payroll tax liability date

[Unregistered]

When issuing a payroll check, how do you figure which quarter the liability falls into? Do you go by the date of the pay check or the date the work was performed?
Someone told me the IRS told them if you issued a check on April 5, 2006 for march payroll, that check is considered to be part of the 1st quarter. I was always under the impression you went by the date the check was issued as which quarter it fell into, not when the liability occurred.

Confused..............

[veritas]

You always go by the date paid, never earned.

I have always found it curious when a client by default thinks in cash basis terms. But for some reason they go accrual with wages.

[oceanlovin'ea]

Reference?

Do you have some written proof that this is the way to do this? I am asking because I just came up against this problem yesterday.

I am doing payroll for a new business (actually there are 2 businesses) She said she would give me all the wages paid for January, February and March after the 31st. I told them that if the checks are written in April then they are reported in 2nd quarter. Both she and her son argued that they are for March wages.

So I would like to have something to show them in writing that if the wages are paid in APril even though for March earnings, it would be filed in the second quarter 941.

Thanks. Linda F

[Gretel]

What an interesting question. Made me go look right away to find some reference. I know it goes by the paid date because I work for a larger company (some years ago), accounting on accrual, but payroll was by paid date.

So, instructions for form 941 say you have to report the wages as you would an W-2.

Instructions for W-2, pg. 9 for box 1 say: Wage PAID, not wages accrued.

[Bees Knees]

Rev. Rul. 73-99 says in part: “For Federal employment tax purposes, wages are paid by an employer at the time they are actually or constructively paid, with certain exceptions not material here. Wages are constructively paid when they are credited to the account or set apart for an employee so that they may be drawn upon by him at any time although not then actually reduced to possession. To constitute payment in such a case the wages must be credited to or set apart for the employee without any substantial limitation or restriction as to the time or manner of payment or condition upon which payment is to be made, and must be made available to him so that they may be drawn upon at any time, and their payment brought within his own control and disposition. See sections 31.3121(a)-2, 31.3301-4, and 31.3402(a)-1 (b) of the Employment Tax Regulations.”


Regulation 31.3121(a)-2 is as follows:


“WAGES; WHEN PAID AND RECEIVED.


(a) In general, wages are received by an employee at the time that they are paid by the employer to the employee. Wages are paid by an employer at the time that they are actually or constructively paid unless under paragraph (c) of this section they are deemed to be subsequently paid. For provisions relating to the time when tips received by an employee are deemed paid to the employee, see Section 31.3121(q)-1.


(b) Wages are constructively paid when they are credited to the account of or set apart for an employee so that they may be drawn upon by him at any time although not then actually reduced to possession. To constitute payment in such a case the wages must be credited to or set apart for the employee without any substantial limitation or restriction as to the time or manner of payment or condition upon which payment is to be made, and must be made available to him so that they may be drawn upon at any time, and their payment brought within his own control and disposition. For provisions relating to the treatment of deductions from remuneration as payments of remuneration, see Section 31.3123-1.”

[Matt Sova]

Paychex, ADP, etc

All the payroll companies do it as PAID.