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Test Your Payroll Knowledge
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man thinking
This page contains hypothetical scenarios designed to stimulate thought and encourage the application of basic payroll theory to diverse circumstances.

Corrected W-2 Scenarios
Which of the following scenarios require a Corrected W-2?
  1. Error found in tax year 2004
  2. Address change
  3. Change in non-taxable income; i.e. MVN moving expenses
  4. State tax withheld other than Oregon not reflected on original W-2
  5. Paying an employee more money this year from a timesheet adjustment last year

None of them require a Corrected W-2.  If you’d like to find out why not, please contact the OSPS Accountant, Melissa Tominaga.
Overpaid OT
In April, an internal agency audit of employee time sheets uncovers an instance where a salaried full-time employee was overpaid by 10 hours of overtime in October of last year. How do you recover this money from the employee, and what calculation is necessary? (hint: it's not an OSPA entry)

You won't be recovering the net payroll. You need to recover the gross amount minus the employee portion of FICA taxes. The gross amount should include not only the 10 hours overtime, but also any additional overpaid overtime monies as a result of this entry.
Once this has been recovered from the employee, you will need to request a Corrected W-2 for the tax year in which the employee was overpaid. The Corrected W-2 process is where the employer portion of FICA is recovered. This transaction is outside of OSPA and should be handled as an agency receivable. Your agency will need to pursue collection of overpaid monies through PERS if applicable.

Jane Doe
Jane Doe works part-time and is classified as a .60 FTE.  She normally has some out-of-pocket premiums for insurance because contribution and subsidy is pro-rated for part-time employees.  The more hours Jane works, the more employer contribution and/or subsidy she qualifies to receive.
On April 23rd after working 80 hours out of an expected 84 hours for the month, Jane goes
out on FMLA.
Does Jane qualify to have the additional four hours she was expected to work factored in to the employer contribution/subsidy for April?

Yes.  The additional four hours that she should have worked would be coded as FMLA-eligible leave (with or without pay), and both the employer's and her own insurance premium responsibility should be calculated as if she worked her whole schedule.

Ben Kenobi
New employee Ben Kenobi turns in an IRS Form W-4, with boxes 1 and 2 completed, box 3 checked as single, box 6 marked as $140.00, and box 7 marked “EXEMPT”. What entry do you make on Ben’s P010 screen?

Stat “S”, Exem “00”, and ADDL “00”.  Ben Kenobi’s W-4 is invalid as completed. Until a valid Form W-4 is completed, you are required to withhold at Single/zero status.
Source: IRS Form W-4, which states in part “If you are exempt, complete only lines 1,2,3,4, and 7.” Additional information is in the IRS Circular E (Publication 15) regarding valid Forms W-4.

Dr. Ceyahh
In October, Dr. Ceyahh calls to inquire about his paycheck. Although he has not recently changed his withholdings, nor have there been any personnel actions this month, Dr. Ceyahh’s paycheck is higher than normal. He likes the  additional money, but wants to make sure it’s okay to cash.
You check to verify he hasn’t changed any deductions, nor did he receive any gross pay adjustments. His normal monthly salary is $9,500.00. Then you check one more thing, and reassure Dr. Ceyahh that he can confidently cash his check. What did you find?

Dr. Ceyahh's salary has reached the wage base limit for the Social Security portion of FICA taxes. Since this tax is no longer withheld, his net pay will be higher than his previous paychecks.

IQ Question with a Payroll Twist
Here’s a payroll-related twist on a classic IQ test question:  True or False?
If some reimbursements are taxable wages, and all taxable wages are reportable on the W-2, then all reimbursements are definitely reportable on the W-2.

The kicker here is "definitely".  Since only "some" reimbursements are taxable wages and therefore reportable on the W-2, then not "all" reimbursements are reportable.
Not related to the brainteaser, but some non-taxable reimbursements do get reported on the W-2, such as moving expenses.

Ima Procrastinator
Ima Procrastinator turns in her expense reimbursement form to accounting in April, seeking reimbursement for taxable meals since January.  Ima regularly works over 40 hours twice or three times a month to cover for sick coworkers and is not exempt from FLSA overtime rules.  Aside from the "MS" or "ZTR" P050 entry, is there anything else you should do to correctly pay this employee for her meal reimbursement?

Because taxable meals affect an employee’s regular rate of pay, Ima’s overtime compensation will need to be re-calculated for each month in which there was a meal reimbursement due.  The re-calculated amount is entered on the current P050 screen as "ZOT".
For help with how to calculate overtime, see the Payroll Calculation guide beginning on Page 6.

Betcha Can't Guess This One
Try to Stump Your Colleagues and Submit Your Own Challenge
  • Do you have a particularly convoluted scenario you think will stump your payroll colleagues?
  • Would you like to share a clever tip about how to approach a problem?
Write it up and send it to us for possible inclusion on this page as well as a home page feature spot.
* OSPS reserves the right to edit submissions for content and to comply with DAS editorial style guidelines.