Year-end bonuses are a great way to reward your team for their part in your company's success. But there are three things to to keep in mind to ensure your bonus pay run goes smoothly.
Direct deposit limits
Bonus pay runs sometimes exceed the pre-approved direct deposit limit for your company. In these cases, we may require that you wire the funds to pay your employees this bonus by the date of your choice. If you are unsure of your limit, email us at firstname.lastname@example.org. We'll help you get this set up so you can pay your bonuses on time.
December 31 falls on a Sunday
This year, December 31 falls on a Sunday. This means you'll want to run all year-end bonus payroll at least two additional days early to ensure pay is receivable within the year. This extra day is in addition to days added due to the IRS next-day rule.
IRS next-day rules
Because of potential limitations around your pre-approved direct deposit amount, any bonus runs resulting in $100,000 or more in federal tax liability qualify for the IRS Next-Day Rules. In this event, the bonus payroll must be run with at least five (5) business days between the pay run and the check date to ensure funds are available on time.
For example, if a bonus pay run that results in $100k+ in federal tax liability is to be paid by December 31st, it should have a check date of Friday, December 29, and should be processed at least six (6) business days prior in order to ensure that there are five (5) full business days between the submit date and the check date. Additionally, banks will be closed on Monday, December 25th. This means you must complete the run no later than December 20th.
This allows time to properly draft the funds and remit the tax payment. If you cannot provide enough time for OnPay to draft the funds, you may be required to wire those funds to OnPay or deposit the taxes with the IRS directly.