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.
Watch: 12 Days of Sleighing Year-End
Day 3: Year-End Bonuses
This video walks through what to consider before running a bonus payroll, why early planning helps avoid delays, and how to make sure payments land in the right tax year. You’ll also learn how IRS deposit rules and bank processing times come into play.
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 hello@onpay.com. We'll help you get this set up so you can pay your bonuses on time.
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 31, it should have a check date of Wednesday, December 31, and should be processed by Monday, December 22, 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 Wednesday, December 25th. This means you must complete the run no later than December 22nd.
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.
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