Go Ask Your New Employer! Administering Payroll in Merged Entities

Mergers and other corporate transactions create complexities in many ways, payroll included. Should FICA restart or is the new corporation a successor to the former entity? Two methods exist in an asset purchase transaction by which a predecessor (seller) and successor (buyer) employer can report payroll in the year of the acquisition, also involving a transfer of employees. Under the standard method, the predecessor performs all the reporting duties for the wages and other compensation that it pays (e.g., filing Form 941, and filing and furnishing Forms W-2 and W-3), and the successor performs all the reporting duties for the wages and other compensation that it pays. Under an alternative method, if the predecessor and successor agree, the successor employer takes over, and the predecessor is relieved from furnishing a Form W-2 to any employee who becomes employed by the successor employer (acquired employees).

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Related Content

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