This tutorial shows how to set up Retroactive Pay inside Payroll Mate® software.
Retroactive or back pay refers to income owed to an employee from a previous pay period. Retroactive pay may happen for a number of reasons, such as incorrect salary compensation or wages for hours worked, or a pay increase. Earnings are taxable payments to an employee that are separate from regular wages. The amounts are included in the wage base and used to calculate percentage-driven deductions such as 401(k). For income tax purposes, the IRS treats all retroactive pay as wages in the year paid.
https://www.irs.gov/publications/p957
Summary of Steps
This is just a summary; please click “Download Tutorial” for detailed instructions with screenshots.
- Click → Company from shortcuts
- Click → Income Categories
- Click → Add
- Enter Title for income
- Select Pay Type from dropdown menu
- Review/Edit Taxes or Deductions applied as needed
- Click → OK
You will need to apply the severance pay income to each employee as needed
- Click → Employees from shortcuts
- Select an employee from the list
- Click → Edit
- The Modify Employee Wizard will open, Click → Next until you are on the Incomes page
- Checkmark to select Retroactive Pay income and enter pay rate as applicable, Click → Next until you reach the end of the wizard
- Click → Finish to save
- Repeat employee steps for each applicable employee
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