Opinion Letters Are Back at DOL!

The Department of Labor (DOL) has just announced that they will reinstate the issuance of opinion letters. The action allows the department’s Wage and Hour Division to use opinion letters as one of its methods for providing guidance to covered employers and employees. An opinion letter is an official, written opinion by the Wage and Hour Division of how a particular law applies in specific circumstances presented by an employer, employee or other entity requesting the opinion. The letters were a division practice for more than 70 years until being stopped and replaced by general guidance in 2010.

“Reinstating opinion letters will benefit employees and employers as they provide a means by which both can develop a clearer understanding of the Fair Labor Standards Act and other statutes,” said Secretary Acosta. “The U.S. Department of Labor is committed to helping employers and employees clearly understand their labor responsibilities so employers can concentrate on doing what they do best: growing their businesses and creating jobs.”

The division has established a web page where the public can see if existing agency guidance already addresses their questions or submit a request for an opinion letter. The web page explains what to include in the request, where to submit the request, and where to review existing guidance. The division will exercise discretion in determining which requests for opinion letters will be responded to, and the appropriate form of guidance to be issued.

Court Case on CA’s Day of Rest…Finally Rested

California has long had a day of rest requirement.  In fact it has existed long before overtime and minimum wage. It guarantees an employee “one day’s rest therefrom in seven”.  But  which employees and what exactly is one day in seven?  This was really never litigated before the current case of Mendoza v. Nordstrom in which the ruling was just handed down on May 8th.  Rather than my trying to explain the entire court case in a blog, I will, instead, urge you to read the recap of the case as presented by Sheppart Mullin Richter & Hampton’s Brian S. Fong for the Mondaq News Update Service. It is an in-depth look at the ruling and the impact on employers.

 

Don’t wait for blog posts to find out the latest in payroll news.  Subscribe to Payroll 24/7 today.

 

 

Is Charity Work Hours Worked?

Got a great blog post yesterday from Bill Pokorny, with Wage & Hour Insights concerning paying employees for charity work.  During this time of the year this question comes up a lot for payroll professionals. In his June 7th blog he has given a clear and concise answer on when charity work could be considered hours worked.  Check out his blog today.

Why Don’t Businesses Embrace Universal Health Care?

Yesterday the California Senate passed SB 562, The Healthy California Act. This bill would create the Healthy California Program to provide comprehensive universal single-payer health care coverage and a healthcare cost control system for the benefit of all residents of the state of California. It would be funded by a combination of employer and employee payroll taxes. Of the 33 developed nations in the world 32 of them have what is known as universal healthcare. The lone exception to this, of course, is the United States. Universal healthcare, however is not defined as government only healthcare, but can include both public and private insurance and medical providers. So if this bill actually passes the assembly and the financial aspects are resolved it would put California on the list of countries with universal healthcare. This would be a very unique situation. One of our states has universal health care but the country does not. But I think the bigger question for this blog is: “why don’t businesses embrace universal health care?”

And I’m not the only one questioning this. Warren Buffett has stated that other countries have gained a five or six point advantage over the United States because of healthcare spending by employers. The National Federation of Independent Business conducted a survey of small business priorities and problems and found that the cost of health insurance is the most severe problem facing American small business today. In fact 52% of small business owners identified it as a critical issue. The Bureau of Labor Statistics (BLS) puts the cost of healthcare in 2016 for employers with more than 500 workers at $4.28 per hour or 9% of the total compensation costs. For employers with 100 to 499 employees the insurance costs are $2.77 per hour worked or 8.5% of total compensation. Now some will say that this cost is due to the Affordable Care Act. But the increase under the Affordable Care Act for employers with more than 500 employees as compared with the cost in 2006 was 1%. For those employers with under 500 employees it was 2.5%. However this statistic does not reflect that many of the employers with under 500 employees did not offer health insurance in 2006. So why do we continue to put this burden on employers and why do they continue to fight to keep it?

Using the 2006 figures so that we do not factor in Obama care, if I were to propose an 8% tax on all employers with over 500 employees there would be riots in the streets. Yet that’s what employers were paying for healthcare. So if we were to take this 8% as a payment from each employer and add in the cost the employee paid could this be the beginning of universal healthcare for the United States. Think about it for a minute. Employers would no longer need to contact insurance companies, negotiate costs, and have someone in the company to oversee the program (an additional cost of a salary) nor have someone in Accounts Payable pay the bill. Would it have to be a federal program? Most countries that have universal healthcare have a combination of national and municipalities handling the programs. The tax would be on the federal level but the healthcare itself is provided on the local level since those are the ones that usually understand what the community requirements are.

Would this help us become more competitive in the world?  Would it help employers become more financially solvent?  Would it get health care for all the citizens of the United States?  The answers to those questions, of course, remained unanswered as of today.  But unless we begin to look into shifting the costs of health care away from employers we will never know.

 

What do you think?  Take our poll

or leave a comment.

Wage Theft Conversation Takes Off with Uber

Wage theft is getting a lot of attention lately. In my May 30th blog I discussed an EPI report that went into detail concerning wage theft in the United States.  But is wage theft even more rampant than that report indicated? A recent article in the New York Times concerns how Uber is just discovering they have been miscalculating the commissions paid their drivers and are getting ready to pay tens of millions in back payments. But a driver’s advocacy group in New York is indicating that the company is also making its drivers swallow the per cab ride tax burden imposed by New York.  This practice, according to the New York Taxi Workers Alliance amounts to wage theft. It all boils down to how the contracts are interpreted and only the courts will decide in the end.  But it is food for thought.  Are major corporations guilty of wage theft as a matter of business practice? This is a disturbing questions that must be answered.

What do you think?  Is wage theft a serious problem in the U.S.?  Take our poll or leave a comment.

Thinking About Getting Your CPP or FPC?

I get a lot of questions on whether or not a payroll professional should get certified and if they should then which certification should they try for first. Should they go right into the CPP exam? Or start off with the FPC and work up to the CPP? Many payroll professionals are even confused as to which certification they could qualify for. In their blog, Payroll News, Symmetry Software has done a very nice and quick comparison of the two certifications offered by the APA. If you are looking to certify but aren’t sure which test to try for, take time to check out the blog today.

EPI Report Shows Employers Steal Up to $8 Billion From Employees’ Wages Annually

A report released on May 10, 2017 by the Economic Policy Institute (EPI) assesses the prevalence and magnitude of one form of wage theft—minimum wage violations. Minimum wage violations is defined in the report as paying a worker an effective hourly rate that is below the legal or binding minimum wage, either state or federal law. The report looked at the 10 most populous U.S. states: California, Florida, Georgia, Illinois, Michigan, New York, North Carolina, Ohio, Pennsylvania, and Texas. These states were chosen to limit the focus of the report so EPI could carefully account for each state’s individual minimum wage policies and state-specific exemptions to wage and hour laws. Two of the states chosen, California and New York, actually have anti-wage theft laws on the books. The data for these states provides adequate ample sizes and the total workforce in these states accounts for more than half of the entire U.S. workforce. The results of the study are a bit alarming even if you take into account that the measuring of wage theft is challenging and suitable public data sources are limited. The key findings of the report are that:

  • In the 10 most populous states in the country, each year 2.4 million workers covered by state or federal minimum wage laws report being paid less than the applicable minimum wage in their state—approximately 17 percent of the eligible low-wage workforce.
  • The total underpayment of wages to these workers amounts to over $8 billion annually. If the findings for these states are representative for the rest of the country, they suggest that the total wages stolen from workers due to minimum wage violations exceeds $15 billion each year.
  • Workers suffering minimum wage violations are underpaid an average of $64 per week, nearly one-quarter of their weekly earnings. This means that a victim who works year-round is losing, on average, $3,300 per year and receiving only $10,500 in annual wages.
  • Young workers, women, people of color, and immigrant workers are more likely than other workers to report being paid less than the minimum wage, but this is primarily because they are also more likely than other workers to be in low-wage jobs. In general, low-wage workers experience minimum wage violations at high rates across demographic categories. In fact, the majority of workers with reported wages below the minimum wage are over 25 and are native-born U.S. citizens, nearly half are white, more than a quarter have children, and just over half work full time.
  • In the 10 most populous states, workers are most likely to be paid less than the minimum wage in Florida (7.3 percent), Ohio (5.5 percent), and New York (5.0 percent). However, the severity of underpayment is the worst in Pennsylvania and Texas, where the average victim of a minimum wage violation is cheated out of over 30 percent of earned pay.
  • The poverty rate among workers paid less than the minimum wage in these 10 states is over 21 percent—three times the poverty rate for minimum-wage-eligible workers overall. Assuming no change in work hours, if these workers were paid the full wages to which they are entitled, less than 15 percent would be in poverty.

The report gives a full explanation of the background and previous research into the problems.

EPI report

 

Don’t Get Rejected by the IRS…Make Sure Your 941 Balances

A recent article from RIA told of the following problem:              

Mike McGuire from IRS Modernized e-File (MeF) told listeners to the May 4 payroll industry telephone conference call that the IRS has been rejecting “tens of thousands” of 2017 first quarter electronically-filed Forms 941, Schedule B (Report of Tax Liability for Semiweekly Schedule Depositors) because the total tax liability on Schedule B does not agree with the total tax liability on Form 941, line 12 (Total taxes after adjustments and credits). Prior to the 2017 tax year, the total tax liability on Schedule B had to agree with Form 941, line 10 (Total taxes after adjustments), or the IRS would reject it. However, the IRS revised some of the line numbers on Form 941, beginning with the 2017 tax year, to take into account that “qualified small businesses” may now elect to claim a portion of their research credit as a payroll tax credit against their employer FICA tax liability, rather than against their income tax liability.  Beginning with the 2017 tax year, the total tax liability on Schedule B must agree with Form 941, line 12 (Total taxes after adjustments and credits) rather than line 10. Some electronic filers have not adjusted their programs to take this change into account. Rejected returns have to be resubmitted to the IRS.

Make sure your system has made this change.

 

Find out about these types of changes fast and easy by subscribing to Payroll 24/7.

Tips vs Service Charges: An IRS Reminder

The IRS wants to make sure that employers understand tax ramifications of the various payments that they make to employees or that their employees might receive.  So the IRS has posted a reminder for employers when it comes to tips verses service charges.  The key difference between the two categories affect the taxation for employees as well as the reporting. So-called “automatic gratuities” and any amount imposed on the customer by the employer are service charges, not tips.  Service charges are generally wages, and they are reported to the employee and the IRS in a manner similar to other wages. On the other hand, special rules apply to both employers and employees for reporting tips. Employers should make sure they know the difference and how they report each to the IRS.

What are tips? Tips are discretionary (optional or extra) payments determined by a customer that employees receive from customers. They include:

  • Cash tips received directly from customers.
  • Tips from customers who leave a tip through electronic settlement or payment. This includes a credit card, debit card, gift card, or any other electronic payment method.
  • The value of any noncash tips, such as tickets, or other items of value.
  • Tip amounts received from other employees paid out through tip pools or tip splitting, or other formal or informal tip sharing arrangements.

Four factors are used to determine whether a payment qualifies as a tip. Normally, all four must apply. To be a tip:

  • The payment must be made free from compulsion;
  • The customer must have the unrestricted right to determine the amount;
  • The payment should not be the subject of negotiations or dictated by employer policy; and
  • Generally, the customer has the right to determine who receives the payment.

If any one of these doesn’t apply, the payment is likely a service charge.

What are service charges? Amounts an employer requires a customer to pay are service charges. This is true even if the employer or employee calls the payment a tip or gratuity. Examples of service charges commonly added to a customer’s check include:

  • Large dining party automatic gratuity
  • Banquet event fee
  • Cruise trip package fee
  • Hotel room service charge
  • Bottle service charge (nightclubs, restaurants)

Generally, service charges are reported as non-tip wages paid to the employee. Some employers keep a portion of the service charges. Only the amounts distributed to employees are non-tip wages to those employees.

All cash tips and noncash tips should be included in an employee’s gross income and subject to federal income taxes.ployers are required to retain employee tip reports, withhold income taxes and the employee share of Social Security and Medicare taxes from the wages paid, and withhold income taxes and the employee share of Social Security and Medicare taxes on reported tips from wages (other than tips) or from other funds provided by the employee. In addition, employers are required to pay the employer share of Social Security and Medicare taxes based on the total wages paid to tipped employees as well as the reported tip income.  Employers must report income tax and Social Security and Medicare taxes withheld from their employees’ wages, along with the employer share of Social Security and Medicare taxes, on Form 941, Employer’s Quarterly Federal Tax Return, and deposit these taxes in accordance with federal tax deposit requirements.Tips reported to the employer by the employee must be included in Box 1 (Wages, tips, other compensation), Box 5 (Medicare wages and tips), and Box 7 (Social Security tips) of the employee’s Form W-2, Wage and Tax Statement. Enter the amount of any uncollected social security tax and Medicare tax in Box 12 of Form W-2. See the General Instructions for Forms W-2 and W-3.

Reporting Service Charges: Employers who distribute service charges to employees should treat them the same as regular wages for tax withholding and filing requirements, as provided in Publication 15, Employer’s Tax Guide. Distributed service charges must be included in Box 1 (Wages, tips, other compensation), Box 3 (Social Security wages), and Box 5 (Medicare wages and tips) of the employee’s Form W-2.

Keep up to date with the latest from the IRS on taxation by subscribing to Payroll 24/7 today.

IRS Looking for Comments on Form 941 Series…Got Any?

Every so often the IRS solicits comments on its various forms. This is an excellent opportunity for payroll professionals to get their two cents in on the forms they must deal with on a regular or sometimes irregular basis.  This time, the IRS is soliciting comments concerning Forms 941 (Employer’s Quarterly Federal Tax Return), 941-PR (Planilla Para La Declaracion Trimestral Del Patrono-LaContribucion Federal Al Seguro Social Y Al Seguro Medicare), 941-SS (Employer’s Quarterly Federal Tax Return-American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands), 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, 941-X(PR), Ajuste a la Declaracion Federal Trimestral del Patrono o Reclamacion de Reembolso, Schedule R, Allocation Schedule for Aggregated Form 941 Filers, Schedule B (Form 941) (Employer’s Record of Federal Tax Liability), Schedule B (Form 941-PR) (Registro Suplementario De La Obligacion Contributiva Federal Del Patrono), and Form 8974 Qualified Small Business Payroll Tax Credit for Increasing Research Activities.

What about the Form 941 or any of the series do you find difficult, needs better explanations, could be revamped or should just be left as is?  Now is the time to speak up.

Written comments should be received on or before July 7, 2017 to be assured of consideration, and should be directed to Laurie Brimmer, Internal Revenue Service, room 6526, 1111 Constitution Avenue NW., Washington, DC 20224. Requests for additional information or copies of the form and instructions should be directed to Ralph Terry, at Internal Revenue Service, room 6526, 1111 Constitution Avenue NW., Washington, DC 20224, or through the internet at Ralph.M.Terry@irs.gov.

 

Keep track of all the latest changes to IRS forms by subscribing to Payroll 24/7 today!