Stimulus Provisions Mean Payroll Considerations

February 20, 2009 ( - The newly approved stimulus bill and other economic proposals will have practical implications on employer payroll, tax filings, and benefits offerings, according to Paychex, provider of payroll, human resource, and benefits outsourcing solutions for small- to medium-sized businesses.

According to a Paychex press release, the American Recovery and Reinvestment Act of 2009 includes a “Making Work Pay” provision which dictates that workers receive a rebate/credit for the 2009 and 2010 tax years of the lesser of $400 for individuals and $800 for couples, or 6.2% of earned income. The credit will be received by workers in their net paychecks through adjusted tax withholding tables, Paychex points out.

“This can be a confusing time for small business owners, who suddenly find themselves trying to understand what they need to do to comply with the stimulus plan’s provisions. They also need to determine whether the way they currently process payroll and administer HR can meet these new demands,” said Walter Turek, Paychex senior vice president of sales and marketing, in the press release.

In addition to the “Making Work Pay” provision, the stimulus bill includes a COBRA premium subsidy for which employers will be reimbursed through a payroll tax credit (see Employers Must Act Now to Comply with New COBRA Law ).

Other economic proposals pending that Paychex warns will affect employer payrolls are a minimum wage increase to $9.50 per hour by 2011, and an option to take a distribution of retirement accounts of 15% up to $10,000 without penalties, but still subject to regular withholding.