Payroll Plan Review

This explains how to review your Payroll Plan. A spreadsheet is mostly meaningful to the spreadsheet designer, so please use the link provided in your email to retrieve your Payroll Plan. We base your Payroll Plan on 3 possible scenarios-

PY Wages / W-2

This means we are basing your Payroll Plan on the prior wages or your W-2. In other words, we are using the prior year as your proxy for the current year. We will update this once your Tax Plan is prepared during our summer tax planning months.

Payroll Launch Matrix

This means we are basing your Payroll Plan on a table to help calculate your federal and state, if applicable, income tax withholdings. This is designed to get out of the gate or off the blocks as they say for the first handful of months. We will update this once your Tax Plan is prepared during our summer tax planning months.

Tax Plan

This is Payroll Plan nirvana. We prepare a Tax Plan given your household and business incomes, and then adjust your Payroll Plan and specifically your income tax withholdings accordingly to land on tax neutrality for April.

Moving on to the meat of the spreadsheet-

Lines 1 and 2 show your salary, and how it might be split between states.

Line 7 show employee deferrals into another 401k plan. If you have a second 401k plan (for example, another W-2 job), your 401k employee deferral might be limited.

Lines 8 and 9 show your 401k owner (employee) deferral deduction (including any catch up amounts). You will need to send these amounts directly to the 401k plan administrator from your business checking account.

Lines 11, 12 and 13 show your income tax withholdings. If necessary, we will adjust these once a Tax Plan is prepared or updated.

Line 16 is an approximate net check that will be direct-deposited into your personal checking account after payroll is processed. Line 15 is an advanced deduction which lowers the cash needs to process payroll (see below for how this works).

Line 21 is the total cash needed to process payroll but does not include your 401k employee deferral payment.

Line 22 is the total cash needed for 401k employee deferrals (see lines 8 and 9 above).

Line 23 is our recommended minimum cash balance in the business checking account for payroll drafts and 401k payments.

The pink column is what the year will look like if we use annualized prior-year amounts and spread them over the full year. If your business or household income will change dramatically this year, we will need to adjust these amounts.

Please read our Payroll Welcome Kit which has a ton of wonderful information about payroll processing and answers to questions like “Where’d the cash go?” See the button below. We’ve also included a Sample Payroll Plan as well.