July 23, 2020
Do we have to include commissions or bonuses in looking at 2019 annualized pay to determine if they should be included or excluded from the Salary Reduction Factor calculation?
Posted by Armanino Financial Advisory Team
Yes. If in any single pay period in 2019 an employee was paid an amount that, when multiplied by the number of pay periods the business had in 2019 (i.e., annualized), totals more than $100,000, they are to be excluded from the Salary Reduction Factor calculation. The amount the individual was paid could include salary, wages, commissions, bonuses, overtime pay, sick leave pay, tips or other sources of taxable income. For ease of understanding, the limit in any single pay period in 2019 is as follows, depending on the frequency with which you pay your employees:
- Weekly payroll (52 pay periods): $1,923
- Bi-Weekly payroll (every 2 weeks) (26 pay periods): $3,846
- Semi-Monthly payroll (twice per month) (24 pay periods): $4,167
- Monthly payroll (12 pay periods): $8,333