FPC cheat sheet

Gross pay = all taxable wages earned in the period (salary, hourly, overtime, bonuses, commissions, taxable fringe benefits); net pay = gross pay minus statutory and voluntary deductions.

FLSA overtime: nonexempt employees earn 1.5 times the regular rate for hours over 40 in a single workweek; hours are never averaged across two weeks.

Exempt status requires meeting both the salary basis test and the duties test; paying a salary alone does not make a worker exempt.

Worker classification under the IRS common-law test weighs behavioral control, financial control, and type of relationship; employees receive Form W-2, independent contractors Form 1099-NEC.

Statutory deductions are required by law (income tax, FICA, levies, child support); voluntary deductions require employee authorization (401(k), insurance premiums, union dues).

The regular rate includes nondiscretionary bonuses, shift differentials, and commissions, but excludes discretionary bonuses and business expense reimbursements.

Pay frequency is governed by state wage payment laws, not by the FLSA, which requires only minimum wage and overtime to be paid promptly.

FICA: employee and employer each pay 6.2% Social Security up to the annual wage base and 1.45% Medicare on all wages with no cap.

FUTA: 6.0% on the first $7,000 of each employee's wages; timely state unemployment contributions earn up to a 5.4% credit, producing a net federal rate of 0.6%.

Additional Medicare tax: 0.9% withheld only from employee wages above $200,000 single, $250,000 married filing jointly, $125,000 married filing separately; no employer match applies.

Form W-4 drives federal income tax withholding; the percentage-method tables in IRS Publication 15-T convert taxable wages into withholding amounts.

Deposit schedule rule: monthly depositor if employment taxes in the lookback period were $50,000 or less; semiweekly depositor if more than $50,000.

Next-day rule: undeposited taxes that reach $100,000 on any day must be deposited by the next banking day regardless of the assigned deposit schedule.

Form 941 is filed quarterly (last day of the month after quarter end); Form 940 annually by January 31; Forms W-2 to employees and SSA by January 31; Form 1099-NEC to recipients and IRS by January 31.

CCPA garnishment limit: withhold the lesser of 25% of disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum wage.

New hires must be reported to the state within 20 days of hire, and Form I-9 must be completed within 3 business days of the first day of work.

FLSA recordkeeping requires payroll records be kept 3 years and time cards or supplementary time records 2 years.

Overtime premium = 0.5 times the regular rate times overtime hours; total overtime compensation = 1.5 times the regular rate times overtime hours.

Regular rate with a bonus: (straight-time earnings plus nondiscretionary bonus) divided by total hours worked in the workweek.

Gross-up formula: gross = desired net divided by (1 minus the combined tax rate); used when a payment is made net of tax.

Social Security withholding stops once year-to-date wages reach the annual wage base; Medicare withholding continues on all wages with no ceiling.

Section 125 pre-tax deductions reduce federal income tax, FICA, and usually state wages; traditional 401(k) deferrals reduce income tax wages but not FICA wages.

Disposable earnings = gross pay minus legally required deductions such as income tax and FICA, and it is the base for CCPA garnishment limits.

Supplemental wages such as bonuses and commissions may be withheld at the optional flat 22% federal rate or aggregated with regular wages for the period.

Piece-rate regular rate = total piece-rate earnings divided by total hours worked; overtime is then due at half that rate for hours over 40.

Final wages on termination must be paid by state-specific deadlines, which range from the day of discharge to the next regular payday.

The payroll register must reconcile to cash actually disbursed and to the tax deposits made for each pay period.

Segregation of duties: the person who prepares payroll should not also approve it or disburse funds, and master-file changes must be logged in an audit trail.

The payroll master file holds employee identifiers, pay rates, Form W-4 elections, deduction authorizations, direct deposit data, and tax setups.

Direct deposit requires NACHA-compliant files; prenote (zero-dollar) transactions validate routing and account numbers before the first live payment.

Retention rules: FLSA payroll records 3 years and time records 2 years; IRS employment tax records at least 4 years after the tax becomes due.

Year-end procedure: reconcile W-2 totals to the four quarterly Form 941 filings and to the payroll register before issuing W-2s and Form W-3.

Payroll calendars define pay periods, timecard cutoffs, approval deadlines, and deposit dates; a missed deposit date triggers IRS failure-to-deposit penalties.