Set Up a Lump-Sum Earnings Payroll Field
If you want to calculate lump-sum earnings for an employee not based on hourly pay levels, you must create an Employee field in Employee Defaults. Then, you must adjust the lump-sum earning payroll field to be included in gross wages because it is considered to be taxable income. In this example, we will use the Bonus payroll field. Using this method you can also track bonus or commission income separately on the employee W-2 forms, if desired.
Note: You could use this example to create other lump-sum payroll fields such as commission, jury duty, maternity leave, and so on. (Keep in mind that lump-sum earnings may be taxed differently depending on your area. Therefore, you need to monitor adjusted gross income accordingly.)
If you don't subscribe to a Sage Business Care plan, you can set up the employee payroll field, but you will have to manually calculate and enter the amounts on the paychecks. You will not have access to payroll tax reports or forms.
Step 1: Set up the employee payroll field
- From the Maintain menu, select Default Information, then choose Employees. Sage 50 displays the Employee Defaults window.
- Select the Employee Fields tab.
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On a blank line, enter Bonus as the name of the new payroll field.
Note: What you enter here will print on employee paycheck stubs in the deduction area.
- Enter a G/L account (usually wages expense) associated with the payroll field. To display a list of existing accounts, type ? in this field or select the Lookup button. To add a new account, type + or double-click the field, which displays the Maintain Chart of Accounts window.
- Select Fed_Income (the default Federal Withholding payroll field), or any other tax field for which Bonus is required in computing taxable income.
- Select the Adjust button. Sage 50 displays the Calculate Adjusted Gross window.
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Select the Bonus check box so that it will be added to gross wages.
Do this for each applicable EE and ER field. For example, select Soc_Sec (the default Social Security payroll tax) next. Select Adjust and add Bonus to Adjusted Gross. Continue to do this for each Employee payroll tax field and Employer payroll tax field that needs to be adjusted to include Bonus.
Since Bonus is an addition (entered as a positive item), it will be added to gross pay when computing taxable wages (adjusted gross). This ensures proper calculation of withholdings as well as proper taxable gross reporting on payroll tax forms.
- When finished adjusting gross wages, select OK.
- Select OK to save the payroll field.
How it works
During payroll entry, enter the number of hours the employee works for this payroll period. When ready to enter an employee bonus, enter the amount in the Bonus payroll field under the Employee/Company Fields section. For example, if the employee earned a $75.00 bonus, you would enter 75.00 in the Bonus payroll field. The $75.00 will not be added to the visible Gross amount at the bottom of the Payroll Entry window. However, if you subscribe to one of the Sage Business Care plans, it will be added in the background to the adjusted gross and taxed properly. The adjusted gross will appear correctly as taxable wages in payroll tax reports.
Step 2: Include bonus (or commission) income on W-2 forms
(optional)
If you are using the Bonus (or Commission) employee payroll field, you may want to note this on the employee's W-2 form as additional income. This is optional at the employer's discretion. Commission or bonus amounts are already included in the total taxable wages in boxes 1, 3, and 5. Using box 14, you can isolate the total commission or bonus earned for additional record purposes. Sage 50 allows only one payroll field to be assigned to box 14 on the W-2 form. If you already have another Sage 50 payroll field assigned to box 14 on the W-2 form, you cannot add the commission or bonus field.
- From the Maintain menu, select Payroll and then Payroll Settings.
- Select Taxes, then Assign Tax Fields.
- Select the W-2 Fields button. Sage 50 displays the Assign Payroll Fields For W-2s window.
- In box 14, click on the drop-down arrow button to open the list of fields. Select the Bonus payroll field from the drop-down list.
- Select OK, then select Finish to close the Payroll Settings wizard.