Business Payroll Services

2016 Year-end OptRight® Customer Guide

October 2016

© 2016 Wells Fargo Bank N.A. All rights reserved. Member FDIC.

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This guide will help you complete your 2016 year-end payroll processing needs and prepare for 2017. You’ll find information to make it easier to meet year-end payroll deadlines, and avoid payroll adjustments and corrections.

This guide provides information on:

Additional resources you can access anytime

How to prepare for year-end processing, including validating Social Security numbers and accuracy of additional payroll, company and employee information

Important dates

Important information about payroll tax Form W-2 and Form 940

What you need to know for 2017

If you have questions, we’re always here to help. Please contact us at 1-888-736-6798, Monday – Friday, 7:00 a.m. to 8:00 p.m. Central Time.

Thank you. We appreciate your business.

Information and views provided are general in nature for your consideration and are not legal, tax, or investment advice. Business Payroll Services does not provide tax advice. Please see your tax advisor to determine how this information may apply to your business.

Making it easier to prepare for your year-end payroll needs

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Contact and Resource Information .................................................................................................. 4

IRS ......................................................................................................................................... 4

Social Security Administration .................................................................................................... 4

State Specific Information ......................................................................................................... 4

BPS Resources ......................................................................................................................... 4

Online Training ........................................................................................................................ 4

HR360TM .................................................................................................................................. 4

Prepare for Year End Processing ..................................................................................................... 5

Year End Calendar and Processing Dates ......................................................................................... 7

Year End Fees .................................................................................................................................. 8

What to Know .................................................................................................................................. 9

Record a Manual Check ............................................................................................................. 9

Create a Bonus Check ............................................................................................................... 9

Report Third-Party Sick Pay ..................................................................................................... 10

2% Shareholder Health Insurance Premium ............................................................................... 10

Tips and Reporting .................................................................................................................. 10

FLSA Overtime Rules ............................................................................................................... 10

Group Term Life ..................................................................................................................... 11

1099 Contractors .................................................................................................................... 11

WageView.............................................................................................................................. 11

Paperless Payroll .................................................................................................................... 11

Form W-2 ...................................................................................................................................... 12

Form 940 ....................................................................................................................................... 14

Preparing for 2017 ........................................................................................................................ 15

Contents

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Contact and Resource Information

For more information about your year-end payroll needs, you can access a variety of helpful resources.

IRS Forms and Publications 1-800-TAX-FORM (1-800-829-3676)

http://www.irs.gov/formspubs/index.html

IRS Contact Information 1-800-829-4933

http://www.irs.gov

Social Security Contact Information 1-800-772-1213

http://www.ssa.gov

State and Local Links http://www.americanpayroll.org/weblink/statelocal-wider/

Business Payroll Services Customer Service 1-888-736-6798

Tip: December 1– January 30, the best time for the shortest wait is to call customer service Monday – Friday, 7:00 a.m. to 9:00 a.m. Central Time.

OptRight Payroll Solutions Training Website (online customers only)

Take advantage of training and online resources to help you get the most out of your OptRight online payroll system, and learn more about managing year-end payroll processes.

www.wellsfargo.com/payrolltraining

HR360TM

If your business is using our HR360 solution, you can easily access forms, posters and HR assistance to keep up to date with laws for small businesses, healthcare reform requirements, and much more.

http://www.hr360.com/

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Prepare for year-end processing To increase efficiency and simplify year-end payroll processing, use the following information to help ensure you have correct information in place for your company and employees. This helps ensure you avoid errors, processing delays, and related penalties and fees.

Review the following information for accuracy: Employee name (verify accurate spelling)

Current address (including tax return delivery address)

Wages, earnings & deductions (year-to-date wages are through current payroll only)

Ensure employee state income taxes and state unemployment insurance are allocated to the correct state

Tip: To help ensure successful processing of your employees’ W-2s (and avoid reruns or delays), be sure to verify employee information before the processing of the forms.

Company information: Verify company name and address (use the legal name as it appears on your federal tax returns)

Note: Your company name and address that appear on the W-2 must match the legal name recorded with the IRS.

Verify company tax information and make sure BPS has received your company tax ID number(s). This helps ensure you avoid possible amendments and penalties from the tax ID agencies.

Federal tax ID

State tax ID(s)

State unemployment compensation ID(s) and rates

Local tax ID(s) and rates

Note: If you are missing a State or Local tax ID, Business Payroll Services may charge a $50 Missing Tax ID fee each month. You may also be assessed a penalty and interest charge if tax filings and deposits are rejected by tax agencies due to missing or incorrect tax ID(s).

OptRight Online customers: To verify the above information online; access the Reports tab, select Tax Documents and review your last quarterly report.

Social Security numbers Verify Social Security numbers are accurate If there is an error with Social Security numbers:

Employees will not receive credit for wages with the Social Security Administration Employees may have issues when filing their personal tax returns A W-2c may be processed, resulting in additional fees and penalty and interest charges

OptRight Online customers: Double click in the SSN field to view and edit the full social security number.

Contractor 1099s 1099s will be issued to all contractors paid through the BPS payroll system during 2016.

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Prepare for year-end processing (cont.) Confirming your company and employee information will make it easier to manage your year-end payroll processing.

If applicable, verify that withholding and reporting have been processed accurately for the following items:

Group-term life insurance in excess of $50,000

Third-party sick pay (if administrator is not issuing a W-2 for these wages)

Personal use of a company vehicle

Non-qualified moving expense reimbursements

Company provided transportation or parking

Non-cash payments

Tips or tip allocation

2% Shareholder health insurance premiums

Any additional fringe benefits

If your Federal tax liability will be over $100,000 for a single check date, contact us at 1-888-736-6798

Note: To ensure your W-2s are prepared accurately, be sure to report this information by your last scheduled payroll but no later than December 28, 2016.

Upon receipt from the state, fax your 2017 unemployment insurance tax rate to Wells Fargo Business Payroll Services at 1-866-546-5260.

FUTA Credit Reduction If you are an employer in a state subject to FUTA Credit Reduction, you will have additional FUTA liabilities due

for 2016. This information is available in your year-end payroll tax package you will receive in January, 2017.

For FUTA tax, your payroll account will be debited on January 23, 2017

Note: See page 14 for location of possible FUTA Credit amount due

Employer Provided Health Coverage – Nontaxable: The Affordable Care Act requires employers to report the total cost of health premiums made to the insurance

agency under an employer-sponsored group health plan. This includes employee and employer payments. Filing is optional for employers filing fewer than 250 W-2 forms in 2016.

Note: Be sure to report any adjustments by your last scheduled payroll but no later than December 28, 2016 – this helps you avoid penalty and interest charges, and fees to process amended returns.

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Year-end calendar and processing dates

The following calendar provides the important payroll dates to complete year-end tasks, holiday hours for Business Payroll Services.

Important payroll dates and deadlines: _______________________________________________________________

Business Payroll Services will be closed on the following holidays:

Thursday, November 24, 2016

Monday, December 26, 2016

Monday, January 2, 2017

Business Payroll Services will be closed early on:

7:00 p.m. CT Friday, November 25, 2016

Important Delivery Date: All year-end packages will be delivered by January 22, 2017

Friday, December 16, 2016 Ensure all voids and manual checks have been processed in the payroll system.

Wednesday, December 28, 2016 Final payroll processing and adjustments for 2016 should be completed to help avoid penalty and interest charges.

Note: Additional fees may apply to any adjustments made after Wednesday, December 28, 2016.

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Year-end fees

The following fees apply to W-2s, 1099s, reprints and amendments.

W-2 & 1099 • $42.50 flat fee plus

• $4.75 per active and termed employee/contractor

W-2 & 1099 reprints – complete • $42.50 flat fee plus

• $4.75 per number of active and termed employee/contractor

• $12.95 delivery

W-2 & 1099 reprints – individual • $5 per reprint plus

• $12.95 delivery

Amended tax returns with

W-2 & 1099 – corrected

• $250 per quarter for Federal and 2 states

• $500 per quarter for Federal and 3 or more states

• $100 Social Security corrections

• $15 per corrected W-2/1099

Note: To save the reprint fees and to access your documents quickly, you may reprint online. Additionally, if your employees use WageView, W-2s can be viewed and printed online.

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Recording a Manual Check

Creating a Bonus Check

What to know

To ensure accurate payroll processing and preparation of W-2s and 1099s, be sure to report all 2016 wage earnings and deductions before your year-end payroll. This helps you avoid penalties, interest charges, and amendment fees.

Before processing a bonus payroll, be prepared to consider the following questions:

Will the bonus payroll be issued via a live check or direct deposit? Should voluntary deductions be taken out of the bonus payroll (such as loans, 401(k) deductions, etc.)? Are changes needed to the tax amount withheld from the bonus check (such as federal or state income tax)?

Bonus payrolls with a 2016 check date will be included in 2016 wages and reflected on all fourth quarter 2016 tax reports and W-2s. If you need to report a 2016 bonus payroll on or after December 28, 2016 (with a check date of 2016) you may incur penalties and interest. If your federal tax liabilities for the bonus payroll are over $100,000.00, then the taxes must be deposited the business day after the check date. If you have questions about taxation for a bonus payroll, please contact your CPA or tax advisor. If you process 2016 payroll adjustments after December 28, 2016 an Approval of Non-Standard Processing and Fees form must be signed by an authorized signor on the payroll funding account.

Remember to fund your payroll account prior to submitting your payroll.

For additional information on Bonus Checks:

Bonus Check Reference Guide

Supplemental Taxation

Employers need to validate that all earnings have been reported. Unreported earnings must be processed through the payroll system.

All manual checks must be processed on or before the last payroll of 2016.

For additional information on Manual Checks:

Manual Check Demo

Manual Checks Reference Guide

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Third-Party Sick Pay

2% Shareholder Health Insurance Premium

Tips and Reporting Validate all tips and tips allocations have been reported accurately for 2016.

FLSA Overtime Rule

Effective December 1, 2016 salaried workers who do not earn at least $47,476 a year ($913 a week) will have to be paid overtime, even if they are classified as a manager or professional. For additional information reference the US Department of Labor website or HR 360.

What to know (cont.)

To ensure accurate payroll processing and preparation of W-2s and 1099s, be sure to report all 2016 wage earnings and deductions before your year-end payroll. This helps you avoid penalties, interest charges, and amendment fees.

Special fringe benefit rules apply to S corporation shareholders who owned more than 2% of the corporation’s outstanding stock on any day during the tax year, considering both direct and constructive ownership. Current IRS regulations indicate that amounts paid by an S corporation for accident and health insurance covering a 2% shareholder-employee (including dependent coverage) must be reported as wages on Form W-2. While these wages are subject to federal and state income tax withholding, they are not wages for Social Security and Medicare tax purposes. Note: These amounts should be included by the last payroll of 2016.

For additional information on 2% Shareholder:

2% Shareholder Medical Reference Guide

Federal legislation requires the reporting of both taxable and non-taxable sick pay made to employees from a third-party. Taxes withheld on those payments must also be reported. Sick pay should be included on either the employees’ W-2s or on a separate form provided by the third-party. If third-party sick pay is not reported by the third-party, it must be included on your employees’ W-2s.

Obtain this information from the appropriate third-party provider as soon as possible. These entries must be processed on or before your last 2016 payroll to ensure accuracy of your Form 941 and W-2 reports.

If any of your employees have received temporary disability payments in 2016 from a third-party carrier, you need to submit the amount of these payments as soon as they are reported to you. Any adjustments submitted after your W-2s are processed could result in additional processing and amendment fees.

For additional information on Third Party Sick Pay:

Third Party Sick Pay Reference Guide

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What to know (cont.)

To ensure accurate payroll processing and preparation of W-2s and 1099s, be sure to report all 2016 wage earnings and deductions before your year-end payroll. This helps you avoid penalties, interest charges, and amendment fees.

Group-term Life

Employee earnings records need to be adjusted to reflect group term life insurance benefits in excess of $50,000 provided to any employee.

Note: Be sure to include these amounts before the last payroll of 2016.

For additional information on Group Term Life:

Group Term Life Reference Guide

1099 Contractors

Verify all wages have been reported for 1099 contractors to ensure accurate data processed for the 2016 Form 1099-MISC.

Note: It is recommended that 1099 wages be reported to BPS as they are earned throughout the year.

WageView

WageView is a secure website in which your employees can access, view and print their pay statements, W-2s and 1099s.

You can save money and time when your employees access their documents on WageView.

For WageView access contact Business Payroll Services Customer Service at 1-888-736-6798.

For additional information on accessing and using WageView:

Employer Reference Guide and FAQ

Employee Reference Guide and FAQ

WageView Demo

Paperless Payroll and Paperless Tax Reports

If you have registered for WageView you have the option to become paperless:

Paperless Payroll means:

Save time and money spent distributing paperwork—with your staff using direct deposit, they can access WageView to track their pay statements and access W-2s and 1099s

Increase efficiency with 24/7 online access to payroll and tax reports you can view, print, and download

Gain peace of mind knowing you’re protected from delivery risks or delays (e.g., weather delays, lost packages, etc.)

Contact us at 1-888-736-6798 to become paperless, or email us at optrightpayroll@wellsfargo.com.

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Form W-2

Form W-2 Box Descriptions Box 1 Wages, tips and other compensation Box 11 Nonqualified plans

Box 2 Federal income tax withheld Box 12 Refer to Box 12 section for details

Box 3 Social security wages Box 13 Status check boxes

Box 4 Social security tax withheld Box 14 Other

Box 5 Medicare wages and tips Box 15 Employer’s state tax ID

Box 6 Medicare tax withheld Box 16 State wages, tips, etc.

Box 7 Social security tips Box 17 State income tax

Box 8 Allocated tips Box 18 Local wages, tips, etc.

Box 9 Not used Box 19 Local income tax

Box 10 Dependent care benefits Box 20 Locality name

Form W-2 Form W-2 shows taxable wages and taxes withheld for each employee.

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Box 12: Codes Code A Uncollected Social Security tax on tips

Code B Uncollected Medicare tax on tips

Code C The cost of group-term life insurance over $50,000

Code D The employee’s contributions to a 401(k)plan

Code J Non-taxable sick pay (not included in boxes 1,3 or 5)

Code P Excludable moving expense reimbursements

Code V Income from exercise of nan-statutory stock options

Code W Contributions to a Health Savings Account (HSA), employer and employee combined

Code Y Deferrals under section 409A nonqualified deferred compensation plan

Code Z Income under section 409A on a nonqualified deferred compensation plan

Code AA After tax contributions to a Roth 401k plan

Code DD Reports the cost of health insurance provided through your employer (nontaxable)

Type of Plan Conditions Check Retirement Plan Box?

Defined benefit plan (for example, a traditional pension plan)

Employee qualifies for employer funding into the plan, due to age/years of service – even though the employee may not be vested or ever collect benefits.

Yes

Defined contribution plan (for example; a 401k , 403b but not a 457 plan)

Employee is eligible to contribute but does not elect to contribute any money in this tax year.

No

Defined contribution plan (for example; a 401k 403b, Roth 401k, Roth 403b but not a 457 plan.)

Employee is eligible to contribute and elects to contribute any money in this tax year.

Yes

Defined contribution plan (for example; a 401k 403b, Roth 401k, Roth 403b but not a 457 plan.)

Employee is eligible to contribute but does not elect to contribute any money in this tax year, but employer does contribute funds.

No

Defined contribution plan (for example; a 401k 403b, Roth 401k, Roth 403b but not a 457 plan.)

Employee contributed in past years but not during the current tax year under report.

No (even if the account grows due to gains in the investments)

Profit sharing plan Plan includes a grace period after the close of the plan year when profit sharing can be added to the participant’s account.

Yes

Box 14: Other You may use this box for any other information that you want to give to your employee. Any requests for Box 14 reporting must be set up prior to the final payroll of 2016. Information included in Box 14 cannot be changed once W-2s have been processed.

Form W-2 Form W-2 shows taxable wages and taxes withheld for each employee.

Box 13: Retirement Plan Checkbox Decision Chart

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Form 940

Form 940 is the employer’s annual FUTA return to report unemployment wages and taxes paid during the tax year.

Line 11 If you are an employer in a state subject to FUTA Credit Reduction, you will have additional FUTA liabilities due for 2016. You’ll see this amount on line 11 on the Form 940.

NOTE: Accounts will be debited on January 23, 2017 for FUTA taxes.

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Preparing for 2017

Use this checklist to set the stage for a successful new year. The first payroll of 2017 is the perfect time to make updates to your payroll information.

Minimum wages in several states and localities are changing effective January 1, 2017.

Note: Your payroll system does not automatically update these rates.

Update any employee rate increases online and calculate any qualified hours paid at both old and new pay rates when entering your next payroll.

Fax your 2017 State unemployment insurance tax rate to BPS at 1-866-546-5260.

HSA/FSA 2016 deductions should be stopped or changed to reflect the 2017 employee contributions.

Note: These deductions do not automatically adjust.

Remind your employees to complete a new Form W-4 if their exemption status has changed.

Ensure any employee-blocked taxes have been removed if not desired for 2017.

Review your payroll process calendar and make any necessary adjustments with our customer service team.

Employer Provided Health Coverage – Nontaxable:

The Affordable Care Act requires employers to report the total cost of the health premium made to the insurance agency under an employer sponsored group health plan. This includes employee and employer payments. Filing is optional for employers filing fewer than 250 W-2 forms in 2016.

Effective December 1, salaried 2016 workers who do not earn at least $47,476 a year ($913 a week) will have to be paid overtime, even if they are classified as a manager or professional. For additional information reference the US Department of Labor website or HR 360.