Accounting, Payroll & Pension Issues/Prior year payroll error

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Expert: - 2/5/2010


Question
We discovered in February that an employee was paid at the wrong rate in the prior year, resulting in an amount due to the employee.  W-2's have been prepared and 941 reports filed.  When I prepare the "make whole" check for the employee must I date it in 2009, revise W-2 and amend 941; or may I date it in 2010 and include in 2010 wages?  If I date the check 12/31/09 will I be charged penalty/interest for late payment of payroll taxes?  Thank you.

Answer
If you date it in 2009 you will be charged penalty and interest for the taxes not paid on time.

If you date it as a retro pay in 2010 it will be fine and no penalties. You are allowed to retro  pay when a mistake is made and it is not caught until the next year. Now you are paying it in 2010 so the check is received in 2010 and the taxes are in 2010.

I would add it on to the next payroll check as a retro pay.

Shirley

Accounting, Payroll & Pension Issues

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Shirley McAllister, CPP, PHR

Expertise

I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.

Experience

25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.

Organizations
SHRM, APA, I.O.M.A.

Publications
I.O.M.A. and BNA

Education/Credentials
P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration. Boise State University Human Resource Certification

Awards and Honors
APA Hotline Citation of Merit for last 8 years.

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