Payroll: Final Paychecks for Deceased Employees
Payroll: Final Paychecks for Deceased Employees
One thing that all parts of a company has in common is that the people who run them are only human. This means that they are acceptable to a range of events and accidents. Sadly, sometimes these can mean the passing of an active employee. While it is a difficult time for the co-workers, both in terms of extra workload and the emotional toll of losing a fellow worker, it is also complicated for management and payroll, who must deal with the last pay of the deceased employee.
There are certain steps that have to be taken to make sure the employee’s last check goes to the right person, along with any added benefits. A few things that you should remember when dealing with a deceased employee are.
Check State Laws: before diving into the proceedings, educate yourself a little on your state laws. Each state has their own wage and payroll laws. Make sure you are current on your own.
Final Paycheck: If you have given the last paycheck and the employee has not cashed it, it is a good idea to cancel the check. Print a new check made out to the employee’s estate or beneficiary.
Taxes: If the last check is issued during the same year as the employee’s death, you must withhold Social Security and Medicare. If the payment is made after the year of death, do not put it on the W-2 form and do not withhold social Social Security or Medicare.
Vacation and Sick Pay: If the employee has accumulated any paid vacation or sick days, check the state law to see if they are eligible to be paid to the estate or beneficiary. If the state law does not comment on paid vacation or sick days, consult the company’s policy on the matter.
Form for Estate/Beneficiary: The IRS requires that the payment made to the estate or beneficiary be put in Box 3 of Form 1099-MISC.This applies regardless of given during the year of death or after.
The best way to know how to handle this difficult time is to have your payroll in the knowledgeable hands of an outsourced payroll company such as Vision H.R. They specialize in all aspects of payroll, and can help guide you in the right steps to take.
