The Payroll Process 2022: A Basic Guide to U.S. Payroll Procedures and Requirements

The Payroll Process, 2022 edition, updates and adds content to the popular prior edition. The broad scope of content explains the entire process, with clear explanations, numerous examples, practical advice, and references for additional research to address the variety of different user needs.

Payroll staff, HR staff, managers, owners, and interested professionals can follow a mapping of all process steps with procedures and compliance explained clearly in each step. For employees, the discussion of employee rights and benefits will be of vital interest. Instructors and students will appreciate the clear explanations, many examples, and the scope of topics. Content summary:

Employment law: Searching and hiring; initial documentation; eligibility verification; employer misrepresentation and negligence; at-will employment; employee vs. independent contractor; the ABC test; employee rights compliance; fair employment laws; monitoring and updating employee status; employment and termination checklists; joint employers; using a staffing agency.

Gross wages and withholding: The Fair Labor Standards Act; minimum wage; conversions to required weekly periods; overtime principles and proper calculation examples - hourly, salaried non-exempt, commission employees, tipped employees, retail sales employees, piecework, hospital and residential care employees, comp. time, deferred pay, and other pay arrangements, including daily overtime states; selecting a payroll period; outsourcing; FICA withholding; income tax withholding methods; self-employment tax; other employer payroll expenses.

Employee benefits: Principles and overview; tax-exempt benefit types and details; tax-deferred (retirement) benefit types and details; managing benefits, ERISA.

Recording payroll: The payroll register illustrated; journal entries - gross pay and related accounts, employer payroll tax expenses, benefits, end of period accruals, vacation pay, sick leave and PTO; employee earnings records; summary of account types used.

Making payments: Payments on accruals; reversing entries and payment; manual paychecks; deposits to taxing authorities; deposit penalty waiver; garnishment; "grossing up" of payments.

Forms, reports and audits: Quarterly and annual reporting; summary of common forms used; making corrections; IRS penalties; IRS penalty abatement options; DOL penalty abatement; preparing for and dealing with audits; reports to management.

Employment of non-U.S. persons: General procedures; resident aliens; non-resident aliens; dual-status aliens; employer form filing requirements; undocumented workers.

Internal control for payroll: Summary; special considerations; internal control checklist.

Appendix I: States and territories with daily overtime laws: Calculations for Alaska, California, Colorado, Nevada, Puerto Rico, U.S. Virgin Islands; key features for other states more limited in overtime scope - Kansas, Kentucky, Oregon, Rhode Island, Washington, Wisconsin.

Appendix II: Timekeeping methods: Critical functions; internal control; offline; online.

Appendix III: Document retention guidelines: Overview; DOL; IRS; ERISA.

Appendix IV: New business / first-time payroll checklist

Gregory Mostyn is an accounting instructor at Mission College, Santa Clara California. He previously worked as a CPA in public accounting.

He has also previously published prior editions of this, a basic accounting text, and research articles in the Journal of Accounting Education and other journals.