Page 248 - Essentials of Payroll: Management and Accounting

Payr oll Deductions
T IPS &T ECHNIQUES

The calculation of a government-imposed tax levy is complex and can
change whenever an employee’s circumstances are altered; for
example, as a result of a change in employee pay, changes in med-
ical insurance deductions, or the addition of union dues as a new
deduction. If an employer does not adjust for these changes, it can
be subject to penalties imposed by the IRS for the amount of any tax
levies that should have been withheld from the employee’s pay. To
avoid this problem, the payroll staff should maintain a “tickler list”
for all employees who are subject to tax levies. This list should be
incorporated into the processing procedure for every payroll, to
remind the payroll staff to verify any changes to the targeted employ-
ees’ pay and to alter the amount of their tax levies as necessary.

employees and remits them to the bank. In either case, the payroll staff
must create a loan payback schedule for all affected employees and use it
to set up deductions from their paychecks. If the loan is through a local
bank, then the bank will likely provide a payback schedule to the payroll

department. If the loan is internal, then the payroll staff must create a
payback schedule in accordance with the terms of the loan agreement.
If a standard loan program for asset purchases with the company guar-
antees payment of the loans,then it behooves the company to require rel-
atively short payback intervals, such as one to three years, to minimize its
risk of having to pay back loans for employees who leave the company.
The agreement with employees should include—in writing—a statement
that if they leave the company prior to paying off the loan, as much as is
legally allowable will be deducted from their final paychecks in order to

pay down the remainder of any outstanding loans.

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