Issues in Municipal Payroll - 3-13-18 Presentation - Sample Process and W2/W3/M3 Forms

Sep 3, 2026

Overview of municipal payroll operations comparing in-house payroll processing with outsourced payroll services. Explains responsibilities across the treasurer/accountant/vendor lifecycle, including reconciliation, warrant and journal entries, withholding payments, and distribution of checks or direct deposits. Includes a sample step-by-step process from timesheet submission through W2 warrant preparation and countersignature. Summarizes key forms—W2, W3, and M3—covering purpose, reporting destinations, and January 31 deadlines.

LanguageEnglish

CategoryPresentations

FormatPDF

Pages41

Reading Time14 min

AccessFree to download

In-House using Municipal Software

Responsibilities and workflow

Outsourced Payroll

Responsibilities and workflow

Sample process

Timesheet to distribution steps

Forms

W2 – Employee Wage and Tax Statement

W3 – Transmittal of Income & Tax Statements

M3 – Reconciliation of Massachusetts Income Taxes Withheld for Employers

| In-House using Municipal Software | Outsourced Payroll | | --- | --- | | Treasurer files required reports | Outsourced vendor files required reports | | Treasurer reconciles & produces W2s | Vendor produces W2s | | Treasurer prints checks or direct deposits | Vendor prints checks or direct deposits | | Treasurer makes withholding payments | Vendor makes withholding payments | | Warrant & Journal entries produced from System | Typically, warrant produced in system after importing journal entry from the vendor | | Treasurer’s payroll position is critical | Some of the Risk are mitigated | | Treasurer responsible for Maintenance of Software and Data Security | Outsourced vendor responsible for Maintenance of Software and Data Security | | Sample process | | --- | | 1. Timesheet submitted by departments with a cover page summarizing accounts to be charged | | 2. Accountant checks pay rates to ensure conformance to contracts (Should happen) | | 3. Accountant totals all cover pages to get a total amount to be charged (Should happen) | | 4. Treasurer or Departments input timesheets into payroll system | | 5. Treasurer produces a summary report for the Accountant | | 6. Accountant reconciles the Total and Produces/Signs Payroll Warrant (Gross Payroll) | | 7. Warrant is countersigned by appropriate person(s) (Mayor, BOS, Town Manager) | | 8. Treasurer initiates distribution of checks and direct deposits | | Forms | Description | Deadline | | --- | --- | --- | | W2s – Employee Wage and Tax Statement | W2 form that an employer must send to an employee and the IRS, SSA, and DOR Reports an employee's annual wages and the amount of taxes withheld | Annual can mail or digital form to employees
Due: On or before January 31 | | W3 – Transmittal of Income & Tax Statements | Shows TOTAL earnings, Social Security wages, Medicare wages and withholding for all employees | Annual along with W2s-mail ore-file to IRS AND SSA
Due: On or before January 31 | | M3 – Reconciliation of Massachusetts Income Taxes Withheld for Employers | Any employer filing 50 or more W-2s for a particular calendar year must submit the W-2 file to DOR in a "machine-readable form." A "machinereadable form" includes files uploaded
through MassTaxConnect and electronic data transfers. | Annual along with W2s-mail or
e-file to Mass DOR unless greater than 50 W2s.
Due: On or before January 31 |

FAQs

What are the main differences between in-house and outsourced municipal payroll responsibilities?

In-house processing assigns key reconciliation, W2 production, check/direct deposit printing, and withholding payments to the treasurer and accountant. Outsourced payroll shifts these operational steps to the vendor, while some reconciliations and risk mitigation remain with municipal roles.

What is the sample payroll process from timesheets to check distribution?

Departments submit timesheets with cover pages, the accountant checks pay rates and totals charge amounts, the treasurer or departments input timesheets into the payroll system, the treasurer generates a summary report, the accountant reconciles and produces the payroll warrant, countersignatures occur, and the treasurer initiates distribution of checks and direct deposits.

What reporting deadlines and purposes do W2, W3, and M3 cover?

W2 reports annual wages and withheld taxes to employees plus the IRS/SSA/DOR, due on or before January 31. W3 summarizes total earnings and withholding for all employees to IRS and SSA, due on or before January 31. M3 reconciles Massachusetts income taxes withheld for employers required to submit W-2 files in machine-readable form to DOR, due on or before January 31 unless exceptions apply (e.g., fewer than 50 W2s).

Sep 3, 2026

Upload by Caleb Sterling