Before you can pay bonuses in RTI 2000 Payroll, you have to address two questions:
1.
How do you want
the bonuses taxed?
2.
How do you want
to pay the bonuses?
Options for paying bonuses are described below. Instructions
are on the following pages. If you are unsure of how to tax or pay bonuses,
consult with your CPA.
Bonuses can be taxed three ways:
·
as Bonus/Supplemental Pay
·
as ordinary income
·
not taxed at all
Bonus/Supp Pay: When the bonus is taxed in
this method, the tax rate is 28%. When entering or editing timecard records,
you will see a field called Bonus/Supp
Pay. This field is used to pay bonus or supplemental pay according to
federal regulations. The amount of pay entered in this field is taxed at a flat
rate of 28%, regardless of how many exemptions an employee claims. See
Option 1 below.
Ordinary Income: In this method, you set up
an addition to the employee’s regular
pay to pay the bonus and you enter the bonus amount in the Addition field. Note: The bonus amount is added to the
employee’s regular pay, and the entire amount is taxed as regular income. This
method is usually chosen to avoid the 28% flat tax rate. Before selecting to
tax bonuses this way, you would probably consider (a) the tax rate currently
paid by the employee (i.e., is it already over 28%?); and (b) if the employee
has reached the FICA limit (i.e., if they are over the limit, they pay less tax
on the income). See Option 2 on the next page.
Not Taxed At All: This method works the
same as the “Ordinary Income” method above, EXCEPT that you force the employee
exemptions so high there is no tax withheld. See Option 3 on the last page.
Bonuses can be paid in two ways:
·
in the regular
pay run, that is, in the employees’ regular paychecks – not available for the “Not Taxed At All”
method
·
in an interim
pay run, that is, by issuing separate checks outside the regular pay run
You can use this method in either a regular pay run or an
interim pay run.
Start the pay run as usual. If you transfer hours from
TimeKeeping or RMS, do so, then edit the employees’ timecard records and enter
the bonus amount in the “Bonus/Supp Pay” addition field.
If you enter hours manually, as you enter hours for
employees, enter the bonus amount at that time. If a salaried employee is
receiving the bonus, edit his timecard record and enter the bonus amount in the
“Bonus/Supp Pay” addition field.
Note: If the bonuses
are going to be paid on a separate check, an interim pay run must be performed. To do so, select the
option Start/Modify Pay Run. Select
the stores to include in the pay run and any additions and/or deductions that
may apply (including of course your “Bonus” addition).
Go to Enter/Transfer
Hours and select Add timecard.
Enter an employee who is to receive a bonus and enter the amount in the
“Bonus/Supp Pay” field. If the employee is salaried, enter $0 in the “Payrate Override” field. This will prevent their regular
salary from being included in this pay run. (You also need to enter 0.00
in the “Balancing Screen” for the store that appears when first entering this
screen.)
Complete the pay run as usual. If you are submitting tax
payments from the bonus run with those from a regular pay run, print a Check
History Summary for the date range that includes the regular payrun and the
bonus run.
You can use this method in either a regular pay run or an
interim pay run.
In Payroll Maintenance,
select Additions. Add a new
addition, selecting Add Data entry
amount as the Addition Method.
Select Add amount to gross pay before calculating these taxes. For W-2 Impact, there will be No special impact on W-2. When the
addition is selected to be included in a pay run, it will appear on the
timecard record under “Optional Information.”
Start the pay run as usual. If you are using a bonus addition, select the addition to be
included in the pay run.
If you transfer hours from TimeKeeping or RMS, do so, then
edit the employees’ timecard records and enter the bonus amount in the “Bonus”
addition field.
Note: If the
bonuses will be paid on a separate check, you must perform an interim pay run. To do so, select the option Start/Modify Pay Run. Select the stores
to include in the pay run and any additions and/or deductions that may apply
(including of course your “Bonus” addition).
Go to Enter/Transfer
Hours and select Add timecard.
Enter an employee who is to receive a bonus and enter the amount in the “Bonus
Addition” field. If the employee is salaried, enter $0 in the “Payrate Override” field. This will prevent their regular
salary from being included in this pay run. (You also need to enter 0.00
in the “Balancing Screen” for the store that appears when first entering this
screen.)
If you enter hours manually, as you enter hours for
employees, enter the bonus amount at that time as above. If a salaried employee
is receiving the bonus, edit their timecard record and enter the bonus amount.
Complete the pay run as usual. If you are submitting tax
payments from the bonus run with those from a regular pay run, print a Check
History Summary for the date range that includes the regular payrun and the
bonus run.
Note: If paid in a regular pay run, the bonus
will be considered ordinary income and combined with the employee salary or
wages. The resulting tax rate for this pay run may be higher than usual,
leading to a higher portion of tax withheld. You can avoid this by performing a
separate “Bonus” interim pay run.
YOU CAN USE THIS METHOD ONLY IN AN INTERIM PAY RUN.
Hint: Write down
any temporary changes you make to the employee information so that when you are
through with the pay run you can go back and enter the information as it
normally appears.
In Payroll Maintenance,
select Additions. Add a new
addition, selecting Add data entry
amount as the Addition Method.
Select Add amount to gross pay before calculating these taxes. For W-2 Impact, there will be No special impact on W-2. When the
addition is selected to be included in a pay run, it will appear on the
timecard record under “Optional Information.”
If you prefer not to withhold any federal income tax from
your employees for this bonus pay, in Employee
Maintenance, pull up the employee record. Select “Tax Constants” and change
the number of exemptions to 999. Do
the same for “State Income Tax,” if applicable. You can also set a fixed amount
to be withheld by changing the number of exemptions to 999 and entering the amount to be withheld in the “Additional
Amount” field.
After editing the employee records, start an interim pay
run. To do so, select the option Start/Modify
Pay Run. Select the stores to include in the pay run and any additions
and/or deductions that may apply (including of course your “Bonus” addition).
Go to Enter/Transfer
Hours and select Add timecard.
Enter an employee who is to receive a bonus and enter the amount in the
“Bonus/Supp Pay” or “Bonus Addition” field. If the employee is salaried, enter $0 in the “Payrate Override” field.
This will prevent their regular salary from being included in this pay run.
(You also need to enter 0.00 in the
“Balancing Screen” for the store that appears when first entering this screen.)
After all employee bonuses have been entered, complete the
pay run as usual. When you are finished, be sure to go back and reinstate the
employee information you changed. If you are submitting tax payments from the
bonus run with those from a regular pay run, print a Check History Summary for
the date range that covers the regular payrun and the bonus run.
If you have any questions concerning bonus pay, call
RTI Client Services at 800-937-1290.