Anna Keizer
Jul 22, 2021

Payroll Compliance 101

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As a producer or payroll manager, payroll compliance is a necessary part of the job. Though, it’s not necessarily one you want to be thinking about all of the time.

We get it, so we’re breaking down exactly what you need to know. 

It may not be the most exciting topic, but if you do not comply with payroll compliance laws, it could mean significant financial cost, as well as legal ramifications. Not to mention the loss of your professional reputation and connections. In an industry built on relationships, just one payroll compliance mistake could mean no longer having the trust of your cast and crew.

Even if you’ve been working in this industry for a while, when getting ready to do payroll, you might immediately ask yourself - how do I stay compliant? 

Let’s get into it.

What is payroll tax compliance?

At its core, payroll and compliance is adhering to federal, state, and local laws that determine how to pay your employees and contractors.

Let’s start with the broad strokes of what is payroll tax compliance… This means the main payroll rules for employers that you as a producer or payroll manager will need to adhere to when hiring and paying your cast and crew. 

These payroll laws include:

Payroll compliance is an ongoing process. Months after a project has ended, you may still be having to address various payroll regulations to ensure that the entire lifecycle of an employee follows proper payroll compliance.

What are the risks of non-compliance with payroll laws?

We briefly mentioned that not adhering to payroll compliance laws can result in reputational, financial, and legal ramifications. 

Depending on the nature of the non-compliance, you could face:

  • Additional taxes.
  • Back wage payouts.
  • Financial penalties.
  • Audits.
  • Legal action by employees, contractors, or governmental agencies.

If at some point you realize or are told that you’ve been non-compliant with payroll laws, it’s more than likely because you simply didn’t know or understand how to be compliant. 

If you’re not a payroll compliance expert, it’s easy to do.

But there are ways to protect yourself.

Download our payroll compliance checklist 

We’ve only just begun to dive into all that is payroll and compliance, so if your head is already spinning, there’s good news. 

We’ve created a payroll compliance checklist that you can download, use, and come back to every time you’re dealing with payroll demands. Because even if you’ve been doing payroll for a while, everyone forgets from time to time. Moreover, payroll compliance laws change.

Payroll Compliance Checklist - Download - Wrapbook

It’s important to get payroll compliance right the first time around to save yourself time, money, and energy that could be going to your next project. So download the payroll compliance checklist now for an added sense of security.

What are the payroll laws you need to know?

Payroll tax laws are implemented at local, state, and federal levels.

Local and state payroll laws can vary from region to region and state to state. And if you’re traveling to another state for a production, it’s likely that you will not be familiar with the particulars of that region’s payroll legislation and processes.

Regardless of locality or state, though, most non-federal payroll laws will still address compliance issues like minimum wage, overtime, income taxes, and new hire reporting.

We’ll get deeper into this in a later section,  but for the time being, there’s no overstating how important it is to be aware of local and state laws. 

As far as federal payroll laws go, the following describes the primary ones that every producer or payroll manager needs to know:

FLSA 

FLSA, also known as the Fair Labor Standards Act, entails payroll compliance considerations such as child labor standards, minimum wage, and overtime. 

Essentially, you must adhere to all payroll compliance laws under FLSA. That means paying minimum wage (or above) for your employees, issuing overtime for all employees who qualify for it, and following the specific payroll compliance restrictions for any underage employee.

FICA taxes

FICA, also known as Federal Insurance Contributions Act taxes, refers to the social security and Medicare taxes that are taken out of employee wages.

You as the producer or payroll manager are required to withhold those taxes and pay them to the federal government. Compliance with FICA also means depositing those taxes on a regular schedule and reporting them each quarter.

FUTA taxes 

The Federal Unemployment Tax Act or FUTA,  refers to the taxes paid to fund federal unemployment benefits. Unlike compliance with FICA, FUTA taxes are paid only by employers. Currently, the FUTA tax rate is 6% of the first $7,000 of an employee’s wages.

SUTA taxes

SUTA, or the State Unemployment Tax Act, refers to the taxes paid to fund state unemployment benefits. 

SUTA taxes can vary greatly from state to state, as each state sets its own tax rate. Some states also require both employers and employees to pay SUTA taxes. Additionally, there are different names for this tax, such as State Unemployment Insurance or the Reemployment Tax. 

As with other types of taxes, SUTA is a key part of payroll compliance for employers.

It sounds like a lot (because it is), but that doesn’t have to translate to anxiety and second-guessing yourself. Tools like a payroll compliance checklist or a software solution can eliminate both your payroll compliance mistakes and fears. 

Equal Pay Act 

As its name implies, the Equal Pay Act legally prohibits an employer from making discriminatory wage rate decisions based on sex, race, or ethnicity from one employee to another if those employees are performing substantially similar work.

Ensuring payroll compliance with the Equal Pay Act may include systematizing wage rate factors, documenting wage rate decisions, and reviewing job descriptions.

Davis-Bacon Act 

In effect for the last 90 years, the Davis-Bacon Act legally requires employers working on federally funded jobs to pay their employees wage rates and benefits that are equal to what local employers pay their own employees for work of a similar nature.

What are other payroll rules and regulations you should know?

Aside from these standard acts or laws, there are a few other key considerations.

Some additional payroll and compliance rules to pay attention to include:

Overtime wages 

It’s important to stay up to date on all overtime laws in your state, as they can change from year to year.

And to answer the question “is overtime pay taxed higher?” that again depends on the state, which only emphasizes how important knowing the payroll regulations of a particular state can be.

Also, if you have an employee who works two different jobs at two different rates, you’ll have to familiarize yourself with how to calculate blended overtime to remain in payroll compliance.

New IRS forms 

Who doesn’t love these guys - am I right? An absolute staple of payroll tax laws are those infamous IRS tax and payroll forms that you, your employees, and your contractors have to fill out all of the time.

That being said, while some may remain the same for several years in a row, you might find some forms undergoing an update or even getting introduced into the IRS form mix.

IRS documents include:

  • Redesigned IRS Form W-4. New for 2021! Be sure to use it.
  • Introduction of the IRS Form 1099-NEC. As of 2020, the IRS uses Form 1099-NEC instead of  Form 1099-MISC for non-employee compensation. (Though Form 1099-MISC is still used for rental income and kit fees.) Know Form 1099-NEC. Love Form 1099-NEC.

Supplemental wage tax rate

If you are paying employees any kind of wage outside of their normal salary – think bonuses, severance, or even expense reimbursements – they may be taxed at a different rate than that stipulated by their W-4.

The supplemental wage tax rate is typically calculated off of the total amount of supplemental wages. Anything under $1 million is generally taxed at 22%. Over $1 million? The rate increases to 37%.

FSA contribution limit 

If you have a Flexible Spending Account set up with your employees, there are limits to the amount of wages that can be deducted for it.

As of 2021, the pre-tax salary reduction limit for FSAs is $2,750, which includes contributions from both the employee and employer.

401K contribution limit

If you have a 401K set up for your employees, again there are annual limits as far as contributions go.

For 2021, employees can contribute as much as $19,500. If they’re 50 or older, they’re allowed up to $26,000. And when you factor in employer contributions, that number jumps to $58,000.

Contribution limits tend to change from year to year, so that means continually being aware of those changes and being legally compliant with them.

What are the most common payroll compliance mistakes?

Here we go… while listing out the main tenets of payroll compliance can be incredibly helpful, sometimes it’s pointing out what you shouldn’t do that resonates more.

Below are some of the most common ways that people fumble various payroll regulations:

1. Misclassifying exempt status, contractors, or employees 

Payroll rules for you as an employer starts the very moment you bring someone on board for a project. How you identify that hire during the onboarding process is critical.  

First, determine whether they’re an independent contractor or employee

Should it be the latter, you must then also determine if they are an exempt or non-exempt employee. Many producers, payroll managers, and others who handle payroll and compliance make the mistake of misclassifying hires.

2. Missing tax filing deadlines and deposit dates 

Perhaps remembering dates isn’t your strength. But unfortunately, payroll rules and regulations involve not only what you should do but also when you should comply.

The importance of payroll compliance legislation largely boils down to employers following it both with action and time sensitivity, so that their employees are legally protected. If you need help remembering tax filing deadlines or deposits dates, have a payroll compliance handbook, checklist, or software solution ready. 

3. Not maintaining records and forgetting to report taxes 

What is payroll tax compliance if not reporting taxes? But you’d be surprised by how many people forget to do exactly that via non-compliance with FICA and other tax oversights.

Rather than assuming the worst, though, this often happens due only to poor recordkeeping. But with a payroll compliance handbook – or better yet, payroll software! – this common mistake can be easily rectified.

4. Miscalculating overtime and fringe benefits 

While it may be nothing more than a mistake, miscalculating overtime and fringe benefits can be detrimental to both employees and their employers.

By making this common error, a producer or payroll manager can preclude an employee from receiving their proper compensation, as well as making themselves vulnerable to future legal action.

Again, don’t try to do it all on your own. Help is available through Wrapbook, which can automatically make those calculations for you.

Payroll Compliance - Overtime Calculations - Wrapbook
Avoid miscalculations with software that does it for you.

This software solution can keep you in check when it comes to staying compliant with overtime and fringe benefits.

What are other typical payroll and compliance mistakes?

The importance of payroll compliance legislation often translates to multiple ways in which you – even completely innocently – might violate particular payroll laws.

It’s a lot to take in especially if you’re new to dealing with local, state, or federal payroll laws. 

Common payroll reports might help you catch most payroll legislation and processes that you must follow, but here are several more facets of payroll compliance that can be easily overlooked.

Forgetting new hire paperwork 

The hiring process can be such a whirlwind that some paperwork falls through the cracks. Once it’s time to file those taxes, though, you will quickly realize how important it is to get those docs organized at the start.

And if you’re still not sure what exactly you might need, a payroll compliance legislation PDF or online payroll system can quickly get you up to speed on what’s necessary for both independent contractor and employee hires. 

One option that conveniently addresses these issues is Wrapbook’s startwork solution within the software. Create, store, and disseminate all paperwork to case and crew during, before, and even after the onboarding process. It’s an assured way to get all your new hire paperwork in order. 

Being non-compliant with the Equal Pay Act 

Have two editors performing the same work? Are they also getting paid the same rate for that work? It’s questions like this that you must continually ask and be vigilant about when it comes to payroll and compliance.

Especially when it comes to payroll rules for employers regarding the Equal Pay Act, what you don’t want is any indication that you are discriminating against someone via a lower wage rate because of their sex, race, or ethnicity.

Making workers’ compensation mistakes 

We can agree that neither employee nor employer want to see an accident happen. But workers’ compensation is also a major part of payroll compliance legislation should one occur.

It all starts with making sure that you are keeping an accurate tally of your payroll projections, as this impacts your workers’ compensation premium.

The number of hours worked also impacts the amount of workers’ compensation. If you don’t keep an accurate tally of those hours, it could impact both your premiums and the total compensation a worker may receive if they need to collect. 

How can you avoid making payroll compliance mistakes?

We’ve covered quite a bit of payroll legislation and processes that all employers should know. But as we’ve mentioned several times at this point, you don’t have to navigate the waters of payroll and compliance on your own.

1. Download the payroll compliance checklist

Have it at the ready year-round to ensure that you’re abiding by all payroll rules and regulations.

2. Follow a payroll compliance calendar

Don’t let being forgetful of dates result in financial or legal penalties.

3. Use payroll services software

Instead of trying to manage all things payroll and compliance yourself, why not work with a company like Wrapbook that has the comprehensive expertise you want to guarantee your financial security?

Wrapbook provides assurance when it comes to paying both union and non-union workers compliantly and properly filing payroll taxes. Rather than spending countless hours of time and energy figuring out these often complicated figures on your own, Wrapbook can quickly and accurately calculate them for you. 

Payroll Compliance - Union Selection - Wrapbook
Select your workers' appropriate union affiliation for correct calculations.

With Wrapbook, you not only get back those hours but also benefit from peace of mind knowing that you won’t be hit up by the IRS, another governmental agency, or an attorney down the road for making a payroll compliance mistake or oversight.

Wrapping Up

The question of “what is payroll tax compliance?” generally comes with a lengthy and oftentimes overwhelming response. But while no one is expecting you to be an expert on such matters, your employees, contractors, and the government are expecting you to follow them.

Therein lies the difficulty that many producers, payroll managers, and other employers face – they attempt to do it on their own. 

But in the same way that you hire experts in their respective fields to helm a project, it pays financially, legally, and time-wise to work with specialists like those at Wrapbook who can make sure you’re always payroll compliant throughout your entire career.

Reach out to one of our payroll specialists with any and all questions. And if you haven’t already, don’t forget to download our Payroll Compliance Checklist.

Disclaimer

At Wrapbook, we're all about providing the very best free resources to producers and their crews. However, this post is not a substitute for professional legal advice. Answers do not create a company-client relationship, nor is it a solicitation to offer legal advice. Seek the advice of a licensed attorney in the appropriate jurisdiction before taking any action that may affect your decisions or rights.

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About the Author

Anna Keizer

Anna Keizer originally hails from the Chicagoland area. After receiving her B.A. in Film/Video from Columbia College Chicago, she moved to California and finished her M.A. in Film Studies from Chapman University. She has also graduated from UCLA’s Writing for Television Professional Program and is currently in post-production on the short She Had It Coming, which she wrote and is executive producing.

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