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W2 Reporting Summary

Date: Monday, December 15, 2015 Time: 9:00 a.m. – 12:00 noon

Presenters: Marie White, Tracy Lehmann

Timeline Schedule

SCOE IT Department Responsibilities

W2 Setup and Processing • December 13 – Load 15.3 Version of Escape into Production (System down until noon.) • December 14 – Load Payroll Detail into W2 formatting (Production/Training) • December 19 – Manual Payroll in Production • December 23 – Load Payroll Detail into W2 formatting (Production/Training) • December 23 –December Regular Payroll Production • January 8 – W2 Manual Payroll Production (Reissues ONLY) • January 12 – W2 Correction Payroll (Dated 12/25/15) • January 13 - Load Payroll Detail into W2 Formatting (A.M.) • January 20-22 – Printing and Folding of W2 Forms • January 26 – Printed W2 Form’s available to the District’s for Pick Up

District Responsibilities

W2 Verification and Payroll Detail Process • December 10-21 – Verification of Payroll Data & Related Correction in Dec Regular • December 21 – Regular Payroll Due by noon • December 23 – Verify W2 Formatting Detail • January 7 – W2 Manual Payroll (Reissues ONLY) due to SCOE by 12 • January 11 – W2 Correction Payroll (Dated: 12/25/15) due to SCOE by 12:00 noon • January 12 – FINAL Verification of Payroll W2 Detail • January 13 – W2 Verification Reports due to SCOE by 4:30

p.m. (Submit Verification Reports by 12 noon or BEFORE) VERIFICATION REPORTS

- Pay01 Payroll Summary - Pay05 Monthly Tax Summary - Pay26a Employer W2 Copy - Pay27 W2 Summary - Pay31 W2 Errors - Pay99 Payroll Snapshot

• January 26 – W2’s available to the District’s for Pick Up after 11:00 am • January 31 – W2 Forms due to Employees (Mail or Delivery)

W-2 REPORTING 2015 December 15, 2015

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W-2 Reporting 2015 - Workshop

Pay26a Employer W-2 Copy (11 Month)

PAY26a W-2 Copy (11 Month) HR/Payroll Reports

December 14, 2015 - The Pay 26a Employer W-2 Copy reports are available in the Production. These reports include all closed payrolls.

Districts should begin running this report starting December 14, 2015. These reports can be run many times to verify that the needed corrections have been made. Each district should review the report for errors to insure the accuracy of employees' W-2 information. The most typical errors include:

• OASDI: The wages subject to the OASDI portion of FICA, multipliedby the rate (6.2%), do not equal the OASDI contributions. Usually thisis the result of an erroneous pay history adjustment.

• MEDI: The wages subject to Medicare, multiplied by the rate(1.45%), do not equal the Medicare contributions. This usually is theresult of an erroneous pay history adjustment.

• NEG: One of the numbers is negative. This can occur as a result of anerroneous pay history adjustment, or by the timing of a canceledwarrant.

• TSA: The employee's TSA contributions exceed the maximum dollaramount of $18,000 for 2015. Because there can be valid reasons whyan employee may exceed the stated limits, this information should begiven to the employee with the suggestion to verify the amount with anaccountant or tax preparer.

For employees with OASDI, MEDI, or NEG errors, please review the employee's pay history and try to identify the error by date. Contact Erin Graves, SCOE External Payroll to discuss the best method for correcting errors. Usually these adjustments will be done with Z-type add-ons.

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W-2 Reporting 2015 - Workshop

Pay26a Employer W-2 Copy (12 Month)

Run after the December Regular Payroll (12/24/2015) • This report contains 12 month of employee payroll information

(January 2015 through December 2015). • Review this report carefully since this is the basis for the W-2 Form. • Refer to Page 2 for specifications to recheck for accuracy.

W2 Reminders in Summary

• Employee Name, Addresses, SS# Changes

REMINDER: The forms are printed with the employee’s address as of the extract date.

• Make sure to verify that the employee’s names, addresses and SS#’s are correct.

You can obtain a listing of current addresses in ESCAPE Go to: HR/Payroll-Employee Management.

Use the following steps: 1. In ESCAPE, define a reasonable search. 2. From the list create a grid of addresses.

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W2 Adjustments Affecting Pay

Collection or Pay Back from Employees SCOE Staff maybe collecting or refunding STRS, PERS, and/or OASDI on the December Regular Payroll (12/30/2015) or on December Manual Payroll (12/18/15)

When collecting from Employees who have no earnings on the December Regular Payroll • SCOE will establish the receivable on the 12/30/15 Payroll• SCOE will send the District a copy of the adjustment.• The District will need to notify and collect from the employee

Terminated Employees • If the employee is terminated from employment and will not again work in your District,

you will need to invoice the employee.• When you receive the money from the employee, you can deposit into your general fund using

object code 9213, where the receivable was established.

Current Employees • If the employee has NO earnings on December Regular Payroll, then on the employee’s next

available payroll in 20169, use the REPAY Deduction to actually collect from the employee.• This will collect from the employee without hitting January 2016 payroll taxes• This will clear the 9213 where the receivable was established by SCOE Staff.

Pay31 – No Errors • Keep in mind, W2’s will not process if there are errors.

Deceased Employees It is necessary for District’s to use the correct process for paying and reporting compensation for a deceased employee. Those guidelines can be found in the IRS Publication 15, and the Instructions for Form W-2. For further information on Deceased Employee reporting please see next page.

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Decease Employees: Final Pay in Escape 1. HR should end the assignment as of the date of death. Make certain the employee has

enough sick leave to be in paid status, or else Payroll should enter a dock.

2. After entering the final sick leave taken, vacation pay out, etc., Payroll should adjust allleave balances to zero.

3. Determine whether any class size overages or other stipends and/or earnings are owed.

4. Work with HR to figure out the appropriate end dates for health benefits, dues and otherdeductions. Normally the deductions should end as of the last day of the month duringwhich the employee died.

i. Exception: CTA Dues are not taken in the month of death

5. Change the number of Federal and State tax exemptions to “99” so no income taxes willbe withheld.

6. Review the benefit inflation and refund any additional amounts taken from the start of thefiscal year to the date of death that would have covered any future months of coverage(i.e. July and August premiums).

7. When final payment is made after the year of death:i. Do not withhold Social Security and Medicare taxesii. Do not process through payroll.iii. Skip Step 8 and go to Step 9.

8. When final payment is made in the same year the employee died:i. Calculate pay in Escape on the next (final) regular payroll, triggering a DNP

payout if applicable.ii. Enter the REPAY deduction to zero out net pay.iii. When the regular payroll runs, the subject grosses will be correct for retirement

and W2 reporting.iv. Exception: A manual adjustment will need to be made to the actual W2; Box 1

and Box 16 will need to be reduced by the final payment amount. Alert ErinGraves you have a decease employee. She will note this, keep it in her W2adjustment file and work with you at W2 reporting time.

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9. Create a new vendor in accounts payable to “The Estate of (employee)” i. Have the family complete a W9 in order to obtain the TIN or SSN for the

beneficiary or estate. ii. Flag the vendor “Yes” for 1099

10. Accounts Payable creates a direct payment req to issue the warrant to the new vendor

“Estate of” i. When final payment is made in the same year the employee died:

• Code payment to object 9213 to clear the REPAY that was created through payroll (done in Step 8)

• This warrant should be issued no later than the date of the next payroll. • Using a req will document the appropriate approvals. • Include a letter with the warrant explaining the pay and that they will

receive both a W2 and a 1099.

ii. When final payment is made after the year of death code payment to object 1XXX and 2XXX • This warrant should be issued no later than the date of the next payroll. • Can set these objects to report in Box 3 of Form 1099 since this is the only

occasion to issue APY warrants coded to these accounts. • Include a letter with the warrant explaining the pay and that they will

receive a 1099 (only).

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W2 - Adjustments

Deductions/Contributions: Health Insurance = W2 Box 12, Category DD

When both the deduction and contribution used for health insurance are correctly set up for reporting on the W2, Box 12, Category DD, whether using benefit providers or only as deductions and contributions, these will report correctly on the W2. This requirement is for those (employees and/or retirees) who have earnings in 2015 and are therefore receiving a W2. It is for reporting medical benefits only for what both the EMPLOYEE and EMPLOYER combined have contributed.

Sometimes an employee does NOT have enough earnings to cover their portion of the benefit through payroll and gets invoiced outside of payroll for these amounts. The correct set up for this is to use the REPAY Deduction in payroll. The repay would be a negative amount thus giving the employee the amount to cover the benefit, and if set up for pre tax benefits the employee will also get the tax break (be cautious, sometimes the tax break can be greater than the employee’s earnings and creates negative subject grosses which is not allowed) and creates the receivable in 9213. This correctly reflects the employee’s portion of benefits in pay records. You would still invoice the employee, but when you receive the money, you will deposit it into 9213. This allows for all of the employer and employee medical contributions to report on the W2 Box 12, Category DD.

If you have not been using the REPAY deduction to account for this, you will need to determine the dollar amount you have received from the employee outside of payroll for medical benefits. There is not currently a report to run that would list out all the amounts received from the customer (employee). You can go to Finance-AR-Invoices and search by Customer ID. This will give you a list of invoices. You can snap shot each individual invoice to determine the amounts invoiced and received for Medical benefits. A specific add-on for adding the dollar amount to the W2 Box needs to be created. Please email helpdesk@scoe.org to request the creation of a Medical W2 Adjustment add-on.

Retirees In other instances, retirees might be paying their portion of medical benefits directly to the district’s health care provider (i.e. RESIG, CVT). Please contact the appropriate health care provider for the amount the retiree has paid outside of payroll in order to report on the W2 being submitted to the retiree by your district. A specific add-on for adding the dollar amount to the W2 Box needs to be created. Please email helpdesk@scoe.org to request the creation of a Medical W2 Adjustment add-on.

Health Savings Account (HSA) = W2 Box 12, Category W

For districts offering HSA’s, verify that the appropriate contribution/deduction was used to report both employee and employer contributions. This should include the employer contributions and what the employee has elected to pay via the Section 125/Flex Plan. These are reported in W2 box 12 with category code W (HSA contribution).

NOTE: If an employee is age 65+ and receiving Medicare they are no longer eligible to contribute funds to the an HSA (Health Savings Account). Please refer to the attached documentation on how to refund and fix their payroll detail.

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Dependent Care = W2 Box 10

Use this deduction to report the amount paid by the employee for dependent care. It is highly unusual for an employee to exceed the IRS limits ($5,000 for 2015), but it is possible. The district typically receives this information from a Section 125 Plan administrator. If you offer this type of benefit, let your plan administrator know your deadline for entering adjustments.

You can also run the Pay12 Employee Deduction Report to verify the 125 Dependent Child Care does not exceed IRS limits. If an employee exceeds the IRS limit, the excess amount needs to be added to boxes 1(wages), 3(OASDI) and 5(M/C) of the employee’s W2.

Employer Paid TSA 403(b) and 457(b) Contributions

Contributions the employer has paid toward a TSA for an employee. These amounts are used for the calculation of the TSA limit. Employer contributions to a section 403(b) for public school employees are exempt from social security and Medicare taxes.

TSA 403(b) and 457(b) Refunds

TSA 403(b) and 457(B) Refunds that are received for employees for calendar year 2015, need to be recognized in the year received. If the refund is received in Dec, it can be adjusted on the December Regular Payroll. If a refund is received in the next calendar year for 2015, it should be returned to the vendor to be reissued directly to the employee, with the exception if the refund is due to exceeding the annual max of $18,000 for 2015. If that is the case, then please work with Erin Graves, SCOE Business Services.

Deduction and Contributions can be updated in Deduction & Contribution Management to populate the correct Box & Category on the W2 Form Go to HR/Payroll - Setup – Payroll – Deduction Management or Contribution Management

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Add-ons:

DOMESTIC PARTNER Add-ons: Domestic/Domregis Use these add-ons to report amounts paid by the employer for health and welfare premiums for domestic partners. Refer to attached documentation regarding Benefits Provided to Domestic Partners as Taxable Income which also addresses Fair Market Value if Composite Rate. Verify if the domestic partnership is registered with the State to determine which add-on to use.

-If you used this add-on throughout the tax year 2015 no added adjustment will be needed. -Please let your IT analyst know that you have need of these add-ons and they will be added for you to use in 2015 -If the add-on was not used and should have been, a one-time adjustment using the add-on needs to be made increasing the subject gross wages for FIT, OASDI, M/C and SIT if not registered and no SIT if registered. This must be done on the December Regular Payroll.

TERM LIFE INSURANCE Add-on: Lifeadj -No additional adjustment will be needed for this tax year if this add-on was used during the year.. -Please let your IT analyst know that you have need of these add-ons and they will be added for you to use in 2015.

If add-on was not used, the district will need to do a one-time manual calculation to correct: Use the Lifeadj add-on that points to the EE-Life earnings table, to report the premium of group employer paid term life insurance in excess of $50,000. For determining the adjustment to income for term life

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insurance over $50,000, the IRS requires the use of the following table. It sets out the cost per $1,000 of group-term life insurance for one month, computed based on four-year age brackets. For purposes of the table, the age of the employee is his/her attained age on the last day of his/her taxable year.

Cost Per $1,000 of Protection for One-month Period: Under age 25 $.0525 through 29 .06 50 through 54 $.23 30 through 34 .08 55 through 59 .43 35 through 39 .09 60 through 64 .66 40 through 44 .10 65 through 69 1.27 45 through 49 .15 70 and above 2.06

For example, if a district pays the premium on a $70,000 group term life insurance policy for a 50-year-old employee, the cost of the policy to be reported on the employee’s Form W-2 is calculated as follows:

Total insurance coverage $70,000 Less amount excluded from taxation 50,000 Excess subject to compensation 20,000

-Tax year 2015 -Add-on Lifeadj = 20 units X .23 X 12 months = $55.20 -- The amount reported on Form W-2 is $55.20. -Tax year 2015 = Month units over X age rate = Monthly deduction

WORKER COMP CHECKS Add on: Worker Comp

All Worker Comp checks for 2015 need to be reflected in the employee’s pay in 2015. This add-on reduces the subject grosses for OASDI, Medicare, FIT and SIT.

This needs to be corrected on the December Regular payroll, because this reduces subject grosses and therefore reduces the amount that should be withheld.

FRINGE BENEFITS OR MISCELLANEOUS INCOME OUTSIDE OF PAYROLL = W2 Box 12, Category L

Any unaccountable expense reimbursement(s) or miscellaneous income received by an employee that is not reflected in the employee’s pay history. Determine the Social Security and Medicare subjectivity and enter accordingly using z-add-ons.

Some examples are:

• Additional income paid by an accounts payable commercial warrant• Mileage reimbursement rate only if it is greater than the government specified

reimbursement rate. The government rate for 2015 is .575 cents per mile. Need to use amileage add-on to report the amount over the government allowable reimbursement rate.

Example: Total number of miles: 250 Rate Per Mile: $.60 (250 X $.60 = $150.00)

$143.75 Mileage reimbursement equal to Govt. rate, do not report. $ 6.25 Mileage reimbursement greater than Govt. rate, reportable income, requires

adjustment to subject grosses (including FIT and SIT) and must report in W2 Box 12, Category L.

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THIRD PARTY SICK PAY = W2 Box 13 marked as YES

If you have employees with third-party sick pay, you need to add the employee to an adjustment pay cycle and adjust the tax grosses accordingly. What tax grosses need to be adjusted depends on the provider and the employee’s setup. This reflects taxable payments to employees for sick pay from an insurance company or any other third-party payer.

These wages are not reflected in the employee's pay detail. The taxable amount is determined by the percentage of the premium the employer pays and Box13 on the W2 needs to be marked yes for 3rd

party sick pay.

RETIREMENT INCENTIVE PAY = W2 Box 12, Category DD

When a choice of payment options is given for retirement payouts, and one of the options is a lump sum, Constructive Receipt Doctrine applies (see attached Nonqualified Deferred Compensation Audit Techniques Guide). When a retiree choses an option other than the lump sum payment option (i.e. monthly payments, benefits in-lieu of payments), special adjustments will need to be made to the W2 the first year reflecting they received the entire amount. The process for this would involve a review of the contract to determine what the true lump sum value is. If benefits are involved, a W2 Box 12, Category DD reporting would be required. Succeeding monthly payments would not be taxable. If you offer a choice of payment options for retirement incentive, contact Erin Graves for determining what you need to report and/or not report.

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W2 Error Report The Pay31 must have no errors in order for W2s to process. Go to HR/Payroll – Reports – Payroll – Pay31 Tax Year = 2015 Click Go

Review report for errors

W2 Adjustment Examples

Example #1 – OUT OF RANGE ERRORS – Box #12 Code DD contains a negative amt

Example #2 – EMPLOYEE PROBLEMS – Address

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HOW TO REVIEW W2 PROBLEMS/ERRORS

EXAMPLE #1 – OUT OF RANGE ERRORS - Box #12 Code DD contains a negative amount

Step 1 - Go to HR/Payroll-Processes-Tax Reporting-Employee W2

Step 2 – Click Go a. Review Section 3 – Box 12 (Special CategoryNotice the Negative (70.40) b. Review Section 8 – Add/Update Info Problem MsgExplains the Problem

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Step 3 - Go to HR/Payroll-Reports-Payroll

a. Run the PAY34 report- Starting Pay Date: 1/1/15 - Ending Pay Date: 12/31/15 - Employee ID: - W2 Box: 12 - W2 Box Category: DD

This will help you identify which payroll created the error

Review report to identify the error and isolate pay period

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Step 4 a. Go to HR/Payroll-Payroll-Adjust Payrollb. Go to the payroll that caused the negative amount. Determine which Deduction/Contribution

was used.

Step 5 a. Go HR/Payroll-Payroll-Adjust Payroll for the 12/30/15 Regular Payrollb. Use the same deduction/contribution to reverse the negative amount reported on the W2

Step 6 a. Create a new deduction/contribution copying the same deduction/contribution code.b. Rename the copied deduction/contribution: HW W2Adj. This will be unique and easy to

identify.c. Go to Section 2 and remove the W2 information. So that the new deduction/contribution

information will not print in Box 12 on the W2 Form.

Step 7 Rerun the Pay34 to verify the correction was made.

Remember to review these adjustments/corrections once the December Regular Payroll has been run.

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EXAMPLE #2 – EMPLOYEE PROBLEMS:

The address is undeliverable; the district will need to fix the address on the W2.

IRS only allows up to 22 characters for the first line of the street address. ESCAPE allows up to 60 characters across two lines. When running the W2’s ESCAPE truncates the second address line.

1. Update the address in Employee Management as follows:

a. Street Address: 3860 S. White Mntn Rd

W2 Timeline for Tax Year 2015 December 7 at 12:00 pm November Supplemental Payroll Due (DISTRICTs)

December 8 at 9:00 am W2 Workshop in Oak Rm D&E W2’s Loaded into Training for District Review

December 9 November Supplemental Payroll Closes in Production (SCOE)

December 13 at 6:00 am Escape down to update to version 15.3

December 14 Initial Load of Payroll Detail into W2 Formatting (SCOE)

December 17 at 12:00 noon Manual Payroll Due (DISTRICTs)

December 19 Manual Payroll Production (SCOE)

December 21 Load Payroll Detail/Changes into W2 Formatting (SCOE) • Included Supplemental and Manual Payroll Changes

December 21 at 12:00 noon December Regular Payroll Due (DISTRICTS)

December 23 December Regular Payroll Production (SCOE)

December 23 Load Payroll Detail into W2 Formatting (SCOE)

December 30 December Regular Payroll

January 7 at 12:00 noon W2 Manual Payroll Due – Cancels & Reissues ONLY (DISTRICTS) Pay Date: 12/31/15

January 8 Manual Payroll Production (SCOE)

January 11 at 12:00 noon W2 Correction Payroll Due – Dated 12/25/15 (DISTRICTS)

January 12 W2 Correction Payroll Production (SCOE) • Districts must to Submit Pay99 Report

January 13 Load W2 Correction Payroll into W2 Formatting (SCOE)

January 13 by 4:30 pm Districts will review FINAL verification of W2 Payroll Detail • Signed Verification Reports Due to SCOE• Pay01• Pay05• Pay26 (Only the last page)• Pay27 (Only the last page)• Pay31

January 20-22 W2s will be Printed and Folded

January 26 after 11:00 am W2’s available for District’s to Pick Pp with Payroll

January 31 W2 Forms due to Employees

Dec 8 Dec 9 Dec 14 Dec 19 Dec 21 Dec 23 Jan 8 Jan 12 Jan 13 Jan 20-22 Jan 26

December Regular Payroll Closes

Manual Payroll Closes

W2 Workshop @ SCOE Oak Rm

D&E 9am

Initial Load W2 Detail

into Production

Load Updated

W2 Payroll Detail

SCOE IT W2 Timeline Tax Year 2015

2015 SCOE IT – W2 Timeline • Dec 8 – Load current W2 Detail into Training

o W2 Workshop @ SCOE Oak RmD&E

• Dec 9 November Supplemental Payroll Closes

• Dec 14 – Load Initial W2 Detail into Production

• Dec 19- Manual Payroll Closes

• Dec 21 – Load Updated W2 Pay Detail into Escape

• Dec 23- December Regular Payroll Closes

• Dec 23– Updated W2 Pay Detail in Escape includesDecember Regular Payroll

• Dec 30 – December Regular Pay Date

• Jan 8 – W2 Manual Payroll Closes (REISSUESONLY)

• Jan 12 – W2 Correction Payroll Closes

• Jan 13- Updated W2 Pay Detail Loaded into Escapeincludes W2 Manual Payroll and Correction Payroll

o Email districts whenW2’s are loadedo Review Signed Verification Reports

• Jan 20-22 Print and Fold W2’s

• Jan 26 – W2’s Jan 26 – W2’s ready for District pickup with December Payroll after 11 am

Current W2 Payroll

Detail Loaded

into Training

W2 Manual Payroll Closes

Print and Fold W2’s

W2 Correction

Payroll Closes

Load Updated

W2 Payroll Detail

Load Updated

W2 Payroll Detail

W2’s Available to Districts for

Pick up after 11am

November Supplemental

Payroll Closes

W2 Manual Payroll

(12/31/15)

Due to SCOE

W2 Correction Payroll Due to SCOE Dated

12/25/15

(Dated: 12/25/15)