers to still reap the benefits of direct deposit while eliminating some of the cons. With payroll cards, your employees can receive their paychecks, withdraw funds, and even make purchases. Some payroll software offer payroll cards for little to nothing in cost, aside from the expense of the service itself. You can also check with your bank as many of them offer pay cards as well, and the money is FDIC insured. Many states won’t allow employers to have pay cards be the only way for employees to receive paychecks. Be sure to check your state rules before you decide how to proceed or you could face penalties and/or litigation. Regardless, we recommend using a combination of different ways to pay employees. Pros & Cons of Paying Employees With Pay Cards If you’re interested in learning more about paying your employees with pay cards, check out our guide. For help choosing the best service, check out our guide to the best pay card providers for small businesses. 3. Paper Check Paper checks may seem outdated to some employers, but it is still a reliable way to pay employees for their work. It’s pretty simple, depending on how you’re processing the check. You can print them using your payroll software or handwrite them yourself. Handwriting them is cheaper—unless you print checks online for free—but more time consuming, especially as your business grows. If you choose to print your paychecks, it’s a good idea to ask your bank about its positive pay options. Positive pay is an automated fraud prevention feature some banks offer that matches the information on checks that are cashed (account number, amount, check number) with a list of checks you have uploaded to its system and authorized for payment. If someone attempts to cash a check from your company that you have not authorized, the bank will reject it. Pros & Cons of Paying Employees With Paper Checks If you’re interested in learning more about paying your employee using checks, head over to our guide. 4. Cash Most businesses distributing paychecks in cash are small and have a handful of employees. And usually, those employees are hourly or part-time workers. Paying thousands in cash every pay period isn’t efficient, so it’s best that you check how much in total you’ll need to pay out each payday before choosing this route. We don’t usually recommend employers pay their employees in cash due to an increase of being flagged for an audit by the IRS, but it is an option if you’re diligent about creating an audit trail. It’s important that you learn how to do payroll (taxes and all), maintain records of any payroll related debits from your bank account, and create pay stubs for both your employee and your business. Tracking your payroll using excel or even utilizing payroll templates can be a good way to stay organized. Pros & Cons of Paying Employees in Cash If you’re interested in learning more about how to legally pay your employee using cash, head over to our guide. 5. Stock Compensation Paying employees in stock isn’t as common as the other ways we’ve discussed, but some employers do use it. We don’t recommend using it to pay the full paycheck amount, unless you have some sort of special arrangement and the stock has value. Typically, it’s offered as a benefit to make the company more attractive to job candidates vs a replacement for their paycheck. Stock, especially for less established businesses, isn’t usually worth much in the beginning, so future payouts aren’t guaranteed. One important thing to keep in mind is that you will owe payroll taxes on the stock payment just as you do for regular payroll. The only difference is that it won’t be until the stock actually vests, which means the employee has to remain with the company for a certain period of time before the stock transfer is truly theirs. Five years is a common period that many employers wait before allowing employee stock to fully vest, but there’s usually a partial vesting period around the third year. Pros & Cons of Paying Employees With Stock Other Ways to Add Money Back to Employee Paychecks These last two ways won’t ever be a substitute for paying employees. In fact, many classify health insurance and discounts as employee benefits. Regardless, they are just a couple of the ways you can add money back into your employees’ paychecks. Health Premium Contributions Contributing toward employee health insurance plans can save employees tons of money. Any funds you contribute is akin to increasing their take-home pay, especially for those who would purchase health insurance anyway. Premiums can be expensive, some exceeding $1,000 a month, so review your budget to determine how much you can afford to pay for each employee. You don’t have to pay the full premium amount. If you have 50 or more employees, we recommend you familiarize yourself with the Affordable Care Act. You may be getting close to being required to provide insurance for your employees; you should definitely ensure you make the minimum contribution amount that the government requires for the plans to be affordable. A plan is considered affordable if the employee’s required contribution for the lowest cost self-only health insurance option doesn’t exceed 9.5% of their wages. If it does, you’ll need to increase the amount of your contribution to comply. Pros & Cons of Paying Employees With Health Premium Contributions Discounts There are a couple of ways you can pay employees with discounts: employee discounts on products and services you sell and corporate discounts on products and services from other businesses. Employees can use these at their discretion and really capitalize on the savings if the discounts apply to purchases they already normally make. Employee Discounts It’s easier for some businesses to offer discounts than others—for instance, restaurants and coffee shops. Everyone eats, and employees usually take at least one break during their shift. In this scenario, it’s easy to offer a 20% discount employees can use to avoid having to pack a lunch or even cook dinner after work for their families. You should track any discounts taken within your accounting system so you’re always aware of how much your employees are exercising this benefit. Also, note that as long as you’re offering a maximum of 20% off the regular price of your product or service, the employee won’t have to include the discount in their income (meaning it’s not taxable, a plus for both of you). Corporate Discounts Employers can give corporate discounts through an employee discount program. Some payroll services like ADP and TriNet provide them if you sign up for one of their products. These partnerships are already set up and give your employees access by providing promotion codes they can enter when making a purchase. The discounts are usually between 5% and 15% and may include big name companies like Enterprise Rent-a-Car and AT&T. Another option you have is to partner directly with companies you use for your business. For instance, some businesses that issue company cellphones can negotiate lower rates because they have so many lines open. And sometimes they can pass these rates on to their employees for their personal use. To manage it in this scenario, you would add employees’ personal cellphone lines to your account at their request and deduct a premium from their paychecks (similar to how health insurance is handled). You can contribute as much or as little as you want. If you opt to offer a benefit in-house, be sure to have a foolproof system set up so you’re not inadvertently paying expenses for employees after they leave your company. Also, ensure employees know that the discounts are for them only, not friends and family. Pros & Cons of Paying Employees With Discounts Bottom Line When it comes to paying your employees or contractors, you should choose payment methods that are best for your business and team. Some ways may seem easier on the surface, like paying your staff with cash, but cause you a headache later. Remember, you’re responsible for withholding payroll taxes from each paycheck and tracking all earnings so you can pay your portion of employment taxes. It’s also important to make sure that you are mindful of your specific employees’ needs. Do they have bank accounts? What’s most important to them—convenience, discounts, or cash? Whatever you decide, be sure to implement a solid system to track it.

Processing payroll and calculating Mississippi payroll taxes is a straightforward process. Mississippi does not have local taxes and only has one state payroll form. It is one of the easiest states in which to run your company’s payroll. You can make running your Mississippi payroll even easier by using an all-in-one payroll service like . QuickBooks Payroll helps you onboard new employees (all electronically), provide them the right forms, make direct deposit payments, and file Mississippi payroll taxes, all while helping you avoid penalties and fees from being late or submitting inaccurate payroll tax numbers. Sign up today and get 50% off for 3 months. Step-by-Step Guide to Running Payroll in Mississippi Mississippi makes payroll easy for businesses by generally following federal guidelines. However, attempting to calculate Mississippi payroll taxes or Mississippi withholding tax by hand could result in costly mistakes. Here are the basic steps you should follow to run payroll in Mississippi. Step 1: Set up your business as an employer. New companies may need to access the federal Electronic Federal Tax Payment System (EFTPS) to create a new Federal Employer Identification Number (FEIN). Your FEIN is required to pay federal taxes. Step 2: Register your business with the State of Mississippi. If your business is new, you need to register on the Mississippi Secretary of State’s website. Any company that pays employees in Mississippi must also register with the Mississippi Department of Revenue. Step 3: Create your payroll process. This entails deciding how often you’ll be paying employees and when, as well as what method you plan to use to issue their paychecks (paper checks vs direct deposit), how onboarding will work, etc. You can opt to process payroll by hand (not recommended), set up an Excel payroll template, or sign up for a payroll service to help you handle your Mississippi payroll. Step 4: Have employees fill out relevant forms. Every company that hires employees in Mississippi must collect certain forms during the onboarding process. They must complete I-9 verification and have a completed W-4 on file, and specifically, the state version of the W-4, called Mississippi Employee’s Withholding Exemption Certificate. Step 5: Review and approve time sheets. Processing your company’s payroll will begin several days before your payroll is due. During this time, you need to collect and review documented work time from hourly and nonexempt employees so you can speak with anyone who might have made mistakes. There are numerous ways to track employee time—some of which are free. Step 6: Calculate employee gross pay and taxes. Using pen and paper or a spreadsheet for this step can be complicated since Mississippi has a graduated tax rate. Because the top tax rate income level is low, most employees will pay the top tax rate on the majority of their income. Learn more about how to calculate payroll if you need assistance. Step 7: Pay employee wages, benefits, and taxes. Most companies today pay all employees through direct deposit. But cash (not the best way) and paper check are also options. Mississippi does not have a state minimum wage, so make sure that you are paying your employees at least the federal minimum wage of $7.25 per hour. You can pay your federal and Mississippi state taxes online. If you use a benefits provider, it should work with you to make deductions simple, automatic, and electronic. Step 8: Save your payroll records. Keeping your company business records is good practice. Mississippi, however, does not require any business to keep employment-related documents. The Fair Labor Standards Act (FLSA) requires that employers keep certain records for at least three years, so you will need to keep employee files for the federally mandated amount of time. Step 9: File payroll taxes with the federal and state government. All Mississippi state taxes need to be paid to the applicable state agency on the schedule provided, usually quarterly, which you can do online at the Mississippi Department of Revenue website. To pay federal taxes, you can make those payments online using the EFTPS on one of the following two schedules: Monthly: When the IRS assigns you a monthly schedule, you need to deposit employment taxes on payments made during a calendar month by the 15th of the following month. Semiweekly: When the IRS assigns you a semiweekly schedule, you must deposit employment taxes for payments made Wednesday, Thursday, and Friday by the following Wednesday, and for payments made Saturday, Sunday, Monday, and Tuesday, by the following Friday. Please note that reporting schedules and depositing employment taxes are different. Regardless of the payment schedule you are on, you only report taxes quarterly on Form 941 or annually on Form 944. Step 10: Complete year-end payroll reports. Every year, you will need to complete payroll reports, including all W-2 Forms and 1099 Forms. You must provide these forms to employees no later than Jan. 31 of the following year. Mississippi Payroll Laws, Taxes, and Regulations Understanding how to calculate Mississippi payroll taxes and apply the related laws is vital to ensuring accurate payroll. To help you maintain compliance with payroll regulations, review the specific laws and regulations for doing payroll in Mississippi below. With few exceptions, most employers in the US must pay Federal Insurance Contributions Act (FICA) taxes. The current FICA tax rate for Social Security is 6.2% and 1.45% for Medicare. Both the employer and the employee will pay these taxes, each paying 7.65% for the combined Social Security and Medicare taxes. Mississippi Taxes Like most states, Mississippi has certain taxes that companies must pay. Mississippi does not levy local taxes, however, so you only need to be concerned with state taxes. Employer Unemployment Taxes All businesses in Mississippi must pay State Unemployment Tax Act (SUTA) taxes. The current wage base is $14,000 and rates range from 0% to 5.4%. All new employers in Mississippi will pay a SUTA rate of 1.0% for their first year, 1.1% for their second year, and 1.2% for their third year. Businesses that pay SUTA in full and on time can claim a tax credit of up to 5.4% on their Federal Unemployment Tax Act (FUTA) taxes. Workers’ Compensation Mississippi businesses with five or more employees must carry workers’ compensation insurance. Workers’ compensation insurance provides benefits to employees who suffer on-the-job injuries. These benefits usually begin to be paid a week or two after a worker is out of work due to their injuries and only covers their lost income and medical bills. There are, however, exceptions to this requirement. If your company employs workers who fall into one of the following categories, you may not need to carry workers’ compensation insurance: Domestic workers Agricultural workers Employees of nonprofit, charitable, religious, or cultural organizations Employers in Mississippi are not required to provide workers’ compensation coverage if they have less than five employees or meet one of the above exemptions. Companies may choose to offer workers’ compensation insurance, however, if they want to do so. Income Taxes Mississippi does not have tax reciprocity with any other state. This means employees who work and pay taxes in Mississippi but live in a neighboring state may end up paying double tax. Mississippi Minimum Wage Mississippi adheres to the federal minimum wage. At $7.25 per hour, the minimum wage was last raised in Mississippi in 2009. Businesses must pay tipped employees at least $2.13 per hour, provided that their tips get them to the hourly minimum wage. If not, the company must make up the difference. Calculating Overtime Mississippi overtime rules follow the Fair Labor Standards Act requirements. Under the FLSA, all employers must pay employees 1.5 times their regular hourly wage for hours worked over 40 in a workweek. To help ensure your overtime calculations are accurate, use our overtime calculator to verify. Paying Employees Mississippi law does not require that employers pay employees on a regular basis, except for employees in manufacturing who work for companies with at least 50 employees. These businesses must pay workers at least once every two weeks and within 10 days of the end of the pay period. There is no federal law stating how often an employee must be paid; however, federal law does state that whatever pay frequency you choose, you must stick to it and not change randomly. Mississippi also does not specify how employees must be paid. The most common ways to pay your employees include: Cash Paper check Direct deposit Payroll card If you need help keeping track of your payroll periods, use one of our free pay period calendars. Pay Stub Laws Mississippi has no law requiring companies to provide a pay stub to employees. However, if you wish to provide a pay stub, which we recommend, and don’t use a payroll service, download one of our free pay stub templates to help you get started. Mississippi Paycheck Deductions Mississippi does not have any law limiting what deductions an employer can make from an employee’s paycheck. Because there is no law prohibiting employer deductions, it likely means that you can deduct the following items: Cash shortage Damaged, destroyed, or stolen company property Uniform costs Other equipment costs Other items necessary for the employee’s job Please note that, according to the Department of Labor, a company cannot make deductions to an employee’s pay if those deductions would cause the employee to earn less than the federal minimum wage ($7.25 per hour) for that pay period. Terminated Employee’s Final Paychecks Mississippi has no law mandating when an employee who is no longer employed with a company must receive their final paycheck. Because there is no law, it would be a best practice to pay the final paycheck on the next regular payroll run. This would apply to employees who are terminated and quit. If you need to pay an employee right away and aren’t currently using a service, use one of our recommended ways to print a free payroll check. Mississippi HR Laws That Affect Payroll Mississippi does not have many state-specific HR laws. That doesn’t mean you can ignore the following sections, however, because you will still need to ensure that you are following the federal guidelines, which Mississippi law mostly follows. Mississippi New Hire Reporting Every employer in Mississippi must report new hires and any rehired employees to the Mississippi State Directory of New Hires. This report is used to enforce child support orders and must include the employee’s name, address, and Social Security number. You’ll have to submit the form shortly after each employee is hired to avoid penalties. Meals and Breaks Mississippi does not require companies to provide workers with a meal period or a break. But employers are free to provide paid and unpaid breaks to employees. Generally, any break of 20 minutes or less should be paid. Mississippi Child Labor Laws Mississippi law has no working restrictions on children 16 or older. Children under age 16 cannot work more than three hours on a school day (Monday through Friday) or a total of 18 hours in a school week. Children under 16 also cannot work in a factory, mill, cannery, or workshop. Time Off and Leave Requirements Mississippi Payroll Forms Payroll forms can vary from state to state, and some have their own W-4, like Mississippi. Fortunately, that’s the only one: Employee's Withholding Exemption Certificate: Employee withholding form; should be completed upon hire Federal Payroll Forms Here is a complete list and location of all the federal payroll forms you should need. W-4 Form: Provides information on employee withholdings so you can properly calculate and withhold federal and state income taxes W-2 Form: Used to report total annual wages for each employee W-3 Form: Used to report total annual wages for all employees; summary form of W2 Form 940: To calculate and report unemployment taxes due to the IRS Form 941: Used to file quarterly income tax Form 944: Used to file annual income tax 1099 Forms: Provides information for nonemployee contract work For a more detailed discussion of federal forms, check out our guide on the federal payroll forms you may need. Mississippi Payroll Tax Resources Mississippi Department of Revenue provides many forms, information on the latest laws and regulations, and other employer-specific information. Mississippi Department of Employment Security offers support and resources to help businesses ensure compliance with unemployment and workers’ compensation plus other labor laws. Bottom Line Running payroll in Mississippi is one of the most straightforward of any state. There is only one state-specific payroll form and no local taxes to calculate.  

Doing payroll in California is more complex than in most states, and laws and other requirements can change frequently. What’s more, you’ll need to keep an eye out for local requirements that apply in specific cities and counties. Unlike states like Texas and Florida, employees are given a great deal of protections, so it’s vital for employers to understand everything from minimum wage and overtime requirements to the ins and outs of paid leave. If you’re processing payroll in California and have concerns about making mistakes or understanding all the laws, consider using payroll software like . Its all-in-one payroll service can help you file payroll taxes correctly, pay direct deposits, and even onboard employees. It even offers health benefits in California. Sign up today and get 50% off for 3 months. Running Payroll in California: Step-by-Step Instructions Step 1: Set your business up as an employer. At the federal level, make sure you have an employer ID number (EIN) and an account with the Electronic Federal Tax Payment System (EFTPS). Step 2: Register with California’s Employment Development Department (EDD). If you operate a business, employ one or more employees, and pay wages over $100 in a calendar quarter, you’re required to register as an employer with the EDD. Household employers with one or more household employees must register with the EDD after paying $750 or more in wages in a calendar quarter. Use e-Services for Business to complete registration. Step 3: Set up your payroll. Under California law, employees must be paid at least twice during each calendar month, and paydays must be designated in advance. Notice of regular paydays must also be posted, including the day, time, and location/method of payment. Step 4: Collect employee payroll forms. When onboarding new employees, request the necessary payroll forms, including those specific to California. This should include the Employee’s Withholding Allowance Certificate (DE 4). Step 5: Collect, review, and approve time sheets. Be sure to collect time sheets with enough time to review and approve them before paychecks are due under state law. Step 6: Calculate payroll and pay employees. California payday law states that wages earned between the first and 15th day of the calendar month must be paid on or before the 26th day of that month. Work performed between the 16th and last day of the month must be paid by the 10th day of the following month. Depending on your accounting preferences, use payroll software, a calculator, or even Excel to calculate payroll. Step 7: File payroll taxes with the federal and state government. All state tax payments need to be made directly to the applicable agency based on whatever schedule is assigned to your business. Federal tax payments must be made via EFTPS. Generally, you have to deposit federal income tax withheld and both employer and employee Social Security and Medicare taxes based on the schedule assigned to your business by the IRS. The IRS can assign you to one of the following depositing schedules: Monthly Depositor: Requires that you deposit employment taxes on payments made during a month by the 15th day of the following month. Semiweekly Depositor: Requires that you deposit employment taxes for payments made Wednesday, Thursday, and/or Friday by the following Wednesday. Deposit taxes for payments made Saturday, Sunday, Monday, and/or Tuesday by the following Friday. It’s important to note that schedules for depositing and reporting taxes are not the same. Employers who deposit both monthly and semiweekly should only report their taxes quarterly or annually by filing Form 941 or Form 944. Step 8: Document and store your payroll records. Keep records for all of your employees, including those who have resigned or were terminated, for at least four years (eight years for exempt employees). Learn more in our resource on retaining payroll records. Step 9: Complete year-end payroll tax reports. You will need to complete W-2s for all employees and 1099s for all independent contractors. Both employees and contractors must have received these documents by Jan. 31 of the following year. California Payroll Laws, Taxes & Regulations Generally speaking, California’s payroll laws, taxes, and other regulations are more stringent than federal regulations. The state’s payroll requirements are also more complex than those common in other states like Texas and Florida. California Payroll Taxes In addition to FICA and unemployment taxes, California employers must pay four payroll taxes—two of which are withheld directly from employee paychecks. To comply with California’s tax reporting requirements, employers must register with the EDD, set up an account, and make quarterly payments. State Income Tax In addition to the federal income tax, employees who work in California also pay two state taxes that must be deducted by employers: State Disability Insurance (SDI) Tax: SDI provides temporary benefit payments for non-work-related illness, injury, or pregnancy. It also includes Paid Family Leave (PFL) which extends benefits to individuals unable to work because of a seriously ill family member or to bond with a new child.The SDI Rate and Wage Limit for 2021 are as follows: California Personal Income Tax (PIT): PIT is a tax on the income of California residents and on income of nonresidents that is earned within the state of California. California PIT is used to provide the state with public services such as schools, public parks, roads, and health and human services. Similar to other states, personal income tax is based on income and the amount withheld is according to the PIT withholding schedule. There is no taxable wage limit or maximum tax. Unemployment Insurance Tax California requires employers to pay unemployment insurance tax. The UI program exists to provide temporary relief to people who are unemployed at no fault of their own. The EDD determines a percentage rate for each employer, which it needs to pay on the first $7,000 of wages to each employee annually. The UI schedule and amount of taxable wages are determined annually, and employers are notified of their new rate each December. Certain government and nonprofit employers are given the option to elect a “reimbursable method” of financing UI. In this case, they then reimburse the UI Fund on a dollar-for-dollar basis for all benefits paid to their former employees. Employment Training Tax California also requires employers to pay an Employment Training Tax (ETT). This is an employer-funded program that provides funds to train employees in targeted industries to make California businesses more competitive. Its purpose is to promote a healthy labor market and help businesses to invest in a skilled and productive workforce. The ETT Rate and Wage Limit for 2021 are as follows: Workers’ Compensation Insurance California Labor Code Section 3700 mandates that all California employers must provide workers’ compensation benefits to their employees as long as the business has one or more employees. California Labor Code Section 3351 defines who is an employee, and therefore who can be covered under a workers’ compensation policy. Executive officers and directors of corporations must be included in workers’ compensation coverage, unless the corporation is fully owned by the directors and officers. Business owners can obtain coverage from a private insurance company or from a state fund. California Minimum Wage California’s minimum wage is much higher than the federal minimum wage and comes with additional eligibility requirements. 2021 California State Minimum Wage Law On Jan. 1, 2021, California's minimum wage increased to: This latest increase will move California one step closer to its goal of a $15 per hour minimum wage. In 2016, California enacted legislation setting forth gradual increases in the minimum wage until 2023; the minimum wage in California will continue to rise each year on a statewide basis until it reaches $15.00 per hour. 2021 California Local Minimum Wage Law In addition to California's statewide minimum wage increase, many cities and counties have enacted their own minimum wage ordinances that exceed state requirements. If a local minimum wage rate is more generous to employees than the state minimum wage rate, employers must comply with the local law. The following went into effect as of July 1, 2021: California Overtime Regulations Nationwide, overtime is calculated as any hours worked over 40 in a standard workweek, is paid at 1.5 times the employee’s regular hourly rate, and typically affects workers who are nonexempt. California adds to this by requiring employers to pay employees time and half and even double time for hours worked beyond their normal workweek. For more details regarding overtime regulations in California, see the below table: With that being said, some California employees are exempt from these requirements and do not receive overtime in accordance with state law. These exemptions include: Outside salespersons Employees categorized as executive, administrative, or professional Certain unionized employees who are subject to a collective bargaining agreement Different Ways to Pay Employees in California While there are many different ways to pay employees, California’s Labor Code specifies that an employer must pay wages by either: Cash Check payable on demand without discount or fee Direct deposit (with employee consent) Pay cards (the use of pay cards is allowed in California as long as your employees are made aware of all payment options and it is their choice to be paid via pay card) California Pay Stub Laws California’s Labor Code requires that all employers must provide employees on each payday an itemized statement of earnings and deductions that includes: The legal name and address of the employer The legal name and Social Security number of the employee (last four digits, only) Total gross and net wages earned The inclusive dates of the period for which the employee is paid All applicable hourly rates in effect during the pay period Total hours worked by the employee, except for any employee whose compensation is solely based on a salary and who is exempt from payment of overtime All deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item Minimum Pay Frequency California requires that most employers pay their employees at least twice a month on the days designated in advance as regular paydays. Employers must establish a regular payday and are required to post a notice that notifies all employees of that payday. Wages earned between the first and 15th days of any calendar month must be paid no later than the 26th day of the month. Wages earned between the 16th and last day of the month must be paid by the 10th day of the following month. Other payroll periods—such as weekly, biweekly or semimonthly when the earning period is something other than between the first and 15th and 16th and last day of the month—must be paid within seven calendar days of the end of the payroll period within which the wages were earned. Employers may pay executive, administrative, or professional employees under the Fair Labor Standards Act once per month on or before the 26th day of the month. Final Paycheck Laws in California California Labor Code 202 dictates when employees need to receive their final paycheck based on the situation surrounding their termination/discharge. The following mandates are in place for employees in the state of California: Severance Pay in California As a California employer, you don’t have to provide your employees with severance pay if they are terminated or voluntarily leave. California law will only enforce that you pay severance payments to your employees if there is a signed written agreement in place between an organization and an employee. Accrued Paid Time Off Payouts Currently, there is no legal requirement for California employers to provide employees with any vacation time (whether that be paid or unpaid) However, if an employer does have an established policy in place, there are certain restrictions that they have to follow to be in compliance. Vacation pay is accrued as it is earned and cannot be forfeited for any reason. Unless otherwise stated in a collective bargaining agreement, all earned and unused vacation must be paid to an employee at their regular rate of pay upon termination. Reason for termination does not impact this policy. Whether an employee quits voluntarily or is terminated, they are still entitled to pay out for all unused vacation. California HR Laws That Affect Payroll California has many HR laws in place that are focused on protecting employees. It’s important that you are aware of what they are and how they need to be followed. Make sure to pay special attention to required breaks and regulations around hiring minors. California New Hire Reporting New hire reporting is required in California to establish wage withholding for child support payments and to locate parents who fail to make on-time payments. The information is also sent to the National Directory of New Hires to assist in the location of debtors in other states. Report of New Employee(s) (DE 34) Using the DE 34 form, California employers must report all new employees and rehires to the New Employee Registry within 20 days of the first day they performed services for wages—their start-of-work date. A rehire is someone who formerly worked for the employer and was separated from that employer for at least 60 consecutive days before returning to employment. Report of Independent Contractor(s) (DE 542) Employers that are required to file a federal Form 1099-NEC, must also report that information to the EDD. Employers must submit a DE 542 to the EDD within 20 days of hiring an independent contractor if all of the following apply: You are required to file a Form 1099-NEC for the services performed by the independent contractor You pay the independent contractor $600 or more or enter into a contract for $600 or more The independent contractor is an individual or sole proprietorship If you have independent contractors, visit the EDD’s Independent Contractor Reporting page for more details on the requirements. Rest & Lunch Breaks in California California’s requirements differ from federal rest and lunch break guidelines, which don’t require breaks at all. In California, employers must provide an employee a 10-minute paid rest break for every four hours worked. These breaks should be scheduled in the middle of the four-hour stretch. In contrast, off-duty meal breaks are unpaid. Employers must provide one 30-minute meal break for every five hours an employee works. Unless the employee is relieved of all duty during the 30 minute meal period, the meal period shall be considered an on-duty meal and must be paid at the regular pay rate. Employees who work more than 10 hours a day are entitled to a second meal break. Meal breaks can be waived by the employee if certain conditions are met. To manage breaks in California, we highly recommend using time and attendance software that can be pre-programmed with the state’s rules. This can help employees log their rest and lunch breaks correctly, while streamlining payroll calculations and ensuring you have the necessary documentation for tax and audit purposes. California Paid Time Off Paid time off (PTO) isn’t required at the federal level, nor are California employers required to provide paid vacation or paid time off to employees. However, California law does restrict PTO in other ways: Accrued vacation time never expires. To protect an employee’s right to paid time off, California does not allow “use it or lose it” PTO policies. That said, employers can cap vacation benefits and place restrictions on notice requirements for employees who want to use vacation days. Earned vacation time is equivalent to wages. If an employee who has earned PTO is terminated, they must receive payment for that unused vacation time in their final paycheck. Payment must include a full day’s wages or the salary equivalent for each day of unused PTO. PTO cannot be retracted as punishment. Once an employee earns PTO, it is treated as wages and, therefore, cannot be taken away. However, employers can count partial-day absences against PTO, including for long lunches, half-day vacations, and personal errands. Leave Requirements in California Under the federal Family and Medical Leave Act, employers with 50 or more employees must provide eligible employees up to 12 weeks of unpaid leave each year for applicable reasons: Birth and care of an employee’s newborn child Placement of a child with the employee for adoption or foster care Care of an immediate family member with a serious health condition Medical leave when the employee is unable to work due to a serious health condition In addition to those requirements, California’s paid family leave laws apply to employees who need to care for a seriously ill family member or bond with a new child, whether through birth, adoption, or foster care placement. Employees are entitled to eight weeks of paid leave at a rate of 60% to 70% of their wages. Pregnant and new moms can also receive up to four weeks of disability insurance benefits before their due dates, and six or eight weeks of benefits after childbirth. Paid Sick Leave California is also one of the states that requires employers to provide paid sick leave to their employees. In California, employees: Accrue a minimum of one hour of paid sick leave for every 30 hours worked Accrue paid sick leave based on a 40-hour workweek if they are exempt from overtime requirements Can start using accrued paid sick leave on their 90th day of employment Determine how much paid sick leave they need to use, but use is subject to reasonable minimum increments (up to two hours) set by the employer In the wake of COVID-19, 2021 California Supplemental Paid Sick Leave, Cal/OSHA Emergency Temporary Standards, and local county and city ordinances went into effect to provide additional employee protections. Child Labor Laws California defines a minor as any person under the age of 18. This applies to those who attend school, dropouts, and emancipated minors. Except in limited circumstances, minors employed in the state of California must have a permit to work. Before hiring a minor, employers are responsible for possessing a valid copy of their Permit to Employ and Work. These permits are issued at a minor’s school. During summer months or when school is not in session, the permits are obtained from the superintendent for the district in which the minor resides. Permits issued during the school year expire five days after the beginning of the following school year and must be renewed annually. The California Department of Industrial Relations published requirements on their website categorized by age, and penalties for violating child labor laws. The regulations are as follows: Payroll Forms In addition to federal payroll forms, there are a few specific to California that you’ll need to make sure are filled out correctly and filed on time. California State Payroll Forms Employee’s Withholding Allowance Certificate (DE 4): The DE 4 form is used by employees to calculate the amount of taxes that should be withheld by an employer to meet the state’s tax withholding obligation. Obtain this form from each employee during onboarding to ensure your HR team has all of the necessary data on-file. Quarterly Contribution Return and Report of Wages and Continuation (DE 9): The CE 9 form helps employers reconcile reported wages and paid taxes for each quarter and makes it easy for the EDD to automatically refund overpayments. Quarterly Contribution Return and Report of Wages - Continuation (DE 9C): The DE 9C form lets employers report wages and withholdings for additional employees. If you are a household employer, you may be subject to additional filing requirements. California State Payroll Tax Deposit Forms The Payroll Tax Deposit (DE 88/DE 88ALL) form is used for reporting and paying Unemployment Insurance (UI), Employment Training Tax (ETT), State Disability Insurance (SDI) withholding, and California Personal Income Tax (PIT) withholding to the EDD. Use e-Services for Business to submit these online. Employer contributions for UI and ETT are due quarterly based on the dates for the DE 9 and DE 9C, but employers may need to deposit employee wage withholdings for SDI and PIT more frequently. These due dates can be found in IRS Publication 15 (PDF), and a 15% penalty and interest are charged on late payments. Federal Payroll Forms Form W-4: Helps employers calculate taxes to withhold from employee paychecks Form W-2: Reports total annual wages earned (one per employee) Form W-3: Reports total wages and taxes for all employees Form 940: Reports and calculate unemployment taxes due to the IRS Form 941: Files quarterly income and FICA taxes withheld from paychecks Form 944: Reports annual income and FICA taxes withheld from paychecks 1099 Forms: Provides non-employee pay information that helps the IRS collect taxes on contract work For a more detailed discussion of federal forms, check out our guide on federal payroll forms you may need. Resources and Sources State of California EDD - Payroll Taxes: This webpage contains a list of payroll tax resources, including how to enroll in or log in to e-Services for Business, how to get started with state payroll taxes, and payroll tax FAQs. State of California EDD - Required Filings and Due Dates: Employers can use this page to stay on top of the necessary filings and due dates for California-specific payroll forms. State of California EDD - Payroll Taxes - Forms and Publications: This general repository contains links to employment publications and resources such as the California Employer’s Guide and Household Employer’s Guide. Bottom Line There are so many factors to consider when doing payroll in California. Employers are required to pay special attention to laws and regulations for specific cities or counties due to the granular laws that affect employment there. California employees are given a great deal of protections and therefore it’s vital for employers to understand all of the requirements.

A payroll card (pay card) is a prepaid debit card employers use to pay employees who don’t have bank accounts. Although regulated by federal and state law, they’re similar to direct deposits in that money is sent electronically, and setup is sometimes free. Pay cards are available from dedicated providers, banks, or payroll companies. Pay cards offer some advantages, specifically that employees don’t have to visit a bank to access their money. If you’re already utilizing payroll software to run your payroll, it’s a good idea to check whether or not they offer them. Some providers will offer pay cards free to customers, while others charge fees for setup, ATM withdrawals, and even inactivity. How Payroll Cards Work Payroll cards work similarly to direct deposits, except employee pay is transferred to a prepaid debit card instead of directly to an employee’s bank account. Once the money transfers, funds are available immediately, and the employee can use the card to withdraw money from an ATM or make online/in-store purchases. Per federal law, employees should be able to access their funds immediately and free of charge. To implement a pay card program, you’ll have to find a provider. Typically, there’s an enrollment process, and you’ll have to sign up before you can begin. Setup can last from a few days to a few weeks, and you should receive training materials to help explain the process to employees who opt to participate. Cards are mailed after setup is complete. In addition to pay card providers, like those mentioned above, some payroll software has the ability to set up direct electronic payments to third-party pay card providers in the same way you would set up direct deposit. Additionally, you may be able to set up pay cards with your existing payroll service provider, bank, credit card company, or even a professional employer organization (PEO). Some of these providers offer additional services to your business beyond merely providing pay cards. Payroll Cards vs Debit Cards Although payroll cards are similar to debit cards, they aren’t the same. Debit cards are linked to funds deposited into a bank account; without a bank account, there can be no debit card. Payroll cards aren’t associated with bank accounts and come with their own separate account from the provider. Employers load money to the account in advance, and it’s usually impossible to spend more than the prepaid amount; this lessens the chances of overdraft fees. Federal Restrictions on Payroll Cards Pay cards are restricted by federal law, which means no matter which state you’re in, you must comply. The purpose is to protect employees from being unfairly impacted when receiving wages. The key to complying is to be transparent, ensure all employees know what a payroll card is, and recognize that an employee’s participation in a pay card system is always optional. Here are the requirements your business should meet when implementing a pay card program: Ensure employees receive minimum wage: The Federal Labor Standards Act (FLSA) governs overtime, minimum wage, and other labor laws. Be aware of any unavoidable fees your employees must incur to withdraw their wages; if the deductions reduce their earnings below minimum wage, you could be liable. Offer an alternative: You’re not allowed to force employees to participate in the company pay card program, so you must offer an alternative option. Per federal law, the alternative can be direct deposit or paper check, but you should check your state law for additional legislation. Issue a disclosure: You must issue a disclosure to employees that lists all fees that may be incurred in addition to the types of electronic transfers they can make. You should also disclose all the details of the pay card program and inform employees that participation is optional. Provide account history: You must ensure the provider you choose provides periodic transaction statements or an electronic transaction history covering the last 60 days or the option to check account history by phone and to request a written history of account transactions covering the prior 60 days. State Laws on Payroll Cards State laws differ in their requirements for businesses that issue payments using pay cards. You’re required to offer an additional payment method, but whether or not it can be electronic (direct deposit) is determined by each state. For example, New York and California, shown in gray on the map below, allow employers to offer a pay card option, but only in addition to a paper check. A paperless system isn’t permitted as the only option in these states. However, states shown in blue, like Texas, permit a paperless pay system like direct deposit and pay card only. They don’t require you to offer a paper check option. In addition, most states have pay card regulations, such as requiring free ATM withdrawals or ensuring some way for the employee to receive their full pay without paying service charges. Pros of Offering Payroll Cards Offering a pay card option can save your business money, especially if you’re paying bank fees to send wages through direct deposit. Employees also benefit from more convenience and faster pay options. Here are the some of the advantages of offering payroll cards: Cons of Offering Payroll Cards There are some drawbacks to using pay cards. Federal and state laws govern the usage of pay cards by employers, and failing to comply can result in a lawsuit. Also, if not careful, employees can rack up hefty fees such as by withdrawing from nonparticipating banks. Here are some of the disadvantages of offering payroll cards: Bottom Line While offering pay cards is a great option for employees without bank accounts, it is just one way you can pay your employees and shouldn’t take the place of other payment methods like direct deposit. You have multiple provider options to choose from, including payroll services, that support both. Many providers allow you to enroll for free; just remember to let employees know it’s optional.

Form 944 is an IRS form that very small businesses use to file their employer taxes on an annual basis. It is specifically for businesses that have at least one employee and owe less than $1,000 annually in federal taxes (income tax withholdings plus Social Security and Medicare taxes). This article covers the when and how to use Form 944 as well as how to fill it out. Form 944 Instructions: How To Fill it Out Step-by-Step Contact information Enter your EIN. Name: Use your legal business name. This is the name of the person or entity that owns the company. In the case of most very small businesses, it will be the owner’s name or the LLC name. Trade name: This is the name you do business under. They may be different. Address: If you have more than one location, use the address of your headquarters. Special Instructions on Numbers The form provides decimal points. Put dollars to the left of the decimal point. Put cents to the right, even if it is 00. Do not use dollar signs. If the entire amount is zero, leave it blank. Use a minus sign for negative amounts when possible. Otherwise use parentheses, e.g., -1.00 or (1.00). Part 1 Line 1: This is the annual total from box 1 of your employees’ Form W-2. Include sick pay from a third party if you were given timely notice and have liability for the taxes. If you were the third-party and transferred liability, do not include sick-pay payments. Line 2: Enter income taxes you withheld or were required to withhold on earnings. This does not include third-party sick pay. Line 3: Check this box if none of the wages, tips, or compensation is subject to Social Security or Medicare taxes. Jump to line 5. Line 4a: Enter total wages, sick pay, and taxable fringe benefits. Do not include tips. If an employee’s taxable wages (including tips) reach $142,800 for the year, use that as their total wages in your calculations. Then multiply by 0.124 to get column 2. Line 4b: Enter all tips your employees reported to you during the year until the total of the tips and wages for an employee reaches $142,800 for the year. Then multiply by 0.124 to get column 2. Line 4c: Enter all wages, tips, sick pay, and taxable fringe benefits that are subject to Medicare tax. Unlike line 4a and 4b, use the full amount even if it exceeds $142,800. Multiply by 0.029 to get column 2. Line 4d: If you paid an employee more than $200,000, then you are subject to additional Medicare tax withholding. For any employees that earned over $200,000, you need to enter the amount paid over that $200,000. For example, if Employee A earned $210,000 and Employee B earned $215,000, you will enter $25,000. Multiply this by 0.09 for column 2. Line 4e: Add columns 2 inline 4a through 4d and put it here. Line 5: Add Lines 2 and 4e. Line 6: There are many reasons to have adjustments such as previously filed Form 944s, fractions of cents, sick pay, group life insurance. Refer to the instructions on the IRS website. Enter this as a negative number if needed. Line 7: Combine lines 5 and 6. Line 8: If you qualify for a Small Business Payroll Tax Credit for Increasing Research Activities, find that amount on your Form 8974 and enter it here. You must attach your Form 8974. Line 9: Subtract line 8 from line 7. Line 10: Enter all your payments for the year, including any overpayments. Line 11: If line 9 is more than 10, enter the difference here. Do not enter on both lines 11 and 12. Line 12: If line 10 is more than line 9, enter the difference here. Do not enter on both lines 11 and 12. Part 2 Line 13: If line 9 is less than $2,500, check the box and go to Part 3. If line 9 is more than $2,500, fill out lines 13a through 13l with your monthly tax liabilities. Then, add them up and put the total in 13m. If your tax liability is negative, enter zero and subtract that amount from the following month’s liability. If 13m does not equal line 9, check your math and your records. If it still does not match, payments may not be counted as timely. If you are a semiweekly depositor, then you need to fill out Form 945-A instead. Part 3 Answer this only if it applies to your business. Part 4 If you have someone else handling your accounts, like an employee or tax preparer, and want to allow the IRS to contact them for questions, fill out this section. This has to be the name of a specific person, not the name of an organization or a person’s job title. Either you or your designee must choose a five-digit PIN that the IRS will use to confirm the person’s identity when talking to them. Part 5 Use your legal name and title, plus the best daytime number where you can be reached. Special Instructions for additional sheets and attachments Write your EIN, “Form 944,” and the tax year on any attachments. Staple attachments to the upper left corner of the form if filing paper forms. Bottom Line IRS Form 944 is an annual federal tax return for very small businesses that either have no employees or are liable for less than $1,000 taxes in a calendar year. You need IRS permission to file this form instead of Form 941, which is for quarterly tax filing. Be sure to fill it out correctly to avoid penalties. Even if you use this form, you need to make payments electronically according to your monthly or semiweekly schedule; check payments can be made with the form in specific circumstances.