Provided the state of our world today and the economy, small businesses could use some direction with respect to PPP. As such, Net at Work and The CEO’s Right Hand partnered together to host a webinar for business owners on Curing HRMS/Payroll from Covid-19.

As part of it, we discussed the following:

  • Eligible Expenditures Incurred and Paid During the Covered Period
  • Maximizing your Forgiveness
  • Tracking PPP Funds
  • Modifications to HR and Payroll Systems
  • Repairing Time Off with Adjustments
  • Repairing Pay History…Taxes and Deductions
  • Payroll Taxes…What Goes Wrong? 
  • IRS Draft Version 941
  • Being Successful in the New Normal

In case you missed it, here is a replay of the event and the transcription:

https://www.netatwork.com/ppp-funding-modifications-to-hr-and-payroll-systems-irs-draft-version-941-being-successful-in-the-new-normal/
Video Transcription

Mark: Good afternoon, everyone, and welcome to today’s live webinar, “Curing Your HRMS/Payroll from COVID-19: Fixing HR/Payroll and Prepping for a New Normal.” This is part of our ongoing series that we’ve been doing for the last eight weeks now. This is week number eight of weekly webcasts for folks, and we’ve brought in a number of speakers from outside of Net@Work. We have some interesting folks. I think that you’ll find some fascinating information as we go along today. We’re also going to be joined by two of our consultants, and they’ll be going over some of the particulars in terms of Sage and HRMS.

Just a couple of housekeeping tasks. First off, this presentation is roughly an hour-and-a-half long. All the phone lines are muted, but you can put questions into the question box. We’re going to have a couple of opportunities to ask questions, both of our presenters and of the consultants as well. So, please feel free to type in the questions, and we’ll break at periods during the presentation. We’re recording today’s presentation, and copies of the slides and other attachments are available in the handouts area of the webinar. There is also a handout for those of you who are getting professional development credits under SHRM. This week’s certificate is also available there as well.

So, I think with that, I’m going to turn things over to our presenters today. I’m going to go ahead and let you guys introduce yourselves, I think, and kick off today’s session. William, the presentation is coming your way.

William Lieberman: Great, great. Well, thank you, Mark. I really appreciate it, and Eric and I appreciate the opportunity to speak to the group and, hopefully, impart some of the wisdom that we have learned along the way. What our firm does, The CEO’s Right Hand, we provide financial and accounting advice to small and medium-sized businesses throughout the country.

We’ve been doing this for a little over five years and look forward to imparting some of the learnings that we’ve found over the last several weeks with regard to the PPP loan, and especially forgiveness. And we’re going to focus in on how to maximize forgiveness of the PPP loans and dig into a little bit of the detail that has been disseminated that many of you, I’m sure, are familiar with. But there are some nuances that you might not have experience with yet, and we’ll be able to help you a little bit along the way.

So, today, what we’re going to focus in on are talking about the expenditures, the expenses that are eligible for PPP forgiveness under the SBA rules, and how to maximize the forgiveness of the loan that you’ve received, as well as how do you track, during this eight-week period, what’s the best way to track the expenses that you are incurring so that you, again, maximize your ability to get as much of the loan, if not all of it, forgiven by the lender when you submit your forgiveness documentation.

So, as you are, I’m sure, all aware, there’s a lot going on. Things are changing very often, and there are no real experts. There are lots of people that have dug into it, don’t get me wrong, and we know the rules. But there are truly no experts because it is somewhat of a moving landscape. Guidance comes out daily. There was new guidance just today about the safe harbor for those companies that may choose to give their loans back and return the loans because they weren’t truly eligible. So, things like that, and how partners and partnerships and their compensation are treated, that guidance came out this week as well.

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And so, as you are all having and experiencing the issuances that come out all the time, there’s also not guidance on everything. And that makes it even harder. So, as we [laughs] like to say, it’s like we’re building a plane after we’ve taken off, or we’re trying to fix the engine as it’s running around the racetrack. So, there are things that just aren’t known. And so, that’s really going to take into consideration, as we go through some of this. We will be able to field questions, again, via the chat. But if there aren’t answers to every single question, either we’ll go find out, or we’ll get some more information down the road.

I’m going to hand it over to Eric, my partner, Eric Meisner, and he’ll go through some of the details starting with the expenditures, and in this case, payroll.

Eric Meisner: Great. Thanks, William. I hope everyone out there is safe and healthy, and home with their families, and doing okay. So, let’s start with the costs that are eligible for forgiveness. We’re starting with salaries of full-time employees. Salaries are capped at $100,000 per person. That includes owners and partners.

We’ve been on a bunch of webinars, so we’re going to try to answer questions along the way that you might have. And the question is always asked, “What does salary include?” On top of salary, vacation pay, sick pay, if you’re out for bereavement, that’s included. Stipends are included if they’re consistent. So, if you, every month, get a $50 stipend for your cell phone, that’s included as salary.

People are always going to ask about the bonuses. So, if a quarterly bonus is part of your compensation plan and you paid an employee a bonus in the first quarter, yes, it’s eligible for forgiveness as part of this process. Lenders also might consider things like seasonality. That’s a whole other set of rules. You should really talk to your lender about that in advance.

Other payroll-related expenditures that are eligible for forgiveness are employer contribution to retirement plans such as 401K, employee payments for employee benefits. Now, these benefits are limited to medical, dental, and vision. The question is always asked, “Well, what about short-term disability, long-term disability, life insurance?” Those insurances are not included. When you hear the word “employee insurance,” we’re talking about medical, dental, and vision coverage. And then state and local taxes assessed on employee compensation. What they’re really talking about here is your state and local unemployment taxes that the employers pay. And the total payroll cost must be at least 75% of the forgiveness amount.

I wanted to talk in a little further detail about FTEs. Again, questions we’ve heard, “Full-time equivalence, what’s the definition?” The guidance is not clear. It’s not out, or it’s not clear. But here are the assumptions that most of us accountants are running with, and that is that a full-time equivalent is somebody who works at least 30 hours per week. So, you can put these together. So, if you have two employees who work 15 hours a week, you can combine them and deem it one full-time equivalent.

We’re going to talk about tracking your forgiveness. If you’ve had a lot of employee turnover, we’re recommending that you have a tracker and you going to list all of your employees on this tracker. If it’s easier to do it by position, so, at the start of the outbreak Suzie was your person, and she left. Then, you hired Bobby as a second person. Just deem it one FTE, and maybe in brackets the two names next to it.

But again, if it’s easier for you, do it by position and not by employee. And then what you’re going to do on your tracker, you’re going to list it position by position. You’re going to compare your first quarter run rates, the salary — everyone’s compensating for the first quarter — against what you paid during the eight-week period. And if everything matches perfectly, it’s forgiven, and it’s easily calculated.

So, here’s a bit of a CYA for companies. This is happening a lot. There are a lot of employees who are refusing to come back to work. So, why is that? Well, in many cases, especially in retail, they’re making more money on unemployment than they’re being paid at work. They might be scared to come back. Whatever the reason is, you want to put the onus back in the employee, right?

So, what you want to do is you want to make a, we should’ve written in writing, but you must make a good faith effort to rehire this person. And if they say no, if they decline the work, get it in writing. Once you have that, the employee is at risk to forfeit their eligibility of continued unemployment compensation. So, again, CYA. Offer it to them. If they refuse, just get it in writing so no one could come back to you later and say, “Hey, I wanted to come back.” Just CYA.

And last is, if your company uses a PEO, you know, in the PEO world, your employees become employees of the PEO. Not in this case, so work with your PEO to get tracking this year. They are your employees in this situation, and not employees of the PEO.

On the next slide there, the nonpayroll expenses that are eligible for forgiveness are your rent, if you’re LSE. If you own the building and have a mortgage, your mortgage interest is eligible. And then employees. So — I’m sorry, utilities. Utilities is not defined. We’re still waiting on clarification for that. We’re assuming internet, gas, electric. So, remember, the initial intent of the PPP loan was to keep the lights on. So, what utilities do you need to keep the lights on? Obviously, electricity, gas, internet. Those are the ones we’re expecting to be part of the forgiveness.

Okay. Let’s talk about maximizing your forgiveness. It’s easier to talk about what will reduce your forgiveness. So, if less than 75% of your funds are not spent on payroll, your forgiveness amount is going to come down. If your payroll costs are less than the prior quarter, again, we’re recommending people compare to the first quarter. Some people are comparing to first quarter of 2019. But if it’s less than 75%, your forgiveness is going to be reduced. And employing fewer full-time equivalents than your base period, and not remedying the situation by June 30th.

Now, June 30th is likely to be extended. A lot of people haven’t gotten their loans yet, right? So, you get your loan, and you have your eight-week period. If you got your loan today, on May 15th, obviously eight weeks is going to take you past June 30th. So, again, here’s the case. We’re looking for more guidance from our lawmakers. But in all likelihood, that will be extended.

Here’s what’s really important about maximizing forgiveness. It’s not all or nothing. Don’t think that if you were expecting $100,000 of forgiveness and you have fewer people, if you don’t hit that threshold, you get nothing. That is not the case. The total amount of your forgiveness will be reduced. Again, it’s not all or nothing. And the worst-case scenario, if you were expecting something to be forgiven and it’s not, again, worst-case scenario, you have a 1% loan for 18 months. So, you could find something else to do with the money. Or you could return it.

Okay. Our next slide. Now, you have to track these PPP expenses. Please know your forgiveness exercise is going to run through your bank, not the SBA. So, if you have a working relationship with your bankers, start working with them now. Don’t wait until they call you. Start reaching out to them now and understand exactly what their definitions of all this guidance is so everyone is on the same page.

The easier you make this for your bank to review the supporting documents, the more likely that it will be forgiven. And that’s not in any guidance. Simply said, don’t be that guy who shows up to his CPA at tax time with all his receipts in a shoebox and says, “Hey, do my tax returns.” That’s not going to [laughs] go over well. You want to make this as easy as possible for the banks. And we’re going to talk a little bit about that now.

So, your eight-week clock begins when the funds hit your bank account. You need to pay all these items during that period. And a lot of questions come from this. There’s no guidance on payroll cycles. You might have to run a special payroll. So, what we’re talking about here, you’re on the clock for eight weeks. Now, was Congress’s intent of eight weeks being two months? So, as a monthly cycle, is your monthly payroll cycle greater than eight weeks?

If your payroll is done monthly, that might extend out greater than 56 days. So, we’re waiting on further guidance on this. We are hoping that the intent of Congress was, “Hey, when we said eight weeks, we meant two months of payroll.” Don’t go changing your payroll cycle. But if we’re wrong here, get in contact now with your payroll provider, especially if you pay monthly. You might need to run a special payroll to get underneath that 56-day window. Again, more guidance to come there.

Consider keeping the funds in a separate bank account. This is not mandatory, but if you have an empty bank account sitting around, you know, you’re going to want to show all the activity going out. So, if you have your own bank account and the 10 items that you paid out are going to be sitting there on two bank statements, life is going to be easy. If it’s all comingled, you’ll have to go in and highlight it. Again, not mandatory here, but you should consider using a separate bank account.

Work with your payroll providers. I have heard that a lot of payroll providers are doing this but set up new payroll codes during this period. The important thing about getting expenses forgiven, and this statement is going to answer a lot of your questions, forgiveness relates to a cost, the period of the cost. It’s accrual accounting — or, it’s not accrual accounting. It’s like, cash and accrual. But the cost must be incurred and paid during that eight-week cycle. So, we can’t use these funds, if you accrued a fourth quarter 2019 bonus and you haven’t paid it yet, obviously, that expense was incurred in the fourth quarter, and you shouldn’t try to pay it in May with PPP funds.

Spreadsheets. You should absolutely have a spreadsheet. We’re going to show you one, and you’re going to have a supporting document for each item. You’re going to have a list, “Here’s everything we spent,” and everything is going to need support. So, if your payroll run was $100,000, that’s going to be on your spreadsheet, “Payroll, $100,000,” and maybe put a big “A” next to it. And then behind that spreadsheet, you’re going to have that first payroll run. And put a big “A” on top of that payroll run so your banker can match, “Here’s my $100,000 from the spreadsheet. Here’s my $100,000 from the payroll run. And then here’s the $100,000 coming out of my bank on the bank statement.”

So, the easier you make it for them to walk through, “Here’s my number. Here’s my rent invoice. Here’s my utility invoice. Here’s my monthly statement for my 401K plan. Here are the employer contributions coming in,” the cleaner, and neater, and easier, and more presentable you make this for your banker, you’re going to sail through the process. And I’ve heard that from bankers. So, simply said, if it can’t be good, look good. Make it as easy as you can for your bankers.

On the next page, we have a sample tracking sheet. Again, here are all the costs. And you’ll notice on an every-other-week payroll, you have four payroll runs during eight weeks. You’re going to have two health insurance payments, two retirement fundings, two months of rent. So, for simplicity, again, that building rent, you might make that A1, the first $3,000 A1, and the second one is A2. And then behind your lead page, you’ll have your May rent invoice and your June rent invoice with the A1 and the A2. Again, this is your lead sheet. Try to make it neat and organized, with the supporting documents right behind it.

Next up, so, we’re on the honor code here. Right? You should be a model citizen. The government is being nice enough to help us all during this crazy time in our lives, so there’s a lot of responsibility. They’re not just giving you money and letting you run. Right? The calculations are the responsibility of the borrower, so make sure they’re accurate. Again, make sure you have supporting documentation for these. It’s not up to the lenders to do the calculation. They are doing a good faith review of the calculation in the supporting documents. Again, make it easier for them.

I apologize, the next bullet — oh. There it is. [laughs] It’s been fixed. This came out yesterday, or two days ago. The SBA will only audit forgiveness of loans in excess of $2 million. So, what that means is, if your PPP loan was under $2 million, the SBA is most likely not going to audit you. Again, it’s a good faith review. And remember, when you applied to this PPP loan, you stated that the current economic uncertainty makes this loan request necessary to support your operations. So, you’ve already attested that you need this loan. So, again, honor code.

And then the last bullet, you’re going to attest again, so you’re going to have a statement, either you’re going to have your external CPA attest that they reviewed your calculation and it’s accurate, or you as a company can provide a statement letter as well attesting that you have complied with the program rules. So, you’re on the honor code.

Okay. So, we’re going to go to a Q&A session in a minute. Again, we’ve been on several of these webinars. So, like the great swami, the old Johnny Carson, we have the answers here. We don’t know what you’re asking us yet, but most likely, we’re going to give you one of these five answers.

Answer one is that bulls win, and bears win, and pigs lose. So, you’re being thrown a lifeline here. Don’t be a pig about it. You know this is really here for your May and your June rent. Don’t prepay six months of rent with your PPP money and try to get it forgiven. It’s not going to work. Don’t pay May bonuses if you’ve never paid May bonuses before. It’s bad optics in front of the bank. Really, be more practical.

Again, answer two, costs must be incurred and paid at the same time. So, again, no prepaying cost, no paying your January expenses. It’s not going to work. It’s not going to work. You’re being forgiven for costs that are incurred and paid during the eight-week period.

Some of your questions, we don’t have guidance on yet. Back to the payroll cycle, there are things we don’t have guidance on yet. Other things, we just don’t know Congress’s intent. Again, that’s the payroll cycle. Does eight weeks really mean two months? We don’t know what the intent was. And then the last one is, that hasn’t been defined yet, like with utilities. The definition of utilities doesn’t exist. We’re assuming it’s internet, electricity, gas, and that’s it. So, here are the answers. Let’s see the questions. I’m not sure who’s asking William and I the questions, but I think we’re ready to start.

William Lieberman: I think Mark is going to —

Mark: Yes. [laughs] We do have several questions here. I thought you were going to just leave up the previous slide and just have an arrow, like a little hand. [laughter] So, let’s start with the last one. Amy asks, “My employer is wanting to pay a hazard pay bonus that will backdate to when our state shut down, March 17th. Would this be a valid use for the payroll?”

Eric Meisner: Can you ask that one more time, please?

Mark: I sure can. The employer is paying a hazard pay bonus that’ll be backdated to the shutdown in March. Would this be a valid use for payroll?

Eric Meisner: So, hazard pay, you can pay hazard pay. That much, I know, as long as it’s not excessive. So, if you generally pay someone $20 an hour, and you took it up to $22 for hazard pay, that is eligible. So . . . You got me. I don’t know if you’re backdating because the state shut you down. You’ve stumped me. I apologize. We’re going to have to . . . So, as William said out of the gate, we’ll research these. You’re going to have our email next. Feel free to email us directly with anything we couldn’t answer for you.

William Lieberman: In general, hazard pay, yes, that does count. The question is, can it go back in time to when the shutdown occurred, as opposed to when you received the funds.

Mark: Yeah —

Eric Meisner: I’m going to guess no. I’m going to guess no under my five answers, [laughs] because it’s in the period incurred. Right? So, if it got incurred before you got your loan, I’m going to go with no. I’m going to go with no. I could be wrong.

Mark: Okay. [laughs]

Eric Meisner: But I’m feeling okay about it.

Mark: Well, even the conversation to talk it through, I’m sure, will give folks some ideas in terms of how they might want to treat their particular one. A little bit earlier on, Sherry asked, “Along the lines of accruals, if we pay out a 3% profit share in January for the previous year, should that be excluded in the forgiveness calculation, or can we include that value for the eight-week time period as an accrual?”

Eric Meisner: So, again, the cost must be incurred and paid in the period. So, if it’s a second quarter profit-sharing and it was earned during the eight-week period and paid in the eight-week period, then it’s allowable. Again, if it’s a first quarter accrual, you can’t pay it in the second quarter. So, again, incurred and paid.

William Lieberman: Right. So, if you have an annual profit-sharing plan, the issue would be, can you convert it to a quarterly and pay four times, and your “second quarter” payment happens during this eight-week period, and you can show, “Hey, we accrued normally, and we have a profit-sharing of 3% per year. We changed it to do quarterlies because our employees needed the funds,” that’s a decent argument to be made for the bank.

Eric Meisner: Yeah. And the bank has a lot of subjective authority in this. So —

William Lieberman: Exactly.

Eric Meisner: — again, start talking to your bankers now. We’re giving our best guesses here. We’re not your loan. [laughs] We’re not your bank CSR. So, definitely start talking to your banks now.

Mark: Sure. A two-part question, or two parts of, I think, the same question. The first is, “Can you give us a definition of hazard pay?” The second part of that is, “Does it matter if the hazard pay is funded by another source? Is this double-dipping?” So, I guess let’s start with, what do we mean by hazard pay?

William Lieberman: So, hazard pay is, you’re putting your employees in a “dangerous” situation, or more dangerous than their normal, everyday job function. So, if your normal function is a white-collar worker working in an office, you are now telling that person, “Hey, you have to go into a space that had exposure. You have to have a hazmat suit on or protective gear.” Definitely, hazard pay is allowable in that kind of situation.

If somebody normally is climbing telephone poles, and they’re still climbing telephone poles, no, you can’t give them hazard pay because they’re doing what they were doing before. There’s no change. So, that’s my perspective on the first question. Eric, I don’t know if you have any other additional thoughts on that.

Eric Meisner: No. Want to give us part two of the question, please?

Mark: Yeah. So, part two of the question was, does it matter if hazard pay is funded by another source? Is this double-dipping? And Gloria, if you have some —

Eric Meisner: Yes. I’m going to go with yes, because you didn’t pay it. The company didn’t pay it if someone else paid it. You can’t be forgiven for something another company paid.

William Lieberman: Right.

Mark: Okay. Let’s see. Let me just ask one more, if I may. I’m going to read out Mary’s question, and then we’ll parse it, I guess. “If comparing Q1 to eight weeks of payroll, won’t you automatically be paying less than the Q1 payroll, 11 weeks to eight weeks? How does that impact the forgiveness?”

Eric Meisner: So, what we’re doing with our clients is we’re converting it apples to apples. Right? So, if you’re comparing the first quarter and you’re paid every two weeks, that’s eight pay runs — six pay runs. So, make it apples to apples. Just convert that first quarter into whatever you have support for.

So, if your first quarter ended March 26th, that’s it. Don’t try to make it bigger. Don’t try to make it smaller. But you’re comparing your actual payrolls that happened to the actual payrolls that are happening during these eight weeks. So, I know that when they say first quarter, they mean, let’s just compare what you pay now and what you paid then. Just do your math and make it apples to apples.

William Lieberman: You’re saying use the average weekly payroll amount. And then that —

Eric Meisner: Yes. [laughs]

William Lieberman: — normalizes —

Mark: Ah, yes. Yeah. Great way to do it. Yeah.

Eric Meisner: Much better said. Thank you.

William Lieberman: [laughs] A lot of words to say, “Use the average payroll.”

Eric Meisner: I’m actually looking at a calc, and I’m trying to explain what I’m doing looking at it in Excel. But —

Mark: [laughs]

Eric Meisner: — much better said, William. [laughs]

Mark: And you guys have a contact slide too, don’t you? Do you have a final contact slide? Let’s go ahead and throw that up. And again, thank you to both of you for bringing us up to speed on this issue. Good information to have. For those of you who are on the session, I’ve added William and Eric’s handout to the list of handouts. It’s there if you were looking forward to pick it up. I know a couple people put a note and said they couldn’t find it, but it is there now.

And I think if everybody’s timing is right, we’ve got to move on to our next topic. Paralea?

William Lieberman: Awesome. Thank you.

Eric Meisner: Thanks for having us.

Mark: Thanks so much, guys. Really appreciate it.

Paralea Boose: Yes. Thanks, guys.

Eric Meisner: Take care. Stay safe.

Mark: All right. Paralea, I am handing it over to you.

Paralea Boose: All right. Shawn and I are going to talk a little bit about all of the things that have happened in your payroll system with the COVID-19, the leaves, the payroll taxes, the pretax deductions. And we’re going to talk a little bit about how to get stuff fixed because, as you all know, stuff has gone wrong.

We’re also going to talk a little bit more about what the normal is going to be, and how you guys can prepare for it. And I’ve also got a little bit of information on some legislative updates, including the draft copy of the 941 for you. You guys know, everybody’s feeling the strain. Everybody is going to be affected. Make sure you’re being prepared. Continuity. Make sure you’re planning for the future. And don’t forget that we’re all here for you here at Net@Work.

All right. Our agenda, we’ve already done the PPP loan. We’re going to talk about repairing your time off with adjustments and repairing your pay history for taxes and deductions. We are going to talk about both suite and HRMS. We’re going to talk about your payroll taxes and what goes wrong there, especially in the HRMS product. We’re going to take a look at the new draft of the 941 and some planning for some additional success in the new normal.

And at this point, I’m going to turn it over to Shawn. And I’m going to see if I can give him keyboard access so he can run the slides. Shawn, just make sure you are off mute.

Shawn Parsons: I am off mute. But it does not —

Paralea Boose: There you go.

Shawn Parsons: — look like I have —

Paralea Boose: There you go. You should have it now.

Shawn Parsons: All right. Yes, I do. All right. Let me see if the page up and the page down work, because it doesn’t look like I have the ability to . . . Why don’t you go back to the initial slide?

Paralea Boose: Okay. There you go.

Shawn Parsons: Sure. This is just a quick summary page. I’ve been working with Sage, and with Abra Suite, and with Sage HRMS for a whole bunch of years. So, at this point, you could go to the next slide. And what I’m going to do is, I’m going to talk generically about how do you actually fix it.

I come from the technical side of the house. And when something goes wrong, you have to understand what the problem is, and then you actually have to go in and fix it. Well, I’m going to adjust to go in and fix it, side of things. And then what Paralea is going to do following up after me is recognizing the issues and some of the others. She gets the good stuff. I get the techie stuff. But you’re going to want to hang around for her. She’s got the fun stuff.

Anyway, first of all, there are two different types of systems. Suite is one type of system, and HRMS is a different type of system. And that is the fact, that Suite actually has two things that can get out of balance within themselves. So, the system itself can get out of balance. It has a summary record and a detail record, or a set of detail records. And what you want is you want that summary record to equal the sum of detail records.

And every time that it puts a new detail record in, it updates its summary record. So, in theory, they should always equal. Well, that’s in theory. Sometimes, they get out of whack. And when you’re going in and making changes, you have to be aware of that because you have to know, “Where am I making this change? If I go in and do modify payroll history, what does that change, and what are the ramifications?” So, that’s the first kind of system. And that’s what the Suite system is, and that’s one of the two that we deal with.

The second one is the HRMS payroll. And with that particular system, there is no summary record. There’s just a summation of the detail. So, what you do is you go in and you put in a detailed transaction. Now, there are different kinds of detailed transactions, and you use different ones at different times and so forth. So, that’s the first thing that you need to know about your system is, does it have a summary and a detail file? Is it just the detail? If I change it here, is that the only place that I need to change it? That’s the first. Okay. Next slide.

This is a picture of a summary file. This is what it actually looks like in a computer when we go in and we look at it. You’ll notice that there are different earnings there, and there’s a current amount. There’s a month-to-date, and there’s a year-to-date amount all sitting on one record, because for the month, it updates the middle column. When you run your current payroll, it updates the first column. And then it updates the last column all of the time. So, you’ll be able to see that, okay, these are one set of numbers, and you want to hope that the summation of that equals what all you’re detailing. So, you can go to the next page.

And this is what it actually looks like in Suite. You look at this screen in Suite, you’re looking at the summary table. And this is the one that you’re looking at. And you could see, you can do it for earnings, taxes, and deductions. So, if you hit the next slide, this is what it looks like for taxes. And if you hit the next slide, this is what it looks like for deductions. So, you wind up, there’s not only one summary table. There are actually multiple summary tables up there.

Now, what we’re looking at is the detail file. And if we look at the detail file, you’ll notice that towards the bottom there, this is all old test data that I’m using for 2010. But you’ll notice that the bottom transactions are all $40, $24, $40, $40, $40, $40. And those all add up to what we saw on that previous summary file. And that’s the way we like them. That’s the way it should be. Can you go to the next slide?

And if we want to find out where are the detail records on the screen, if you go in and you take a look at a particular check, if you go to the next screen, you’ll notice that here’s one of those 40 that we were looking at on the detail file. It’s under “Earnings,” and it combines with the other detail, detail taxes, detail deductions, and it gives you your net. So, if you’re making a change on the detail side, you’re making individual changes. Whereas, if you’re changing the summary side, you’re changing that single summary record. All right. Next.

Our goal is for the detail and summary to equal . . . Okay. The real goal here is to make sure that both of them equal each other. Now, if they don’t, who wins? That’s the big question. And in Suite, summary totals go to the W2. So, those summary totals that we were looking at, those are the ones that are the most important because those are the ones that are going to go to your W2. Those are the reporting totals. So, if you’re making adjustments and things get a little out of whack, and you go to a check/direct deposit register and you run it, and the summary totals don’t look right, and then you go to their summary screen and those are correct, those are the ones that need to be correct. They win when it comes to going to the W2. Okay. Next slide.

With the detail only system, the total aggregate amounts must be accurate. Which means that the details equal the reporting, so there’s no question as to what’s going to the W2. In Sage HRMS, which is the other system that we work with, the detail totals go to the W2. And if we take a look here at a particular check, you can go to the next tab. Keep going. Next. Yeah, back up one. Back up one. There we go.

I want to take a look at a zero check. These are just summary, and I’m trying to get through this quickly because I want to leave Paralea as much time. If we do a zero check, what you’re doing is a net zero check to move money around. That’s the first way that you can do it in a detail with a detail and a summary file. And the beauty of doing it with a zero check is that it updates both.

What we’re doing is we’re just moving eight hours from regular to vacation here, and it creates a zero check, as you can see. But it does create the detail, if you go to the next tab. And when we come back and we look at our summary tab, you’ll notice that it’s 32 and eight rather than the 40 that we looked at previously. So, the 40 and zero has changed to 32 and eight in the first column. Okay. Next tab.

And here, we just highlight. Okay. Next tab. And when we go back to the detail, we can see that it’s there as well. So, in Suite, if you can make an adjustment with the zero check, you can adjust what you need to adjust with the check. That’s the best way to do it, because it keeps everything in balance. That’s what we’re trying to get across. Okay. Next slide.

The other way that we can make changes is to edit payroll history. Now, when we edit payroll history, we’re going in and we’re changing that summary file. And we’re making the summary file correct, but we’re going to put it out of balance. So, we choose a particular employee. Next slide. And we go in, and it shows us the totals that are there. So, we say, “Okay, we’re going to change the 40 to 32.” So, we change it. Next slide. Actually, it was 32, because we put through the check. We’re going to change it back to 40. My bad. We’re going to change it back to what it was before we made the adjustment. Okay. Next slide.

So, when we go back in and we look at it again, we’ll see that it’s 40 and eight rather than the 32 and eight that we previously made. Now, we know that the detail is 32 and eight because we did that. We saw it. And if we come back here to look at the detail again, we can see that nothing here has changed, but that 32 is changed to 40 with no net effect on the detail. So, if we were to go run reports now, they would not equal for this person. That’s the point.

However, if you did the W2s and the tax reporting on this person, they would be accurate. That’s the big takeaway here, is that we only edit payroll history when we must, but there are times when we have to. Okay. And a brief summary of how and when to use each method. We basically went over that. Use the checks if you can. If you can’t do a manual check, then you have to edit payroll history. Okay. Next slide.

Okay. Now, we’re going to go into the Sage HRMS, and we’re going to do the same thing here, a zero check. We’re putting in a timecard. We’re doing, in essence, the same thing. We can go to the next slide. And there’s something that I’m going to bring up here that I don’t use. I avoid it like the plague, and they’re called negative checks in HRMS. HRMS will do them.

Suite won’t, where you can create, put in, and post a negative check. Suite just doesn’t allow them. They have to be zero checks, but they have to have a net amount. But you can do them. And if you’re familiar and you know how to use them, then that’s also an additional option. I’m not going to go through it here because I really don’t know them, and I tend to stay away from them. We use another option, which is transaction history. So, next slide.

And the one that we normally use is the one that’s highlighted here, which is transaction history. Okay. Next slide. And when we go in, you’ll see that it looks somewhat like a timecard. You can go in, you can put in your positives and negatives, and it gives you the ability to put a date on it, and to put a description. And then when you post it, next slide, and you go to their detail, it actually shows up as the transactions.

Now, when you’re doing this particular one, you’re always posting the net. Sometimes, when you’re doing the summary file, you’re kind of more interested in what you want that final number to be. But whenever you’re dealing with this, you’re always posting the net because you’re not dealing with a sum number. You’re dealing with a number that’s going to be aggregated into the total. Okay. Next slide.

And then you can also edit taxes, and you can do adjustments to the taxes. And this particular adjustment is going through, and this is the one where you really are probably going to wind up fixing whatever your issue is in Sage HRMS, is on this particular screen. And I’ve got all the different taxes up here, and I’ve highlighted them in yellow. And what this transaction does is it says, “Hey, somebody has $150 too much in their gross. We need to adjust it off.” So, it’s adjusting it off the taxes.

So, you’ll notice that on the right-hand two columns there’s a minus 150, because it’s taking $150 out of their wages. And then the two columns in the middle they have highlighted, those are the amounts themselves that are being adjusted off. So, that first line, we’re saying it’s USFIT, which is federal income tax. It’s a no-ceiling wage. We’re saying, “Take off $150 and give them back $15.”

The next one down is the FUTA. And in this particular one, you’ll see that the ceiling and the non-ceiling wage are not the same, which means that it reached its $7,000 limit, and then went $50 over. So, you’ve got to be aware that we’ve got wages under the cap, and then we’ve got total wages. Ceiling wages is actually wages under the cap, and then no ceiling wages is total wages.

Next is Medicare. That’s fairly simple. Although, it has an employee and an employer portion to it. And then you’ll notice on the no-ceiling, it’s minus 150. Social security, again, it’s very similar in that it has an employee and an employer component. But it’s considered a ceiling wage. And then we have a state tax, which is California state tax, which is an employee, and then a no-ceiling wage. Then there’s the California unemployment, which is an employer tax, but has both ceiling and non-ceiling wages. They haven’t hit the limit for the California unemployment tax yet.

And the last one is the local tax. And that’s how some folks have set up and are handling the COVID social security. And the thing that you want to notice about this is it allows you to edit some of these fields, and not some of these fields. You’ll notice some of them are highlighted with yellow, but some of them are blank, which means you can’t edit all of these fields. The system locks you out of some of them.

And with some of the ways that people have, or the things have been used, this creates a problem. So, you may be going in and trying to change, you say, “I need to change that, and I can’t.” You’re right. You do need to change that, and you can’t. And you’ll have to either come to us, or come to someone to have them make that change for you because this doesn’t allow you to change every single thing that you need to change in order to get some of these things back into the line.

The issue is the ceiling wage on the local tax, which is that very last line. In some cases, we have to change that, and the software doesn’t give you the ability to do it. So, we have to go in programmatically to do that. But most people probably won’t have that. But anyway, this is where you’re probably going to have to do most of your adjusting if you’ve run into any of the issues that Paralea is going to talk about. Okay, next slide.

And the beauty of the transaction is that it goes into history just like the zero check did. The zero check, you can see that above. It’s the second-to-last line. And then the transaction history is the last one. So, they both go into transaction history. You can see them. You can call them up, and you can look at them. And you can be sure if you make the changes and they appear there that they will be incorporated into the reporting that goes to the local, state, and to the federal authorities. Next slide.

A brief summary of how and when to use each method. Simply, really, the only difference between a check and a transaction history is that if you do it with a check or a zero check, you get a check number. Sometimes, that’s important when you send it for audit purposes. Or maybe when you send it to your general ledger, you want a check number or something like that associated with it.

But there’s really not much difference between the two of them, other than one is considered a check, and the other is a transaction. But other than that, they do almost exactly the same thing. And they’re pretty interchangeable. We suggest most people use transaction history because it’s easier, and you can get at it. It’s easier to do one, and you don’t have to worry about actually processing a check.

So, at that, I will turn it over to Paralea.

Paralea Boose: Hi, everybody. And this is me, a little bit about me. Just like Shawn, I’ve been around forever. And I’m going to talk a little bit more about the payroll taxes in depth. And we’re going to start with the payroll taxes in HRMS and figure out what goes wrong. Those of you with Abra Suite are kind of lucky because you can already go into Suite and say, “Hey, just don’t put imp one or imp two, whichever one of those is social security. Just don’t put it on my COVID leave codes,” and you guys are fine. We don’t have that luxury in HRMS.

Okay. So, I’m going to talk about HRMS for a few minutes, and then I’m going to switch back to some Suite stuff. In HRMS, if you’re using your normal social security and Medicare with your COVID leave codes, if you’re using the new local taxes that Sage recommended we set up with your leave codes, it doesn’t matter which one you pick. There are problems with either option.

If you’re using your regular social security and U.S. Medicare codes, the problem is, in HRMS, you can’t not calculate the employer part of social security. So, you’re going to have to take Shawn’s method and you’re going to have to go into transaction history and back out that social security on each employee with COVID leave. And you’re also likely going to run into a little bit of trouble filling out the 941. That might be a little bit more difficult because social security and Medicare need to be reported separately for leave wages.

Now, it’s not the end of the world. You can certainly take your leave wages and multiply it by the correct percentages to come up with the numbers for the 941. It just means you may have some manual work to do.

If you’re using the local taxes that Sage recommended you set up, there are a couple of different scenarios. You could have people who have normal pay and COVID leave pay in the same payroll period. You could have somebody who has all COVID leave in the same pay period. And all is good, until you have pretax deductions for social security and Medicare.

And if you have to take those pretax deductions for social security and Medicare, if the person only has COVID leave, or if they have both COVID leave and normal pay, or they have a little bit of normal pay but not enough to cover the deductions, you can see where I’m going with all of these problems. And most of you have probably already encountered these.

You have three possible scenarios with the COVID leave and pretax deductions. And it might take you having to do two separate payrolls to handle them properly in HRMS. In the first one, if an employee has enough normal wages to cover pretax deductions and they may or may not have COVID leave, the trick is they have enough normal wages to cover those pretax deductions.

In the second scenario, you could have an employee who has all COVID leave, but they don’t have any pretax deductions. And then your third scenario, the employee has COVID leave that will need to cover some or all of the pretax deductions. And I’m talking about pretax deductions j