If Health Insurance is Mandatory…Is it a Mandatory Deduction (for Garnishments)?

The Affordable Care Act has been in full swing for a couple of years now.  However, there appears to still be one more question that needs to be answered.  If health insurance is mandatory then does it now qualify as a mandatory deduction under garnishment rules? Both payroll professionals and employees have been tackling with this question so let’s see what the actual law requires.  The Consumer Credit Protection Act (CCPA) is the governing law when it comes to deducting for garnishments.  It is enforced by the federal Department of Labor. It states that the employer must take the gross wages and minus out all “mandated deductions” to arrive at the disposable pay. The garnishment percentage (such as 25% for a creditor garnishment) is then taken from this amount.  It states clearly that mandated deductions include taxes such as federal and state income tax, FICA taxes, local taxes, and mandated pension plans such as PERS (Public Employee Retirement System).  401(k)s etc. do not count.  So if I am required as an employee to have health insurance is that now mandated.  The answer is easy…NO.  The DOL has been asked by the APA Government Affairs Manager, Bill Dunn, if they planned to change the definition of mandated deductions to include health insurance.  The answer was no they are not.  Although it is mandated that a taxpayer have health insurance it is not mandated that they have the employer’s insurance. They could buy it through the open exchange and by-pass the employer altogether. So as far as the CCPA is concerned health insurance does not reduce the disposable income.

However, always remember that the states can always do less than the CCPA. It is possible that the state may permit the health insurance as a mandated deduction. Many state legislatures are looking at legislation that will adjust their requirements. It would appear on the garnishment you receive if the state permits the deduction.  You should also be aware that state tax levies might also permit the health insurance deduction. For example, Colorado and Virginia have added the deduction from state tax levies.

So to recap…the federal CCPA is not adding health insurance as a mandated deduction for garnishments.  However, the state legislature may or may not pass legislation to permit it as a mandated deduction, you need to check on each state requirements by reading the garnishment.

Age OId Question…How Should I Handle Duplicate W-2 Requests?

It is that time of year again where current employees and especially former employees want duplicate copies of their Form W-2.  Although we do our best to confirm addresses etc. it never fails that a certain number of forms will get “lost in the mail”.  So with the high amount of imposter fraud going on with W-2s what procedures should you have in place to ensure to protect this information while providing customer service to employees and former employees?  I have always advocating having a written procedure in place for issuing duplicate Forms W-2. Whether you can do them electronically or not, you need to know who has access to what when it comes to this form. I use a standard request form (see attached pdf) for all employees, current and former.  No other form can be used or will be accepted.  They cannot email me a request (but they can send the completed form via email as a pdf attachment) and I do not take “phone orders”.  They must complete the entire form in order to get the copy, including signing the form with a full signature. No exceptions.  They must furnish their name, social security number and badge number if current.  If a former employee and requesting an address change, they must provide picture identification such as a driver’s license which shows that address or I need a bill with that address and name such as a gas or electric bill. If they are asking just to have it resent to the same address I will do that without ID since I already sent it once. The IRS is clear on what you can and cannot do when it comes to duplicates…anything as long as it is within reason.  Asking for identification is definitely within reason. If they do come to pick it up in person, they have to show their ID at that time. If requesting the W-2 to be mailed, they must furnish me with a copy of it when they submit the request.  With the fraud we have today, it is always reasonable to protect this valuable information.

Request for Duplicate Form W-2
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Studying for the CPP Test Can Be Fun!

Okay so I have roped you in with the title of this blog post, but believe it or not studying for the CPP test can be at least not overwhelming.  I am often asked, as a matter of fact just this morning, “how should I study for the CPP test?”.  And my answer is always the same.  So I thought I would take a few moments and share my thoughts on how to study for this important test without stressing yourself out so much that you flunk the test just from nerves.  Or worse yet, studying some parts too much while only skimming over other parts. Again leading to flunking the test. There are several steps to take to ensure you study what you need, calmly and efficiently. So let me share those with you.

Before you get started you need to get organized.  I recommend creating an excel spreadsheet as a study planner.  Get the test outline from the APA website.  For example under section I Core Payroll Concepts it covers: Worker status; Fair Labor Standards Act; Employment Taxes; etc. List each one of these on the spreadsheet in the first column.  Then locate one or more sources that provides you with information on that subject.  For example, page xxx of Publication 15.  This way you know you are studying every facet of the test and not just those you “like” or “feel comfortable with”.  It also helps you get to know your sources you will be using.  As to those sources:

  1. Get a good source to study as the principle guide.  What do I recommend?  It is the APA test so use the APA guide.  It is that simple.  The Payroll Source is an excellent reference manual but it is an exceptional study guide.  Since the APA touts it as one of the sources you should use why not do so. It has the info, test questions and test quizzes.
  2. Don’t rely just on the one guide.  Read all the publications that apply from the IRS and DOL.  For example read, and I mean actually sit and read, Publication 15, 15-A and 15-B cover to cover at least three times. Also publication 525 is helpful.  DOL has several but the best resource is their website.  Read up on exempt employees and how to calculate overtime. In fact, they have an overtime calculator you can use.  Create an employee with a time sheet that shows 40 hours reg and xxx of overtime at a certain wage.  Give him a bonus discretionary and non-discretionary.  You do the math and then check your math against their calculator. If you don’t match within a penny or two, find out what went wrong. Maybe you don’t understand regular rate of pay. Practice until you can do it in your sleep.
  3. Use the APA website resources such as the Webinar On Demand-Preparing for the 2016 CPP and FPC Exams which is free.  Again it is their test so use their resources.
  4. Create or buy flash cards.  Take the questions in the APA book and write them on one side of a 3×5 card.  Put the correct answer on the back.  These work great when you are at lunch, standing in line at the bank or just want to take a few extra minutes to study without lugging a heavy book around.  Plus by creating the cards you also learn the info.
  5. Record the info and listen to it when you can.  I did this and found it one of the most useful tools.  I would record just one section at a time by basically reading the book, the IRS publication etc., one section at a time and playing it back when I was driving to work and driving home.  Just record enough for the drive.  Once you got that part down go on to the next section.
  6. Do practice tests with full proctoring.  Take the test in the Payroll Source, sit down at a table with a normal chair, have someone time you, and take the test. No distractions, no talking, bathroom breaks count on your time.  It helps relieve real test nerves and gets you use to doing the test under a time deadline.
  7. Chapter study groups. If you do better studying in a group or need others to keep you on track, this would work for you.  They usually have an outline and follow it meeting once or twice a week for several months to cover all the info.  Costs vary but you should check it out if you prefer to study with others.

And finally, but most important, give yourself time to study.  Three months is usually minimum. This is one of the most important business tests you will take.  Do not take it lightly.  Tell family and friends you are taking the test and make sure they understand this isn’t just some silly test, but one that will advance your career. They and you need to take it that seriously.  Don’t try to “squeeze in” a bit of studying here and there. If your life (whether work or home) doesn’t allow for the time to study, then take the test another time.  Remember people who study for the bar exam, the CPA exam or any other type of certification do not do so in their spare time. They make it a major part of their life and so should you.

I hope you find these tips helpful.  If you have any tips that helped you pass the test, please share them.

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Watch Out for Fraud, W-2s, Your “CEO”

We all know that fraud has been occurring with the Form W-2.  This is what has caused the IRS to request and Congress to approve moving the due date of the form up to January 31st. But now the IRS is alerting payroll professionals to be aware of an emerging phishing email scheme that is targeted directly at payroll and the information you have on your employees.  It seems that these schemes send bogus emails purporting to be from company executives and requests personal information on employees. This is a new twist on an old scheme and is focusing on the busyness of this timirs newswiree of year. IRS Commissioner John Koskinen has advised payroll departments to be sure to check out requests for company lists that come from executives before sending out the data.  “Everyone has a responsibility to remain diligent about confirming the identity of people requesting personal information about employees” states Commissioner Koskinen.

The IRS is already investigating and reviewing several cases of what is known as a “spoofing” email. It will contain, for example, the actual name of the company chief executive officer.  In this variation, the “CEO” sends an email to the company payroll office employee requesting a list of employees and information including social security numbers.  The following are some of the details of the scheme that the IRS has furnished:

  • Kindly send me the individual 2015 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review
  • Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary) as at 2/2/2016.
  • I want you to send me the list of W-2 copy of employees wage and tax statement for 2015, I need them in PDF file type, you can send it as an attachment. Kindly prepare the lists and email them to me asap.

What can payroll professionals do to handle this situation?  First, immediately inform your higher ups that the phishing scheme is now in play. Make sure they are aware ahead of time of your need to be even more diligent than ever on guarding your payroll information.  And then, as usual, guard the information in your system as you always have, in the most professional manner available.  If your managers need more info please refer to this link for a copy of the IRS alert

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