If a company uses a special payroll bank account: Multiple Choice
A There is no need for a payroll register.
B There is no need to issue W-2’s.
C The company does not need to issue paychecks
D The company draws one check for the entire payroll on the regular bank account and deposits it in the payroll bank account
E The company must use a federal depository bank for the payroll bank account
The correct answer and explanation is :
The correct answer is D: The company draws one check for the entire payroll on the regular bank account and deposits it in the payroll bank account.
Explanation:
A payroll bank account is a specialized account that businesses set up to handle their employees’ paychecks. It serves as an intermediary account for distributing payroll funds. However, even if a company uses a special payroll bank account, it doesn’t eliminate the need for certain administrative tasks. Let’s explore each option:
A. There is no need for a payroll register.
- This is incorrect. A payroll register is a critical document that tracks the wages, deductions, and benefits for each employee. Regardless of whether a company uses a special payroll bank account or not, the payroll register is a requirement for recordkeeping and tax reporting purposes.
B. There is no need to issue W-2’s.
- This is incorrect. A W-2 form is a legal requirement for reporting employee earnings to the IRS. The payroll bank account does not impact the need for issuing W-2 forms. The company must still provide W-2 forms to employees at the end of the year.
C. The company does not need to issue paychecks.
- This is incorrect. The purpose of a payroll bank account is not to eliminate the need for paychecks. Rather, it is to manage the funds for payroll more efficiently. Employees can still receive paychecks or direct deposits; the payroll bank account helps manage the funds for these transactions.
D. The company draws one check for the entire payroll on the regular bank account and deposits it in the payroll bank account.
- This is correct. The company typically transfers the total payroll amount from its general operating bank account into the payroll bank account. From there, the company can pay employees via checks or direct deposits. The payroll bank account ensures that only the required funds for payroll are available for distribution, streamlining payroll management and reducing the risk of commingling payroll funds with other operational funds.
E. The company must use a federal depository bank for the payroll bank account.
- This is incorrect. While companies are required to deposit federal tax withholdings in a federal depository account, the payroll bank account itself does not need to be a federal depository bank. The choice of bank for the payroll account is up to the company.
In summary, a payroll bank account helps manage the flow of payroll funds more efficiently, but it does not eliminate the need for essential payroll documents or reporting obligations. Option D is the best answer because it describes the typical process of transferring payroll funds from the company’s main bank account to the payroll account for distribution.