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In the Payroll Mailbag …

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in Office Management,Payroll Management

The payroll profession is tailor-made for the worrier. So much can go wrong so quickly. Please be aware that questions chosen for the Payroll Mailbag may be edited for space reasons. For a prompt response, email questions to PAYeditor@BusinessManagementDaily.com. Thanks for asking.

Any W-2c exception for wages paid late?

Question: Due to a bookkeeping oversight, which we discovered when we closed out the books on the company’s 2015 fiscal year, an employee is owed $5,000 in bonus money for work she did last year. We paid her this year, but do we have to complete and file Form W-2c to correct this error?

Answer: No. Regardless of the bookkeeping error, there is no payroll error. The employee was never in constructive receipt of this pay during 2015 and constructive receipt is the catalyst for withholding. You’re paying the bonus in 2016, so you report those wages paid, along with the other wages this employee receives, on her 2016 Form W-2.

Is the company liable for a mistake in FICA withholding?

Question: Without confirming this with Payroll, HR informed a terminating employee that he met the $118,500 Social Security wage base, so nothing was withheld from his lump-sum severance check. It turns out that HR was mistaken, so he (and the company) now owe money. Are we liable to make up the shortfall?

Answer: Yes, you’re liable for the underpayment. Under normal circumstances, you’d make up the underwithholding from later payments to the employee during the same calendar year. But since the employee terminated, you’ll have to gross up the payment on his final W-2. You will also have to work out any reimbursement arrangement with him.

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