Archive for the ‘PayDay News’ Category

The Overtime Final Rule – What’s it Mean to Me?

May 26th, 2016

The Overtime “Final Rule” signed by President Obama last week will have a significant impact on employers, as an estimated 4.2 million workers will become eligible for overtime when the law goes into effect on December 1, 2016. The greatest impact will be on employers whose employees are earning salaries just above the former standard of $455 per week. Below is a Q&A, adapted from FAQ’s created by the Department of Labor (DOL), to help employers create a strategy for dealing with this new legislation.

  • What is the purpose of the new Overtime Final Rule?
    • The main purpose of the Final Rule is to update the regulations that determine whether white collar, salaried employees are exempt from the FLSA’s minimum wage and overtime protection. The regulations were last updated in 2004, when the standard “exempt” salary level was set at $455 per week. The new ruling increases the weekly standard salary to $913 per week or $47,476 per year for a full-time worker. 10% of this amount may come from “non-discretionary” bonuses. This would include commissions or established bonuses based on quotas, etc. and paid at least quarterly, but would not include spontaneous/unplanned merit or performance bonuses. The Final Rule includes provisions for the standard exempt salary to be updated every three years. The ruling does not change the standard duties test, identifying terms by which executive, administrative, or professional employees may be considered exempt. The main purpose of the final ruling is to update the wage requirement for overtime exemption, which in effect increases the number of U.S. workers who are eligible for overtime.

 

  • How do I determine if my employee is exempt?
    • To qualify for exemption, a white collar employee must:
      • be paid a salary – a fixed amount not impacted by quality or quantity or work performed
      • be paid more than $913 per week ($47,476.00 annually)
      • perform executive, administrative, or professional duties as described in the Department of Labor’s duties test (found of the DOL website).
    • In addition, the DOL regulations provide exemption for certain highly compensated employees who earn above an annual compensation of $134,004 under the new rule, and satisfy a minimal duties test.

 

  • How will employers adapt to the changes in the Final Rule? 
    • Employers have a range of options for responding to the updated standard exempt salary level. Some of these options include:
      • increase the employee’s salary to the new standard salary in order to maintain exemption for a currently exempt employee
      • pay overtime at one and a half times the employee’s regular rate for any overtime worked
      • reduce or eliminate overtime hours
      • reduce base salary (as long as employee still earns minimum wage) and pay overtime for any hours worked over 40 each week
    • The response of the employer will be dependent upon each individual employee’s circumstances. Employers may give raises to those close to the new standard salary, maintaining their exempt status, while choosing to pay occasional overtime to those lower-salaried employees who rarely work overtime. It is important to note that nothing in the ruling requires employers to switch newly “non-exempt” employees to hourly. They can remain on salary, but must be paid overtime if working over 40 hours per week. Employers may use the same means to track overtime as they use for hourly employees. (Ask AccuPay if you need help with timekeeping services.)

 

  • Who is covered by the FLSA and required to comply with the Final Rule?
    • The FLSA or Fair Labor Standards Act, establishes minimum wage, overtime pay, recordkeeping, and youth employment standards for employees in the private sector as well as in Federal, state, and local governments. In general, employees of enterprises with an annual gross volume of sales made or business done of $500,000 or more who “engage in commerce or in the production of goods for commerce” are covered by the FLSA. Employees of hospitals, businesses providing medical or nursing care, schools (both for profit and not for profit) and government agencies are covered regardless of sales/income. Individuals may be covered by FLSA even if the business is not. For example, if individual employees initiate interstate commerce, such as ordering supplies, he or she may be eligible for FLSA protection even if the business is not.
    • Non-profits and/or their employees, are likely subject to FLSA, although it is possible some smaller non-profits and churches are not. The DOL will be conducting a webinar for non-profits pertaining to the Final Rule on Tuesday, June 7. Visit the DOL website to register. Determining exemption from FLSA is something that must be carefully considered. Churches and non-profits should review all of the guidelines carefully in light of their specific circumstances before making such a determination. There is no “blanket” exemption for non-profits or churches when it comes to the FLSA, and penalties for non-compliance can be severe.

 

Depending on your workforce, the Final Rule could be significant for your business and your payroll costs. It is important to plan now for how you will implement that new rules when enforced in December. For more information, you can sign up for free webinars conducted by the Department of Labor at https://www.dol.gov/whd/overtime/final2016/webinars.htm. If you would like more one on one assistance, try out AccuPay’s HR Support Center. Our HR On Demand service connects you with an HR expert who can help you navigate the new FLSA rules. These experts are available to you on an unlimited basis for just $40 per month, which includes access to the HR Support Center that is full of resources and information on this and other HR topics. Contact Accupay today for more information at 317-885-7600.

 

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques. You should consult with your CPA, tax, HR or legal advisor before implementing any ideas, comments or planning techniques.

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Indiana County Income Tax Rules

January 5th, 2016
In Indiana, it’s important to review your employees’ county tax withholdings at the beginning of each year to ensure that accurate county taxes are withheld with each payroll.  A quick review of county income tax withholding rules is as follows:
  • Where did the employee reside and work on New Year’s Day? Answers to these questions on  Form WH-4 establish an employee’s county tax withholding rate for the entire year (moving from one county to another during the year does not change the county in which taxes are withheld.) Generally, county income tax should be withheld based on each employee’s county of residence on New Year’s Day of each year; 
  •  If an employee resides out-of-state on January 1, 2016, but works in an Indiana county on New Year’s Day, the employee’s county tax withholding should be based on the employer county’s “non-resident” tax rate, which is generally a lower rate (Indiana county income tax withholdings are required even if Indiana state tax is not withheld due to a reciprocity agreement with an adjoining state); and
  • If an employee both lives and works outside Indiana on New Year’s Day, they are not subject to county tax for the entire year even if they move to an Indiana county on January 2.
  • In addition to the federal form W-4, an employer should request a new Indiana Form WH-4 from every employee currently on the payroll who is living or working in Indiana. Make sure AccuPay receives a copy of Form WH-4 for every employee currently on your payroll or that you hire during 2016.
 To access the complete list of Indiana county tax rates, click here: County Tax Rate Table .

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques. 

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Indiana Unemployment Tax – Important!

December 17th, 2015

IMPORTANT!!

The Indiana Department of Workforce Development recently mailed out 2016 “Merit Rate Notices” to all applicable Indiana employers. You and AccuPay need to take the following 2 action steps in response to your 2016 Merit Rate Notice:

SHOULD YOU MAKE A “VOLUNTARY PAYMENT”?

If you are eligible, your Merit Rate Notice will provide you an opportunity to “buy down” your scheduled 2016 Indiana unemployment tax rate to the next lowest schedule rate for 2016.

AccuPay will determine if your “voluntary payment” is a good deal. If we receive your 2016 Merit Rate statement from the Department of Workforce Development, we will complete these calculations for your company. WE DO NOT CHARGE FOR OUR CALCULATIONS! If we determine you will benefit by making the voluntary payment, you will receive a letter explaining your next steps.

WE NEED YOUR 2016 TAX RATE NOTICE

AccuPay needs a copy of your 2016 “Merit Rate Notice” so we can collect the correct amount of Indiana unemployment tax from your first payroll in January 2016. You can fax a copy to us at 317-885-7591 or e-mail it to payroll@accupay.com.

A BIT MORE INFORMATION FROM THE INDIANA UNEMPLOYMENT DIVISION

NO MORE RETROACTIVE FUTA TAX! Indiana repaid its unemployment benefit loan (taken several years ago) to the federal government. This means that Indiana is no longer a “credit reduction state” and Indiana employers will no longer be required to pay extra Federal Unemployment tax at the end of each year!

If you have any questions about your 2016 unemployment taxes, call us at 317-885-7600. We appreciate you as a client and look forward to partnering with you in 2016!

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques. You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.

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“S” Corporations – “Don’t Blow This!”

December 14th, 2015

Special rules must be followed so that 2% or more “S” corporation shareholder-employees can deduct health insurance premiums covering the shareholder, his/her spouse and dependents.  IRS Notice 2008-1 permits tax deductions for “S” corporation shareholder-employees who meet the following requirements:

  • The health insurance premiums are either paid directly by the “S” corporation OR are reimbursed to the shareholder-employee, if paid from personal funds; AND
  • The “S” corporation employer must report the amount of health insurance premiums paid or reimbursed as taxable wages in the employee’s Form W-2. The premiums are not taxable for FICA or Medicare taxes.

If the above requirements are met, the “S” corporation deducts the owner’s health insurance as compensation expense, the owner reports the premiums as income included in his/her W-2, and the “S” corporation owner then deducts the same amount as “self-employed health insurance” on his/her Form 1040 personal tax return. 

IRS Notice 2008-1 clearly indicates that the owner’s health insurance deduction is not available if the shareholder-employee personally pays the premium and is not reimbursed and taxed by the “S” corporation on Form W-2.

CONCLUSION

Every “S” corporation should directly pay or reimburse their owners’ health insurance premiums and report the amount at year-end as wages on the owners’ W-2 forms. AccuPay can assist you in reporting the insurance on year-end W-2 forms to ensure annual income tax deductions for the employee-shareholders of the “S” corporation.

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.
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100 Million Tax Notices

May 27th, 2015

The IRS acknowledges that it sends over 100 million tax notices every year to taxpayers, based on billions of information documents it receives annually.

Add to that the millions of tax notices sent by financially strapped state governments and unemployment agencies, and the result is that virtually every taxpayer will receive a tax notice at some point, with many receiving a handful of notices and information requests every year.

Action steps required to resolve a tax notice are as follows: 

1) DON’T PANIC – Most tax notices can be quickly resolved with information, not additional tax.

2) CAREFULLY READ THE NOTICE – Most tax notices are computer generated and you must carefully read the entire notice to understand its message. Look for the form # — 941, WH-1, etc – the period – 2012, 3/31/13 (first quarter of 2013), April, 2013, etc – and the “explanation” noted.

3) DON’T UNDERSTAND THE NOTICE? – then call the phone # referenced on the notice and request an explanation. A tax notice may indicate that “a math error was made” when in fact they have no record of receiving your tax form. Tax notices are computer-generated to achieve taxpayer action (even if they invoke fear!), without regard to clarity. A call to the phone # listed on the tax notice often can clarify the real reason for the notice.

4) SEND IT TO A PRO – if you hired a CPA or payroll company to handle your tax issues, send them a copy of the notice for their review. Experienced tax pros are “trained readers” of tax notices and often can resolve them the same day you send a copy to them.

5) BE A PROJECT MANAGER – Tax Notices can escalate quickly as the computers aggressively send out second and third notices, if you do not manage the process. Dealing with the IRS or state government is not on a “level playing field”, so you must stay on top of tax notices – from day of receipt until the notice is resolved. If the notice lingers on, request that a “hold” be placed on your account until the issue is resolved.

 6) DOCUMENT EVERY EVENT – Maintain a “diary” or “log” in chronological order of every person you speak to. Ask for their complete name, where they are physically located, and their phone #! Keep copies of every piece of written correspondence. Always end every conversation with an agreed on “next action step” and a timeframe.

7) REQUEST PENALTY WAIVER – Many penalties can be eliminated or reduced if you request a waiver based on “reasonable cause”. If your first request is denied, you can appeal and request a meeting with a “real person” – who has greater decision-making authority than the agent who denied your first request.

8) GET IT IN WRITING! – Once you have resolved the tax notice to your satisfaction, make sure you obtain a written “letter of resolution”. It is not uncommon for a previously “resolved” notice to again surface a year or more later. Your “project management” of a tax notice is not over until you get the “letter of resolution”.

AccuPay pays payroll taxes and files payroll tax returns for over 1,000 central Indiana clients. Our Tax Director is a CPA with 40 years experience in resolving tax issues/notices. Most tax notices can be resolved “same day”, although some must be “project managed” for up to a year.

If you receive a payroll tax notice or payroll tax correspondence, call us at 885-7600, fax to us at 885-7591, or email the entire notice to us at chris@accupay.com or larry@accupay.com. You can also send it to your dedicated payroll processor, who will make sure a tax notice is submitted to AccuPay’s Tax Department for review and resolution.    

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques. You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.

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Budget for Retro FUTA Tax

May 19th, 2015

Indiana employers have been paying extra or above normal Federal Unemployment Tax (FUTA) since the year 2010.
The additional FUTA tax is due to Indiana’s loan from the federal government in 2008 which was used to pay unemployment benefits from a depleted unemployment trust fund. (See attached January 21, 2015 memo here)
The Indiana Department of Workforce Development anticipates that the year 2015 will be the final “credit reduction state” year for Indiana, meaning that the “extra” FUTA tax will end January 31, 2016 for the year 2015.

Budgeting Extra 2015 FUTA Tax

AccuPay recently paid 2015 first quarter FUTA tax and has each employer’s actual FUTA tax amount for the first quarter of 2015.  If you would like to budget funds for the FUTA retroactive tax for 2015, your processor can provide you with your actual first quarter FUTA tax for 2015.  Since the 2015 “extra” FUTA tax rate is three times the “normal” FUTA tax rate, your additional 2015 FUTA tax due is exactly three times the amount of FUTA tax you paid for the first quarter of 2015.  This “three times multiplier” can also be used to calculate your extra FUTA tax for the next three quarters of 2015.  Some employers may choose to accrue this additional expense as a liability in their company financial statements.
AccuPay’s Pay Day from November 10, 2014 also explains the same FUTA tax matter. (More FUTA tax for 2014)  AccuPay can not impound or collect the additional FUTA tax from you since it does not become statutorily due until Indiana repays the Federal government loan on it’s November 10, 2015 due day.  As Indiana has advised, it does not anticipate repayment of the loan until the year 2016.

If you would like to know how much “extra” FUTA tax to accrue for the first quarter of 2015, any of AccuPay’s processors can provide you with your first quarter 2015 actual FUTA tax expense and simply multiply that amount by three.

 

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.

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Save for College – Save Tax!

March 4th, 2015

As employers continue to struggle to provide cost-effective employee benefit programs, AccuPay and the Indiana College Choice 529 Program have partnered to provide a no-cost payroll deduction Section 529 college savings program. The purpose of our business alliance is to make it easy for employees to save money for college in a tax-wise manner.

SIGNIFICANT TAX BENEFITS

An Indiana resident who participates in the Indiana College Choice 529 college savings program receives the following significant tax benefits:

  • Indiana provides an annual income tax credit of 20% of the first $5,000 contributed to the College Choice program. Thus, is a household contributes $5,000 to the program, Indiana credits your state tax bill by $1,000;
  • Once you contribute to the program, the investment earnings compound on a tax-deferred basis – all your money goes to work for you; and
  • If the College Choice funds are used for educational purposes (including technical and trade schools), no Federal or State taxes are ever imposed on the College Choice funds.

Observation: Think of the income tax benefits like a Roth IRA “on steroids” – you never pay income tax on your investment income PLUS you receive a 20% up-front tax credit every year!

THE PROGRAM IS EASY

Employees will find it’s easy to save for college and save taxes.

A few examples are:

  • UPromise, the program manager, makes investing easy with “auto-pilot” age-based high quality mutual funds; and
  • AccuPay will handle your payroll deductions and remit funds to your account(s) with the College Choice program.

FREE ADMINISTRATION AND REPORTING BY ACCUPAY

AccuPay has agreed to provide assistance to employers and employees in setting up and monitoring this program.  We will withhold each employee’s savings amounts and make sure they are promptly transferred to each employee’s personal College Choice 529 accounts via direct deposit.

We will also compile each employee’s 529 funding amounts and report the total funding amount in “information box 14″ of their annual W-2’s – as a reminder that they should claim the Indiana tax credit on their personal income tax returns.

WHO SHOULD CONSIDER AN INDIANA COLLEGE CHOICE 529 PLAN?

  • An adult who is currently attending a college or trade school. Fund your Indiana 529 plan, withdraw funds for school, and earn the Indiana tax credit.;
  • Parents wishing to save for their children’s education; and
  • Grandparents, uncles, aunts, etc. who wish to help fund college for loved ones

To get started, the employee will need to open a College Choice 529 Plan Account(s). Employees may enroll online at www.collegechoicedirect.com. (To download a paper enrollment kit, Click Here.) Once enrolled, simply return your employee’s direct deposit information to AccuPay, and we will take care of the rest – at no cost to the employee or employer.

Why Free? – Because we passionately believe in the program! Indiana has helped our state’s very largest employers implement payroll deduction programs but does not have the resources to meet with small-medium sized employers. Our CPP/CPA/SPHR teams at AccuPay want to offer this same service to small and medium sized employers.

If you have an interest in discussing how this college and tax savings program can benefit your employees, with absolutely no cost to you, call Leslie Myrick, our CEO, at 317-885-7600 for more information. Or visit the employer information page at www.collegechoicedirect.com

 

This blog is a communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.

 

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Indiana County Withholding Tax Rules

February 16th, 2015

In Indiana, it’s important to review your employees’ county tax withholdings at the beginning of each year to ensure that accurate county taxes are withheld with each payroll. A quick review of county income tax withholding rules is as follows:

  • Where did the employee reside and work on New Year’s Day? Answers to these questions on Form Wh-4 establish an employee’s county tax withholding rate for the entire year (moving from one county to another during the year does not change the county in which taxes are withheld.) Generally, county income tax should be withheld based on each employee’s county of residence on New Year’s Day of each year;
  • If an employee resides out-of-state on January 1, 2015, but works in an Indiana county on New Year’s Day, the employee’s county tax withholding should be based on the employer county’s “non-resident” tax rate, which is generally a lower rate (Indiana county income tax withholdings are required even if Indiana state tax is not withheld due to a reciprocity agreement with an adjoining state); and
  • If an employee both lives and works outside Indiana on New Year’s Day, they are not subject to county tax for the entire year even if they move to an Indiana county on January 2.

An employer should request a new Indiana Form Wh-4 from every employee who is currently on payroll. Make sure AccuPay receives a copy of Form Wh-4 for every employee currently on your payroll or that you hire during 2015.

To access the complete list of Indiana county tax rates, click here: County Tax Rate Table.

 

This blog is a communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques. You should consult with your CPA or tax adviser before implementing any ideas, comments or planning techniques. 

 

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Indiana Unemployment Tax – Important!

February 2nd, 2015

IMPORTANT!!

The Indiana Department of Workforce Development has recently mailed out 2015 “Merit Rate Notices” to all applicable Indiana employers. You and AccuPay need to take the following two action steps in response to your 2015 Merit Rate Notice:

SHOULD YOU MAKE A VOLUNTARY PAYMENT?

If you are eligible, your Merit Rate Notice will provide you an opportunity to “buy down” your scheduled 2015 Indiana unemployment tax rate to the next lowest scheduled rate for 2015.

AccuPay will determine if your “voluntary payment” is a good deal. If we receive your 2015 Merit Rate statement from the Department of Workforce Development, we will complete these calculations for your company. WE DO NOT CHARGE FOR OUR CALCULATIONS! If we determine you will benefit by making the voluntary payment, you will receive a letter exxplaining your next steps.

WE NEED YOUR 2015 TAX RATE NOTICE

AccuPay needs a copy of your 2015 “Merit Rate Notice” so we can collect the correct amount of Indiana unemployment tax from your first payroll in January 2015. You can fax a copy to us at 317-885-7591 or email it to payroll@accupay.com

A BIT MORE INFORMATION FROM THE INDIANA UNEMPLOYMENT DIVISION

  • Employer tax rates for 2015 Indiana unemployment taxes will range from a low of .510% to the highest rate of 9.568%. These rates are established based on each employer’s prior tax payments into the unemployment system as compared to benefits paid out to former employees.
  • Indiana will again be a “credit reduction state” during 2015. This means that Indiana employers will pay federal unemployment tax (FUTA) at the normal rate of 6/10 of 1% during 2015, but most likely will also pay an additional “credit reduction tax” of 1.8% in late 2015. This could result in a significant tax bill – the equivalent of $126 for every employee who reaches $7,000 in wages during 2015. Indiana employers would be wise to plan for this now.
  • Indiana now anticipates that the federal loan will be repaid in 2018, which will then eliminate Indiana’s status as a “credit reduction state.” Indiana employers will no longer pay the “catch up” year-end FUTA tax as of the year in which the federal loan is repaid.

 

If you have any questions about your 2015 unemployment taxes, call us at 317-885-7600. We appreciate you as a client and look forward to partnering with you in 2015!

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques. You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.

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How to Read Your W-2

January 15th, 2015

Years ago, W-2 forms were fairly straight-forward, reporting wages paid to your employees along with tax withholdings. The days of simple W-2’s are long gone! Wgaes reported in boxes 1, 3, and 5 for income, social security and Medicare tax withholdings are frequently 3 different amounts – and confusing to your employees. The number of IRS required alphabetical “codes” in Box 12 range from “A to Z.” and are now on “round 2″ of the alphabet with “codes AA-EE.” Box 12, Code “DD” reports the combined employer – employee cost of employer-sponsored health insurance premiums for 2014 and is for infomation purposes only (only required by employers who issued over 250 W-2 forms for 2013).

Ever had an employee ask you a question about amounts reported on their annual W-2 form?

AccuPay has prepared a memo titled, “How to Read Your W-2,” at www.accupay.com. Feel free to download copies and provide them to your employees and colleagues.

Our recommendations to employers about their 2014 employee W-2’s are as follows:

  • Download the “How to Read Your W-2″ and read it before you provide 2014 W-2’s to your employees. This memo will answer many of your employees’ questions about their W-2 forms; and
  • Box 14 on the W-2 form provides employers with an opportunity to report “non-required” payroll information to employees. We have included examples of Box 14 reporting on our downloaded memo.

While at AccuPay’s website, we encourage your to check our our Payroll Calculators which includes a “W-4 Assistant” to help your employees provide you with curent/updated W-4 exemption forms for 2015. Simply click on “Online Calculators” from our website homepage.

We have a passion for “payroll excellence.” We love ideas from our clients on how we can improve our services – call us at 317-885-7600 or email larry@accupay.com with your ideas and input!

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques. You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.

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