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Table of Contents T-5 SECTION 5: PAYING THE EMPLOYEE 5.1 Pay Frequency....................................................................................................................................... 5-2 5.2 Payment on Termination. ..................................................................................................................... 5-5 5.3 Payment Methods. ............................................................................................................................... 5-8 5.3-1 Cash or Check...................................................................................................................... 5-9 5.3-2 Direct Deposit (Electronic Funds Transfer). ........................................................................ 5-9 5.3-3 Electronic Paycards............................................................................................................. 5-17 5.4 Pay Statements Provided to Employees.............................................................................................. 5-31 5.5 Unclaimed Paychecks. ........................................................................................................................ 5-34 5.6 Wages Owed Deceased Employees. ................................................................................................... 5-35 5.7 Extra Paydays Caused by the Calendar..............................................................................................5-40 5.8 Review Questions and Exercises. ....................................................................................................... 5-40 SECTION 6: WITHHOLDING TAXES 6.1 The Principle of Actual or Constructive Payment................................................................................ 6-2 6.2 Social Security Numbers. ..................................................................................................................... 6-3 6.2-1 Obtaining an Employee’s SSN. ............................................................................................ 6-3 6.2-2 Verifying Social Security Numbers....................................................................................... 6-5 6.3 Employee Withholding Allowance Certificates. .................................................................................. 6-8 6.3-1 Form W-4 . .......................................................................................................................... 6-8 6.3-2 Form W-4P. ....................................................................................................................... 6-16 6.3-3 Form W-4S. ....................................................................................................................... 6-16 6.3-4 State Employee Withholding Allowance Certificates........................................................ 6-16 6.4 Methods of Withholding Federal Income Tax. .................................................................................. 6-18 6.4-1 Wage-Bracket Method ...................................................................................................... 6-19 6.4-2 Percentage Method............................................................................................................6-21 6.4-3 Alternative Withholding Methods..................................................................................... 6-23 6.4-4 Supplemental Wage Payments. .......................................................................................... 6-25 6.4-5 Withholding on Pensions and Annuities. .......................................................................... 6-34 6.5 Backup Withholding.......................................................................................................................... 6-38 6.6 Advance Earned Income Credit. ........................................................................................................ 6-39 6.7 Social Security and Medicare Taxes.................................................................................................... 6-40 6.7-1 Social Security and Medicare Tax Rates............................................................................. 6-40 6.7-2 Social Security Wage Base.................................................................................................. 6-42 6.7-3 Calculating the Withholding Amounts.............................................................................. 6-43 6.7-4 Related Corporations and the “Common Paymaster” Option............................................ 6-47 6.7-5 Self-Employment Tax. ....................................................................................................... 6-48 6.7-6 What Wages Are Exempt From Social Security and Medicare Taxes................................ 6-48 The Payroll Source®