Common Payroll Myths

SOME salaried employees aren’t paid overtime, but you can be paid a salary and still receive overtime. There are certain types of employees that are exempt from being paid overtime. Click here for the different exemptions.

While it is true that you will save money, it is not so simple. The IRS uses three categories to determine if someone is an employee or independent contractor: behavioral, financial and type of relationship. Click here for more information on the criteria.

If an employee receives a tax-free fringe benefit, that means they don’t have to pay income tax on what they receive. However, the employee and the employer may still owe FICA (social security and Medicare tax). For example, many retirement contributions are still subject to FICA, as is adoption assistance. Click here for a list of fringe benefits and their tax treatment (see Table 2-1, page 6).

If it is compulsory, then it is work. Employees are entitled to be paid for time that they are required to spend at any meeting or training outside of their regular work hours.

With the right vendor, it’s not. The right payroll service provider will guide you through the process, doing the majority of the work and setup, with you simply providing information.

Everyone loves getting unexpected money, but if you get a large tax refund, that is because you are having too much tax withheld during the year. If you were to change your federal W4 form and your state tax form to have less withheld, you would have more money throughout the year. You could put that money in a savings account and let it earn interest, rather than giving it to the IRS.

Helpful Payroll & Employer Website Links

Internal Revenue Service

The Internal Revenue Service is the revenue service of the United States federal government, which is responsible for collecting taxes and administering the Internal Revenue Code.

State Department of Revenue – Select your State

US Department of Labor

The US Department of Labor is responsible for occupational safety and health, wage and hour standards, unemployment benefits, reemployment services and occasionally economic statistics. You can use this site for information regarding the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA).

The United States Social Security Administration

The United States Social Security Administration is an independent agency of the U.S. federal government that administers Social Security, a social insurance program consisting of retirement, disability and survivor benefits.

The American Payroll Association

The American Payroll Association is a professional association for individuals responsible for processing company payrolls. The Association conducts payroll training courses and seminars on a yearly basis and publishes a library of payroll resource texts and newsletters.