Tax Operations Playbook

The intent of this Playbook is to provide an outline for the basics of the Tax Operations and the Activation Tax Operations teams’ processes. We will continue to develop and iterate on these processes over time as our product is grown and enhanced. We hope to answer your questions here but are always available through our help center should you have any additional questions or need for assistance.

In the majority of states a Tax ID is required for a payment submission. When the Tax ID  for a tax is set to ‘Applied For’ it cannot be included in an ACH file and also may not be allowed as a paper check submission. Check will take the following actions when a tax liability has reached its due date but the Tax ID is marked as ‘Applied For’:

If the company received a refund from Check of their tax liability and they now have the respective Tax ID, they will have two options:

The best practice is for companies to register for any and all applicable taxes as soon as they are aware they will hire an employee in a new state or locality. Some states may have certain limitations as to when you can actually register so be sure to check out their website for the actual requirements. You may also review our guides on new company registration.

A Tax ID is required for an electronic filing submission. When the Tax ID for a tax is set to ‘Applied For’ it cannot be included in an e-File. In addition, agencies are rapidly moving away from accepting any type of paper return and have become very strict in regards to a paper return with an ‘Applied For’ account number. Check will make every attempt to mail a paper return but cannot guarantee the agency will accept the return once it has been received. If the agency will not accept a paper return the company will be added to the Partner’s Filing Failure spreadsheet.

We highly recommend companies register for any and all applicable taxes as soon as they are aware they will hire an employee in a new state or locality. Please refer to our Knowledge Base for agency by agency instructions for the registration process.

The following quarter-end deadlines will apply to all companies:

Missing Tax IDs, TPA assignments, and correcting entries must be completed no later than the fourth business day following the end of the quarter. We cannot guarantee a timely filing submission or payment in the event this information is not received by the noted deadline. Also of note, there are a small number of agencies that will not allow any type of filing, including a paper submission, without a proper Tax ID.

In the event there are tax payments that cannot be submitted to the appropriate agency due to the missing information, Check will process a refund back to the company by the 15th of the second month following the filing quarter (March 15th, June 15th, September 15th, December 15th).

The following timeline will be followed when the filing month has been reached (January, April, July, October). Please note that dates may fluctuate if the deadline falls on a non-business day -

The following exceptions to the above noted timeline will include -

Third-Party Administrator rights are commonly referred to as TPA. In this definition of TPA, we are referring to a process that must be completed by the company with the purpose of allowing Check to file a company’s tax returns and remit payment for the returns filed. There are a handful of states that will not allow a Payroll Provider to file tax returns without the company completing an action using their own account login. These state taxes are CO PFML, HI SUI, MN SUI, and NM SUI. This isn’t to say other states won’t have their own unique data requirements, but in the case of these states, Check cannot file a tax return without the company completing the required steps. During the Activation process, Check will identify if the company is in one of the states noted above. The Activation communication will include a notification that TPA is required. In addition, as part of the TaxOps team’s quarterly preparation, the following steps will be completed:

The TaxOps team at Check will begin filing tax returns in the month following quarter-end. The majority of our tax returns are filed electronically via a bulk file upload. During the filing process, agencies will provide a response, typically within 24 hours, to confirm that the file was uploaded. This is when Check is able to identify Filing Failures and the process of building out a Partner specific spreadsheet begins. This spreadsheet is shared immediately and updated on a daily basis as agency responses are received.

Filing Failures can occur for a variety of reasons. The term is used to describe an electronic tax return filing that was rejected by the agency during the submission process. Common reasons for filing failures are:

Check will attempt to send a paper return when a filing failure is encountered. Tax agencies are rapidly moving away from accepting a paper tax return which makes this a haphazard solution at best. The ideal solution is for the company to correct the filing blocker so the return can be submitted electronically. The resolution for the common situations noted above are:

Current filings will take priority over a filing failure. After all current filings are completed, the TaxOps team will circle back on all resolved failures and make every reasonable attempt to refile a return before its due date. Should the due date not be met, Check will not be responsible for any penalty and/or interest associated with the original failure.

When a company has a funding failure that remains unfunded, Check will process a termination of services for that company. A failure to fund payroll will be considered a breach of contract, thus nullifying Check’s obligation to pay and file tax returns on the company’s behalf. If the payroll remains unfunded after 30 days, Check reserves the right to take further action including but not limited to terminating all payroll services for the employer.

The company will be placed into a held status and no tax returns will be issued. Should the company fund the payroll, we will resume processing for them, including filing untimely returns and remitting tax liabilities. Any late filing penalties will be the company's responsibility to pay.

If funding is not received, the process below will be followed:

Hello,

COMPANY NAME has failed to fund their XX/XX/202X payroll and has been unresponsive to our collection attempts, resulting in a termination of service with Check. All pending funded tax liabilities will be refunded immediately, and the company will be responsible to remit and file QX 202X taxes directly to the appropriate agencies.

Please note that QX 202X returns will not be filed.

A refund of $XXX.XX will be processed back to the company immediately.

The differences between a ‘1099 Only’ company and a W2 employer are small but important in regards to payroll tax processing. While it is not necessary for a ‘1099 Only’ company to have a second business verification review, it is necessary for that company to be reviewed at a payroll tax level. The Activation team will look at such things as Tax IDs, tax payment frequencies, unemployment tax rates, TPA requirements, etc. As such, when at least one W2 employee is added to a company which was initially implemented as a ‘1099 Only’ entity, the Activation team will receive an internal notification and an expedited review will begin. Check understands how critical the ability to run payroll is and will process these companies as quickly as possible. After the review is completed, the Partner will receive an Activation communication outlining any necessary actions to be completed.

It is common for a company to switch Payroll Providers midway through the year. This can happen at any point during the year and isn’t restricted to the beginning of a quarter. When a company decides to leave their previous Payroll Provider, there are frequently payroll taxes that were accrued but remain unpaid because the due dates haven’t been reached at the time of the company’s departure. Check on the other hand, will be processing payroll for the company when the due date is reached. This means Check needs to process a collection of any unpaid tax liabilities in order to have the funding to remit those payments on a company’s behalf. This collection is known as a “Mid-Quarter Collection”.

Mid-Quarter Collection usually includes state unemployment, federal unemployment, and local taxes but it can also include federal and state income taxes based on the company’s first check date and the due dates of the tax liability. During the Activation process, our team will identify and communicate to the Partner the amount of the expected collection. This amount is open for discussion based on whether the previous provider made the deposits and should be reviewed by both the Partner and the company! If the company indicates a tax was in fact paid by their previous provider, the collection amount will be adjusted to remove that item from the total.

The collection is scheduled for the first business day of the month following the company’s start date. For example, a company that starts on February 15th will have a Mid-Quarter Collection processed on March 1st (assuming the first is not a weekend). Because the Mid-Quarter Collection can include income taxes that are paid on a monthly payment frequency, it is important to note that a company starting later in the month would still have the same due date. This ensures Check is properly funded for all pending tax payments and avoids late payment penalties.

A No Start occurs when a company has been fully implemented and submitted to the Activation team, their first check date is scheduled, but they have not run their first payroll on the scheduled first check date. They may intend to process payroll through Check and are simply pushing their first check date out, but when this occurs Check must evaluate if their new first check date crosses a month, quarter, or a year. If and when it is determined that the first check date does in fact cross from one quarter or year into another, there are steps that will have to be completed by the company.  It should also be understood that Check will not file any tax returns for the quarter or year for their original first check date. Check’s filing obligations will begin when the company begins processing payroll on our API.

The steps to be completed are the following:

Ideally, a company is 100% satisfied with their payroll offering and never chooses to move to another Payroll Provider. When a company chooses to move to another Payroll Provider or if they cease operating entirely, there is specific information needed in regards to payroll tax filings that will have to be gathered from the company.

The answers to these questions will ensure all tax returns and tax payments are properly processed and any applicable refunds are handled appropriately.

There are basic SSN errors that are outlined by the Social Security Administration (SSA) and enforced by Check’s tax filing software. These validations include the following:

In addition, the following SSNs are considered to be dummy numbers:

000000000, 1111111111, 222222222, 333333333, 444444444, 555555555, 666666666, 777777777, 888888888, 999999999, 123456789, 987654321

It is incumbent on the Partner to contact the company and notify them of the invalid SSN. The SSN must be corrected prior to the Quarter-End Deadline.

If the SSN is not corrected there are several areas that can and will be affected.

Payroll Corrections is an all-encompassing phrase that considers all post-live check date changes that may need to occur for a payroll and that may also require amended returns. Some examples of payroll corrections are:

More examples and their explanations can be found in the Check Knowledge Base.

Requests for payroll corrections should be submitted as a support ticket using the Correct Payroll request type. Multiple options for the type of correction required will be displayed.

In the event that a payroll must be added to the record (e.g. a missed historical) Check support will provide a .csv template that contains all of the wage and tax fields customized to the company requesting a payroll correction. This is the same template used during company implementation and should be filled out with all applicable fields. Once it is returned to the Check Support team, it will be reviewed and added to the payroll record as required.

For all correction types, please be sure to include the check dates that need to be corrected, the nature of the correction, and all wage, tax, and benefit data required to make the change. Please also notify the Support team if the company consents to any necessary tax debits related to these corrections. This will minimize touch points between companies and ensure a smooth process.

Once corrections have been made, the Check team will process amended tax returns as needed and provide the relevant copies to the Partner to then provide to the company. Check will file the applicable returns with the tax agencies and these copies are for the company’s records.

The current SLA for payroll corrections is up to 20 business days depending on the correction request. These are manual requests and special care is required to append to the payroll record.

We understand that adjustments are often necessary for the current quarter's payroll. To ensure smooth processing and avoid the need for amendments, corrections should be submitted at least 20 business days before the quarter ends to make it in an original filing. It's worth noting that many corrections within the quarter can often be handled as voids or off-cycle payrolls. These adjustments can typically be made up until the quarter's end date.

If, for any reason, you miss the 20-day deadline, no worries! Corrections for that quarter will still be accepted and we will begin processing them starting from the first day of the month following the quarter's start. As an example, a Q1 Correction would be processed starting on May 1st. The reason these corrections don't start until the following month is because the initial filing needs to be completed first. This process aligns with the preferences of tax agencies and ensures that our original filing submissions are precise.

An FEIN ‘failure’ occurs after a company has been submitted to the Activation team for processing. The failure will sometimes be identified by the IRS’ EFTPS system quickly which allows the Activation team to request additional documentation, such as the SS-4 or a letter from the IRS with the company’s legal name and FEIN, before the company runs their first payroll. This is not always the case. The EFTPS system can take up to 10 business days to return a ‘terminated’ status and Check does not pause a company’s go-live date as a result of this delay.

If the failure occurs after the company has gone live, it will affect the tax payments submitted on behalf of the company to the IRS. The IRS will reject the payment submission causing a payment failure. When this occurs the Tax Operations team will immediately review the FEIN and verify that an SS-4 was not already received by the Risk team. If an SS-4 has not been provided, TaxOps will immediately notify the Partner via a Zendesk ticket and request the Partner/Company immediately provide a copy of the SS-4 or a letter from the IRS with the company’s legal name and FEIN.

The following timeline will apply to all companies with an FEIN failure:

Every state is different, and as a result, some states have different deadlines for the tax return due dates. When a tax return is due to an agency early in the filing month, it is considered an Early Filing. The earliest due date is the 15th with each due date cascading later and later, with the final due date typically being the last day of the month. In respect of these Early Filing Deadlines, it is important for the TaxOps team to adhere to the Quarter-End Deadlines.

The Reconciliation Recap is a summary of activity for each tax type and is included in the company tax returns that are loaded to the company documents each quarter. It will outline any credits due back to the company, additional collections needed from the company, refunds that will be issued by an agency, as well as any fractional amounts that were written off. Additionally, Check will write-off any variance amount that is less than $1.00 (positive or negative).

The top half of the Reconciliation Recap contains the following information:

The grid portion of the Reconciliation Recap contains the following detail: