Customers are required to report pay information accurately and on time in order for Justworks to collect and remit funds to proper government agencies by their respective deadlines. Government agencies (including the Internal Revenue Service) often require that Justworks remit any tax liability the business day following the recorded check date. If a payment has already occurred and is reported late, the government agency has the right to levy penalties and interest against any tax underpayment.
Note: Late reported payment is different from retroactive pay. Retroactive pay should be used when an employee has not received any payment tied to a past date.
Recording Late Reported Payments
Use the Late Reported Payments pay type to record manual payments made to an employee outside of Justworks. Only payments covered by Justworks Customer Service Agreement (dated after your company joined Justworks or the employee’s hire date) should be recorded.
Once selected, you can choose from three different earning types based on your needs: off cycle salary, paycheck tips and supplemental pay.
If you select off cycle salary or paycheck tips, you will be able to enter basic pay date and pay period information with the option to add a note that is visible to the employee on their paystub.
Only dates within the current calendar year will be considered valid pay dates. If you need to record a payment for a previous year, please contact our Customer Support team for further information.
By default, the payment can be entered as the net pay amount. The net pay is the final value the employee received after accounting for taxes. You can also use the gross pay amount which is the amount before taxes are withheld.
If supplemental pay is selected, you will be required to specify what type of supplemental pay was issued.
While several standard supplemental pay types are provided, if the supplemental pay type Other is chosen, you will be required to provide further information.
Other is most often used when recording the exercise of equity based compensation such as restricted stock units (RSUs).
Late reported supplemental payments will default to the flat rate calculation. However, if you need to apply the cumulative method for tax calculation, please reach out to our Customer Support team for assistance.
Once your earnings type, payment settings, and date information have been entered, you can click Continue.
You can enter the applicable amount for the necessary employee(s). A summary of the total number of payees and amount will appear on the right-hand side.
Click Continue once all late reported payments have been entered and you will be redirected to a final review screen.
Prior to submitting the late reported payment, please review the hyperlinked addendum and check the box acknowledging the terms and conditions.
Once submitted, you will see a success page giving confirmation the payment is ready to be processed on the next available invoice. This will be the same business day if submitted prior to 2pm Eastern or the next business day.
You will still be able to adjust or cancel the late reported payment prior to processing on the Payments Activity tab found in the Payments Center.
Adjust the filter for Pay Date Start to include the original date of the payment rather than the processing date.
Late Reported Payments and Invoices
Late reported payments will apply to the next available invoice for processing. The gross value will appear based on the payment type selected (ex: Salary Off-Cycle) with the appropriate employer side taxes applied.
To ensure employee-side taxes are collected but no funds are deposited into the employee’s bank account, an offsetting manual payment will appear to reduce the total debit of the invoice.
Any estimated government penalties will be listed under the Justworks Fees section as a Late Fee.
General IRS Penalty Guidelines
Any penalty calculated follows the guidelines from IRS Publication 3151-A (page 21) and is determined by multiplying the amount of total underpaid taxes (including federal, state and local liabilities) by the applicable percentage based on how late the deposit is made.
The percentages are set as follows:
- 1-5 days late - 2%
- 6-15 days late - 5%
- 16 or more days late - 10%
Disclaimer
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.