| 1. | Bonus pay should be set up as one of the six miscellaneous pays on the Payroll > Properties > Misc Pays / Ded tab. Make sure that the W2 box is checks so that it will be included in gross wages. Typically, the bonus pay is not marked as exempt from any taxes nor as exempt from workers comp but check with your CPA. The g/l account on this line does not need to be filled in because the system will use the associated department code in the time card entry for the g/l account. |
| 2. | Go to Payroll > Controls > Department Codes to set up a code specifically for the bonus pay. Most companies accumulate bonuses into one expense account. Be sure to choose this department code on the time card entry otherwise it will use the department code found in the employee's file. |
| 3. | There are a couple of ways to manipulate the calculation of the Federal Withholding and State Withholding taxes on the bonus check: |
•Option 1 - Turn on the Override Auto Tax Calc option on the Payroll > Employee > Federal tab. When taxes are calculated you will be able to manually type in the specific tax amount that you want deducted from the check.
•Option 2 - Temporarily change the default pay period from weekly to monthly or annual on the Payroll > Properties screen. This will reduce the amount of tax calculated on the entire batch of checks. Refer to the IRS and State publications for withholding table calculations. Be sure to reset your pay periods after the bonus checks have been posted, otherwise all other checks will be calculated incorrectly.
| 4. | When you enter your time card entries, use the transaction code associated with the bonus pay. This will be code 51 - 56 (misc pay NOT withheld). The term not withheld on this screen has nothing to do with the taxable status of the item; the status is defined in the payroll properties as described in step 1. Instead, 'not withheld' on this screen simply means that the employee will be receiving the amount on his check. |
▪Do NOT use transaction codes 81-86 for the bonus pay. The term 'withheld' on this screen is for a pay item where the amount is shown on the check, taxed, and then deducted from the check in order to send it to a 3rd party (ie. a union or an approved benefits plan).
| 5. | Calculate the taxes as usual. If you chose the override auto tax calculation option in the employee file, then you will need to manually fill in the FWH and SWH fields with the proper amounts. If you chose to change the payroll periods, then review the tax calculations using the Pre-Check Tax Register. |
| 6. | Print and post your checks as usual. |
| 7. | If you chose to change the payroll periods, then be sure to reset your pay periods to your normal setting, otherwise all new checks will be calculated incorrectly. |
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