Why does the check date matter?
Anytime payroll data is processed, a check date must be assigned to the payroll run. The check date of the payroll indicates the date of constructive receipt of the employee's pay, but also dictates when any resulting tax liabilities will be due. As a result, all wage and tax information processed in a particular payroll run is tied to the assigned check date and fixed to a particular tax period, or payroll quarter. Payroll quarters are always January-March (first quarter), April-June (second quarter), July-September (third quarter), October-December (fourth quarter).
Sally is the payroll administrator for Bob's Garage. She runs payroll every two weeks (bi-weekly), on Mondays for a Friday check date. Based on the company's pay schedule, the first check date for 2020 is January 10th. Subsequent check dates are January 24th, February 7th, February 21st, March 6th, & March 20th. Because the first payroll quarter ends March 31st, these are all of the check dates for first quarter. This means that for the tax period of January 1st through March 31st (first quarter), only these payrolls will be included in any quarterly payroll tax filings.
When you correct a check date in the past, it's important to understand if the wage and tax information you are modifying has already been reported to a taxing authority. In the example above, if Sally discovers an error in June on one of these first quarter check dates, correcting that payroll may require her to amend the first quarter wage and tax amounts that were previously reported to the taxing authorities.
What if I need to correct a payroll from a previous year?
To avoid downstream issues, correcting historical payroll information should be thought through carefully and, when appropriate, corrections via the payroll system may not need to be completed. The following general guidelines will assist payroll administrators in determining the right actions to take in some of the most common correction scenarios:
Incorrect income tax withholding:
- If an employee was under or over withheld for federal or state income taxes in a prior year, a correction to the payroll and W-2 should not be requested. Both federal and state agencies mandate that employees must address amounts due and refunds when filing their personal tax return once a tax year is closed.
- If an employee was taxed in the wrong state in a prior year, a correction to the payroll and W-2 should not be requested. Employees should file a tax return to the state agency for which the taxes were collected and request a refund and file a tax return to the state for which they should have had tax withheld in order to pay any liability due.
- For local city/county tax errors, the requirement to correct the wage and tax information, and file a W-2c and other amendments, may vary. Corrections to city, county, and other local income tax types on a W-2 should be discussed with a tax professional and payroll administrators should contact Zenefits as soon as possible to determine the proper corrective action.
If a payroll administrator needs to add additional income to the tax year, it's important that the following details are collected prior to processing a correction:
- What should be the check date of the correction payroll?
- How should the income be taxed?
- Does the income need to display in a specific way on the W-2? (e.g. Box 12 with a Code "T")
- When did the employee receive the net income?
If the income needs to be added to a prior tax year due to adjustments requested by an accountant or errors found on an employee's W-2, amendments to previously filed tax returns and a W-2c for the impacted employee will likely be required.
What should I do if I need to process a payroll correction?
Important information for deduction and contribution corrections:
If payroll administrators need to correct employee deductions, this can usually be resolved via an adjustment (increase or decrease of the same deduction type) on the next payroll run as long as it’s within the same tax year. Additionally, if employer contributions need to be corrected, these are best resolved via an adjustment (increase or decrease of the same deduction type) on the next payroll run as long as it’s within the same tax year. Deduction and Contribution corrections may not be resolved on a future payroll adjustment in the following circumstances:
- If the employee was over deducted (or the employer contribution was too high) and there are no future payrolls in which this deduction will be taken.
- If the employee is terminated.
Requesting a Correction
If payroll administrators determine that a correction is necessary, they should reach out to Zenefits as soon as possible. The best process for submitting a request for a correction is through Zenefits Customer Care.