OSPS E-News ~ Year End Guidelines

Fri Oct 1 16:26:12 PDT 2004

As we do each October 1,  we are providing payroll year-end guidelines.  You
will find these included in Appendix D of the OSPA Manual.  The full
document and a link to the manual can be found below.   

The year-end guidelines are intended to help you have a smooth year-end and
a clean W-2 run.  We will provide year-end training at our users forum on
November 17.  We hope you will familiarize yourself with each of the
year-end topics and come to the users forum ready to ask questions. 

OSPS Website (select Intranet):
http://www.oregon.gov/DAS/SCD/OSPS/index.shtml
<http://www.oregon.gov/DAS/SCD/OSPS/index.shtml>  

Full Text of Year-End Guidelines:

yearendOSPS

LETTER OF RECOMMENDED PAYROLL PRACTICE

01-1001

REVISED ISSUE

October 1, 2004

REVISED
Issued October 1, 2004

SUBJECT:               Guidelines and special procedures for year-end
payroll processing.

Terminations

P010 final check period ending and final check issued dates are critical at
year-end as these dates force the calculation of wages in the current
calendar year - 2004.  Dates should not be entered on the P010 screen for
December unless an employee terminates from state employment.  Transferring
to another state agency is not a termination.  The IRS considers the State
of Oregon, and OSPS, as one employer and a transferring employee's December
wages should not be included in 2004 earnings.

A true December termination must have the P010 dates entered (December
dates) whether the final check is produced as a "manual check" or by the
payroll system.  If your agency issues an agency check to a terminating
employee, be sure to enter the PANN deduction on the 12/31/04 P070 screen.
NOTE: Earnings in 2004 must be entered in the payroll system in order for
the P010 dates to be valid.  Remove all "ACH" XDNN deductions from the
terminating employees' 12/31/04 P070 screen before payroll is processed.

Agency payroll staff will not be able to enter, change, or delete P010
termination dates beginning 12/10/04 (after November paid December Run 2)
through 01/10/05 (December paid January Run 2).  You will need to call or
e-mail OSPS to have P010 termination dates entered.  After 01/10/05, P010
dates can be entered but December P010 dates can only be removed by OSPS.  

Prior to December Run 1 (12/27/04), if an employee terminating in December
is owed wages for November you must make the additional entries on the
December 12/31/04 P050 screen.  December termination dates must be entered
on the P010, so you will need to call or e-mail OSPS.  No corrective can be
set for the November pay period after 12/10/04.

IMPORTANT NOTE:  If a corrective flag has been set for November and the
employee terminates before December Run 1 - you will need to work with OSPS.
All November information must be entered on the December screens and the
dates on the P010 screen must be changed from 11/30/04 to 12/31/04.  This
calculates all earnings in calendar year 2004 to produce a correct W-2.
This procedure must be handled with caution in order to prevent the November
corrective from calculating into the 2004 tax year.  If you encounter this
situation (November P010 dates will be your red flag) please call or e-mail
OSPS.

LRP01-1001
Page 2

After December 31 if you find that you still owe money to a terminated
employee, request that OSPS make the entry on the P050 screen in the 1/31/05
pay period.  This will produce a check with a 2005 date and a W-2 for the
new year which complies with Internal Revenue Service regulation
§31.3121(a)-2, since the employee will receive the pay in 2005.  We can not
set a corrective flag for terminated employees.

After November Run 2 if you find that you need to make an adjustment for
months prior to November for a continuing employee, combine the adjustment
for all months and input the entry on the November, 2004 P050 screen.  View
the P370 screen and calculate the year-to-date (YTD) by entering "Y" in the
field at the bottom of the screen to verify correct year-to-date totals.
When you have confirmed all the entries are accurate, enter the dates on the
P010 as Final Check Issued: 11/30/04 and Final Check Period Ending:
11/30/04.   To meet audit guidelines for documentation, we will require a
written request or a signed P370 with a notation to set the corrective flag
for November. 

After November Run 2 and prior to December Run 1, if money is due a
previously- terminated employee, send OSPS a written request to enter the
gross pay on the December P050 screen.  OSPS will also enter P010 dates as
Final Check Issued: 12/31/04 and Final Check Period Ending: 12/31/04.  This
will calculate the entry in the 2004 tax year and avoid an unnecessary
corrective.

Agency staff will not be able to set corrective flags for tax year 2004
beginning 12/10/04 (November paid December Run 2) through 01/10/05 (December
paid January Run 2).  Ideally, you should correct errors before December 7,
2004 at 6:00pm.  After this time if you feel that an adjustment and/or
corrective is needed for an employee, refer to the above guidelines and call
or e-mail OSPS for advice if needed.  Correctives for the month of December
will also be set by OSPS due to prior year-end problems.  To avoid
unnecessary correctives for a continuing employee, please make adjustments
on the current month screens.

OSPS will not backdate checks for those who terminate or retire before
12/31/04 and are not reported to us and a check is issued 1/1/05.  It is not
consistent with IRS rules to move money from one tax year back into another.
Agencies will have to work directly with PERS to adjust the income.

Check Reversals

Payroll checks produced in error for the 2004 tax year must be reversed,
hours or gross pay adjustments removed from the payroll system, and
corrective flag set prior to December Run 2 (01/10/05).  Gross wages and
withholding must be removed from the 2004 tax year.  If you have erroneous
checks produced prior to September that have not been reversed, call or
e-mail OSPS for assistance.

P370 Screen

P370 check date is critical at year-end.  This screen displays the
anticipated payroll calculation.  If the check date is entered as 2004, the
system will perform the calculation based on the tax-year 2004 withholding
percentages.  If the check date should be 2005, the net amount will not
match when 2 Run is processed using the tax-year 2004 withholding
percentages. 

LRP01-1001
Page 3

Also, if you access a P370 with the incorrect check date after December Run
1 wages have been calculated into a specific tax year, the system will
display an assumed calculation for the full month.  Since December has not
been paid in the tax year you have indicated, the system assumes the full
month is due (December has been paid as 2005 wages, not 2004, or vice
versa).

Reports

Each payroll run review the report XREF68 "Employees with Negative Amounts
EIN" which lists year-to-date negatives. All columns of that report should
be considered with the exception of the column entitled "special payments".
Correct any year-to-date negative amount(s) which would prevent printing of
the W-2.  If you are at all unsure whether a negative YTD amount will
prevent production of the W-2 or you need assistance in making the
correction, please call or e-mail OSPS.  

Review OSPS B400 "Terminated Employees with Leave Balances" produced October
Run 2.  If the terminated employee's leave balance needs to be paid off, it
should be included in 2004 earnings.  All adjustments should be made on the
11/30/04 P050 screen prior to November Run 2.  If you are unable to enter
P050 adjustments due to termination, call or e-mail OSPS for assistance.

Thoroughly review 11/30/04 and 12/31/04 "Payroll Exception Report"
preliminary (E120-052A) and final (E120-042A).  Verify that any terminated
employees with net pay negatives are correct.  Continuing employees'
negatives may carry forward as long as the 2004 gross wages are correct.
Check for 1150 "fatal" errors that may cause 2004 earnings to be removed
from the calculation in error.  If you have questions or problems with your
exception reports, call or e-mail OSPS.

Expense Reimbursements

Moving expense, education expense, and all taxable expense reimbursements
must be entered on the 11/30/04 P050 screen prior to 12/9/03 (November Run
2) in order to be included on the 2004 W-2.  All employer-paid moving
expenses (taxable and non-taxable) and all taxable expense reimbursements
must be entered in the payroll system and reported on form W-2.  If you have
questions on a particular situation, please call or e-mail OSPS.

W-4s and W-5s

Employees receiving the "Advanced Earned Income Credit" (EIC) should be
reminded to provide a new form W-5 for 2005 since the form expires on
December 31 of the current tax year and must be replaced if payments are to
continue.   OSPS will distribute a report with 10/31/04 Run 1 payroll that
lists employees receiving the EIC.

A Form W-4 claiming exemption from withholding is valid for only one
calendar year.  To continue to be exempt from withholding in the next year,
an employee must file a new Form W-4 by February 15 of the following year.
OSPS will distribute a report with the 10/31/04 Run 1 payroll that lists
employees claiming exempt or more than 10 exemptions.

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