Payroll responsibilities go beyond processing regular paychecks. For New Jersey employers, certain lump sum payments may need to be reported to New Jersey Child Support Employer Services before the payment is distributed.
Understanding what qualifies as a lump sum payment and when reporting is required can help employers establish the appropriate processes and stay on top of their responsibilities.
What Is a Lump Sum Payment?
According to New Jersey Child Support Employer Services, a lump sum payment is generally income other than a periodic, recurring payment of earnings made on regular paydays.
Examples of lump sum payments can include:
- Discretionary and nondiscretionary bonuses
- Commissions
- Performance bonuses
- Merit increases
- Safety awards
- Signing bonuses
- Moving and relocation incentive payments
- Clothing stipends
- Holiday pay
- Termination pay
- Severance pay
Workers’ compensation, insurance settlements, and personal injury settlements paid as replacement for wages owed may also be considered lump sum payments.
Expense reimbursements are not included in the definition of a lump sum payment.
Who Needs to Be Reported?
One important detail for employers is that reporting responsibilities apply to all employees and contractors, regardless of whether they have a child support case.
Employers or income payers registered with the State of New Jersey are responsible for reporting upcoming lump sum payments to New Jersey Child Support Employer Services prior to distribution.
Is There a Minimum Amount for Reporting?
No. There is no established minimum threshold for reporting purposes.
All qualifying lump sum payments must be reported, regardless of the payment amount.
This means that employers should have a process in place for reviewing payments before they are issued rather than assuming smaller payments do not need to be reported.
How Can Employers Report Lump Sum Payments?
New Jersey Child Support Employer Services offers reporting options through its Employer Dashboard. Employers can use the “Lookup Lump Sum” feature to enter an employee’s last name and Social Security number and receive results. Employers with multiple employees receiving lump sum payments can also upload a file.
The Interactive Lookup tool can provide employers with information in real time regarding whether a lump sum payment can be released.
If an employee owes past-due support, an income withholding order may be issued to the employer or income payer with instructions for compliance.
Stay on Top of Your Payroll Responsibilities
Payroll compliance involves much more than calculating hours and issuing paychecks. Bonuses, commissions, severance, and other one-time payments can come with additional employer responsibilities.
Reviewing your payroll processes and understanding when lump sum payments need to be reported can help your business stay organized and prepared.
Need help managing the many responsibilities that come with payroll? The team at Abacus Payroll provides personalized payroll solutions and support to help businesses spend less time managing payroll and more time focusing on their operations.
Contact Abacus Payroll to learn more about our payroll services.