Payroll Accounting: Cafeteria Plan Payroll Taxes | Cafeteria Plan Payroll Deduction


In payroll accounting terminolog  a cafeteria plan, a section 125 plan, is a plan that allows employees to choose between receiving cash or taxable benefits versus certain qualified benefits that the law provides an exclusion from wages. As a rule cafeteria plans do not include deferred compensation however 401K benefits can be included in a cafeteria plan.

“Most plans today work as a salary reduction, deductions that are considered pre-tax deductions. Both employees and employers gain from this agreement. Employees see reduced taxable wages (gross income) as contributions are not subject to federal, state or social security payroll tax withholding. Employers in turn see a savings on employer contributions of FICA, FUTA and workers’ compensation insurance premiums.

Qualified cafeteria plan benefits can include dependent care assistance, adoption assistance, group term life insurance (including costs that cannot be excluded from wages), accident and health benefits (not including Archer MSAs or long term care insurance) and health savings account, HSAs (distributions from an HSA may be used to pay eligible long term care insurance premiums or qualified long-term care services).

For purposes of a cafeteria plan common-law employees, full-time insurance agents who are current statutory employees and leased employees who have provided services basically full time for at least one year under employer’s direction. Of course there are exceptions those exceptions are regarding S Corp Shareholders, plans favoring highly compensated employees and plans that favor key employees. Do not treat the benefit as a reduction in distributions to the S Corp Shareholders. The previous two situations above employers will include the value of taxable benefits the employees have selected in their wages.

Payroll Mate payroll accounting software allows users to add any type of income or deduction category that meets their needs. User-defined incomes and deductions support both taxable and pre-taxed categories therefore supporting Section 125 Cafeteria Plans.

Create a pre-tax deduction (Cafeteria plan) for yourself by downloading a free payroll software demo.

Payroll Accounting: Payroll Fringe Benefits | Payroll Tax Fringe Benefits

A fringe benefit is a type of pay for services carried out. A fringe benefit is taxable unless the law specifically excludes it. See for yourself how Payroll Mate treats fringe benefits by downloading a free payroll software demo.

The value of a fringe benefit must be included in an employee’s pay if the value is more than the sum of the amount the recipient paid for the benefit or the law excludes the amount from the pay. Recipients of any fringe benefit, whom are considered employees, are subject to employment taxes. The fringe benefit is subject to Payroll taxes and must be reported on Form W2. Special payroll accounting rules apply to fringe benefits based on the recipient of the benefit and the tax-exempt fringe benefit laws.

Fringe benefits are tax exempt if they fall into specific exclusion rules. The benefit will be exempt from federal income tax and possibly social security, Medicare and or FUTA and will not be reported on W2 forms.

Some types of fringe benefits considered tax-exempt under the current payroll accounting rules:
Accident and health benefits
Achievement awards
Working condition benefits
Adoption assistance
Athletic facilities
De minimis (minimal) benefits
Dependent care assistance Educational assistance Employee discounts. Employee stock options
Group-term life insurance coverage Health savings accounts (HSAs) Lodging on your business premises Meals Moving expense reimbursements No-additional-cost services Retirement planning services Transportation (commuting) benefits Tuition reduction Volunteer firefighter and emergency medical responder benefits

Payroll software providers will find valuable information in IRS Publication15-B regarding treatment of fringe benefits under employment taxes.

Our payroll accounting solution supports user-defined Income, Tax, and Deduction categories. This feature allows employers to enter fringe benefits in a manner required by law. Easily enter fringe benefits as taxable or tax-exempt.

Find more information about our cost effective payroll software online at  or try Payroll Mate for yourself by downloading a payroll software free trial.

CA DE-6: How to Prepare California Form DE-6 Using Payroll Mate Software


Prepare California Form DE-6 using our Payroll Mate software. CA employers easily print EDD DE 6 form from your computer using our payroll program. 

Use our payroll tax solution to calculate withholdings, generate paychecks, prepare and print payroll reports and forms including California ED-6. Simply enter company and employee data into our payroll program using set-up wizards to guide you through the process. Once data has been entered CA employers are ready to run payroll. Creating a check, which in turn creates data that is automatically filled in on EDD Form DE-6, is as simple as clicking the pay button. 2010 Form de6 is automatically populated with the payroll data that the user has entered throughout the quarter.

Quarterly, employers need to file DE6 (Quarterly Wage and Withholding Report) to California Employment Development Department (EDD) accomplish this task using our payroll software.

Follow the State of California Form DE-6 instructions to print the form to blank white paper:
Step 1. Complete payroll for a specific quarter.
Step 2. Click on forms in the bottom left corner of the software.
Step 3. Choose State Reporting.
Step 4. The state tax reporting wizard will guide you through the process of generating DE6 form. Click next.
Step 5. Choose California, the appropriate quarter and Form DE-6.
Step 6. Our software gives you a choice to choose to print the EDD approved form which can be mailed or to print a report which can be used to manually fill in Form DE-6. To print EDD form de6 choose California state form DE6 and click next.
Step 7. Choose the employees to include in the report or edit any of the employees listed.
Step 8. Preview the form. Make sure you double check the following fields “M. GRAND TOTAL SUBJECT WAGES”,  “N. GRAND TOTAL PIT WAGES” and  “O. GRAND TOTAL PIT WITHHELD”.
Step 9. Print the CA DE-6 Form.

The DE-6 form is submitted to State of California/ Employment Development Department/ P.O. Box 826288/ Sacramento, CA 94230-6288. 2010 Form DE-6 is due April 1, 2010, July 1, 2010, October 1, 2010 and January 1, 2011. To find valuable information you can go to EDD’s California Employer’s Guide or call the Taxpayer Assistance Center line at (888) 745-3886.

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Payroll Tax NYC | NYC Payroll Taxes | New York City Payroll Tax Calculator


New York City employers can use our NY payroll software to calculate NY City income tax withholding. Find more information about our complete payroll program at .

New York City personal income tax rate has changed effective September 1, 2010. The rate change will affect wages of $500,000.00 or more. New York State income tax rate will not be affected by the change. Effective September 1, 2010 the supplemental withholding rate will be 4.75% (.0475).

Steps for computing the amount of tax to be withheld using our payroll software:

(1) Start Payroll Mate payroll software.

(2) Click on the “Employees” screen.

(3) Select the employee you want to configure to be liable to NCY Payroll Tax.

(4) From the top toolbar, select “Edit”, the “Modify Employee” wizard comes up.Follow the wizard until you reach the “Tax Setup” screen. Under “State Tax Setup“, make sure to set the state to “NY”.

(5) Click next and follow the wizard until you reach the “Taxes” screen. Check the box “New York City Tax”, this will tell Payroll Mate to auto calculate Payroll Tax NYC. Follow the wizard until you reach the end and click “Finish”.

(6) With same employee selected click on “Pay”, this will bring up the new payroll check dialog. Enter amounts for incomes and press “Recalculate”. Our payroll tax software will auto calculate the New York City withholding among other taxes and deductions.

NYC Payroll Tax examples:

(1) NYC Payroll Tax Example One: Aiden is on a Weekly payroll, $400 gross wages, single with 3 exemptions. The amount of NYC payroll tax is $5.74.

(2) NYC Payroll Tax Example Two: Noah is on a Semimonthly payroll, $5,000 gross wages, single with 1 exemption. The amount of NYC payroll tax to be withheld is $177.54.

(3) NYC Payroll Tax Example Three: Emma is on a Monthly payroll, $50,000 gross wages, single with 3 exemptions. Withhold $2,005.90.

(4) NYC Payroll Tax Example Four: Jack is paid daily, $750 gross wages, single and has two exemptions. The amount of New York City tax to be withheld from this employee’s check is $27.76.

(5) NYC Payroll Tax Example Five: Madison gets paid weekly, with $400 gross wages, married with 4 exemptions. The amount of tax to be withheld for NYC payroll tax is $4.85

(6) NYC Payroll Tax Example Six: Ethan is on a semimonthly payroll, $5,000 gross wages, married and has 3 exemptions.  Withhold $173.38.

(7) NYC Payroll Tax Example Seven: Isabella gets paid Monthly, $50,000 in gross wages, married, 3 exemptions. The NYC payroll tax to be withheld is $2,003.93.

(8) NYC Payroll Tax Example Eight: Sophia is on a daily payroll, with $750 gross wages, married, 2 exemptions. Withhold this amount:  $27.69.

We offer a free trial of our NY payroll solution on our website.


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Payroll Forms W2, W3, 941 and 944 Will Change Due to the Elimination of AEIC in 2011


A number of US Payroll Forms will change in tax year 2011 due to the elimination of Advance Earned Income Credit (AEIC) after December 31, 2010. Employers and payroll preparers can rely on our payroll tax solution to prepare the most up to date versions of these forms and stay compliant with the IRS regulations.

The advance EITC allows taxpayers who expect to qualify for the Earned Income Tax Credit (EITC) and have at least one qualifying child to receive part of the credit in each paycheck during the year the taxpayer qualifies for the credit. The credit is sometimes called the AEITC.

On August 10, the “Education Jobs and Medicaid Assistance Act of 2010” was signed into law. The new law will fund the jobs of an estimated 140 thousand teachers who would otherwise have lost their jobs, and it will also help states with Medicaid costs.

To pay for these new provisions, the EJA act makes a number of changes to the foreign tax credit and eliminates the advance payment option for the earned income credit (EITC).

Beginning with 2011 employers will no longer need to report advance payments of earned income credit. This means that a number of payroll forms where AEIC is currently reported will change. The list of US payroll forms will most probably include:

Form 941 – Employer’s QUARTERLY Federal Tax Return
Form 944 – Employer’s ANNUAL Federal Tax Return
Form 943 – Employer’s Annual Federal Tax Return for Agricultural Employees
Form 941-X – Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund
Form W2 – Wage and Tax Statement
Form W3 – Transmittal of Wage and Tax Statements
Form W-2c – Corrected Wage and Tax Statement
Form W-3c – Transmittal of Corrected Wage and Tax Statements

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