As described in the University of Iowa Operations Manual (www.uiowa.edu/~our/opmanual/iii/17.htm#171), salary checks for monthly faculty and staff are distributed on the first workday of the following month. Days not included as workdays are Saturday, Sunday, and any day recognized as a federal holiday.
The federal government recognizes Monday, Jan. 2, as the official New Year’s holiday. The federal government will not be conducting business on Sunday, Jan. 1, or Monday, Jan. 2. Payroll deposits processed for the January 2012 payroll will be deposited into your account on Tuesday, Jan. 3, 2012. If you have any automatic withdrawals that are deducted from your account on the first, second, or third day of the month, UI Payroll suggests that you call your financial institution to make arrangements for those deductions.
The two questions listed below are typically the most common questions we receive from staff regarding the January pay date:
Why can’t the university make a one-time exception and pay us on Friday, Dec. 30, 2011?
By paying everyone on Dec. 30, 2011 we would be adding an additional paycheck to your taxable income for this calendar year. This could affect your tax status by moving you into a higher tax bracket. It also could have a negative effect on your tax filing strategy since your withholding might not be correct when this extra payment is included. In the next tax year, 2012, you would only receive 11 paychecks.
Some employees complete student loan applications and other government forms using Dec. 1 earnings statements. If a Dec. 30 payroll payment is added to their W-2, then those employees who have already filed applications will have filed with incorrect information. Increasing their W-2 income with the 13th payment this year may also decrease their chances of qualifying for financial aid.
Nonresident alien employees, who are expecting financial benefit as a result of new international tax treaties affecting their January 1st paycheck, would not be entitled to this favorable treatment if the payment were made in December. Many of these employees are counting on treaty benefits for personal financial reasons.
Individual retirement plan and health and dependent care spending accounts could be negatively affected, since the federal government restricts the amount of money individuals can place in these programs within a calendar year.
An additional payment in 2011 would negatively affect employees who participate in the IRS earned income credit program.
Why can’t the university pay us on Sunday, Jan. 1?
When the university sends your payments to your financial institution, the funds have to move through the Federal Reserve System. The Federal Reserve banks are closed Sunday–Monday, Jan. 1–2, due to the federal holiday—and are always closed on the weekend. As a result your payroll deposit will not technically clear the banking system until Tuesday, Jan. 3.
Sometimes your bank will show your funds as available before they actually receive the money from the university; this is called “memo post.” Be aware that other bank transactions that move through the Federal Reserve System also will not process during this time period because the Federal Reserve will be closed on Jan. 2 and the weekend. If your financial institution does not “memo post,” your funds will not be available through automated teller machines until Tuesday, Jan. 3, 2012.