Payroll Processing Checklist

For each employee added since last run, confirm signed W-4 (or state equivalent), I-9 with Section 2 verified within 3 business days of start, direct deposit authorization, and any state new-hire reporting filed within 20 days. Missing W-4 forces default withholding (single, no adjustments).

Apply pay-rate changes, promotions, terminations, leave-of-absence transitions, and benefits enrollment changes effective this period. Terminated employees in most states must be paid final wages on the last day worked or within a state-defined window (CA: same day for involuntary, 72 hours voluntary).

Check for new child support orders, IRS levies (Form 668-W), state tax levies, creditor garnishments, and bankruptcy orders received since last run. Federal CCPA caps total garnishment at 25% of disposable earnings (50–65% for child support depending on dependents and arrears).

Compute disposable earnings (gross minus mandatory deductions), apply CCPA cap, and stack multiple orders by priority — child support first, then federal levy, then creditor garnishments. Note remittance address and case number for each order; many states require disbursement within 7 days of pay date.

Pull approved hours from Gusto Time Tracking, When I Work, Deputy, ADP Time, or QuickBooks Time. Confirm all managers have approved their teams' timesheets — unapproved hours typically default to zero and trigger a correction run later.

FLSA overtime is 1.5x regular rate over 40 hours in a workweek (not pay period). California adds daily OT after 8 hours and double-time after 12. Confirm shift differentials, on-call pay, and bonus regular-rate recalculations where applicable.

Match time-off requests against approved leave balances. Watch state sick-leave laws (CA, NY, NJ, MA, WA, CO require accrual at 1 hour per 30–40 worked). Update the accrual ledger so balances on the pay stub match HR's records.

Common discrepancies: missed punches, overlapping shifts, hours posted to wrong cost center, salaried-exempt employees with partial-day deductions that violate exempt status. Capture each open item with employee, manager, and resolution note.

Loop in the employee's manager to confirm corrections in writing before posting. Do not adjust hours unilaterally — written manager approval is the audit trail if a wage-and-hour complaint surfaces later.

Build gross from regular hours, overtime, bonuses, commissions, retro pay, severance, and imputed income (group term life over $50K, personal use of company vehicle). Bonuses paid separately are subject to 22% supplemental federal withholding.

Run cafeteria-plan deductions before tax: medical, dental, vision, HSA (employee + employer), FSA (medical and dependent care), commuter benefits, 401(k) traditional deferrals. HSA and 401(k) reduce FIT and SIT but HSA also reduces FICA; 401(k) does not.

Apply FIT per current W-4 (2020+ form steps), Social Security at 6.2% up to the wage base, Medicare at 1.45% with additional 0.9% over $200K, state income tax, SUI/SDI where applicable, and any local taxes (NYC, Philadelphia, Ohio RITA, PA EIT). Confirm reciprocity agreements for cross-border employees.

Roth 401(k), after-tax voluntary contributions, union dues, charitable contributions, and post-tax benefit premiums come after tax withholding. Verify 401(k) deferrals against the IRS annual limit ($23,000 base + $7,500 catch-up at 50+ for 2024) and shut off employee contributions when the limit is reached.

Run the preview/draft register before submitting. Compare gross, taxes, and net to the prior period totals and to a YTD trend. Variances over 5% on any line should have a documented reason (raises, new hires, terminations, bonus run).

Sort by net-pay variance descending and investigate any line over $500 swing or 10% change. Common causes: unapproved OT, missing hours, retro pay, terminated employee with PTO payout. Document each variance reason in the register memo.

Send the approved register to the client owner, controller, or CFO with totals: gross, employer taxes, net cash required, ACH debit date. Most providers debit 1–2 business days before pay date — confirm operating account has cleared funds.

Make the changes the approver flagged, regenerate the preview, and re-circulate for sign-off. Do not submit the run until you have a clean approval on the final version.

Submit the run before the provider's cutoff (typically 4 PM PT 2 banking days before pay date for standard ACH; same-day ACH options exist with a fee). Print check stock for any non-direct-deposit employees and prepare delivery to worksites.

Schedule depends on the lookback period (Form 941 liability July 1 – June 30 of the prior year). Under $50K = monthly depositor (15th of following month). Over $50K = semiweekly (Wed/Thu/Fri pay → following Wed; Sat/Sun/Mon/Tue pay → following Fri). $100K next-day deposit rule still applies regardless of schedule.

If accumulated 941 liability hits $100,000 on any day, deposit by the next banking day regardless of normal schedule. Submit via EFTPS by 8 PM ET to be timely. Penalty for missing the next-day rule: 10% immediately, plus interest.

State deposit cadences vary widely — CA (EDD) requires next-banking-day for withholding when federal is next-day; NY runs PrompTax; TX has SUI only. Confirm the state's e-file system credentials are current; locked-out logins are a common reason deposits go late.

Child support orders typically remit to the State Disbursement Unit (SDU) within 7 days of withholding. IRS levies remit per the 668-W instructions. Track each disbursement by case number and keep proof of payment for at least 4 years.

Map gross wages, employer taxes, and benefit expenses to the proper GL accounts in QuickBooks Online, Xero, or NetSuite. Confirm the provider's auto-posting integration (Gusto-to-QBO, Rippling-to-NetSuite) tied to the actual register; manual edits to the JE break the audit trail.

Match each ACH debit, tax payment, and check clearing the bank against the register. Outstanding items beyond 7 days should be investigated — uncashed paychecks may be subject to state escheatment after the dormancy period (typically 1–3 years).

Save the final register, JE, tax confirmations, and any garnishment notices to the encrypted client folder (SmartVault, ShareFile, TaxDome). IRS Pub 4557 and state data-protection laws require that payroll records containing SSNs live in an access-controlled store, not on a local desktop or generic shared drive.

Common questions: missing OT hours, withholding feels too high (point to the W-4 step calculation), HSA deduction stopped (limit hit), 401(k) catch-up not applied (eligibility). Document each issue and any corrective action; if a void/reissue is needed, run an off-cycle check rather than wait for the next regular run.