Taxation of Wellness Programs

The Office of Chief Counsel of the Internal Revenue Service has issued a memorandum on “Tax Treatment of Wellness Program Benefits and Employer Reimbursement of Premiums Provided Pre-tax Under a Section 125 Cafeteria Plan”.  Not quite a catchy title I admit but it does contain guidance that is useful.  The two questions  that were at issue are as follows:

  1. May an employer exclude from an employee’s income under section 105 or section 106 cash rewards paid to an employee for participating in a wellness program?
  2.  May an employer exclude from an employee’s income under section 105 or section 106 reimbursements of premiums for participating in a wellness program if the premiums for the wellness program were originally made by salary reduction through a section 125 cafeteria plan?

The conclusion reached by the Chief Counsel was no on both counts. 1. An employer may not exclude from an employee’s gross income payments of cash rewards for participating in a wellness program. 2. An employer may not exclude from an employee’s gross income reimbursements of premiums for participating in a wellness program if the premiums for the wellness program were originally made by salary reduction through a section 125 cafeteria plan.

For those of you who need to research this closer I included the link to the memorandum issued on April 14, 2016 and released on May 27, 2016.  They review three different situations and then provide the law and analysis you may need if this affects any benefits you are offering.

 

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Review for Wage Hour Laws–A Good Thing

Knowing the wage and hour laws and applying them is one of the basic requirements of the payroll profession. But whether new to payroll or a seasoned professional the question can arise—what are the laws in effect at this time? Lists, payroll chat rooms, blogs and classrooms discuss this question constantly.  And questions arise every day when new company policies are added or amended. Questions such as:  Are the employees entitled to a break or meal period? Is vacation pay required?   How is on call pay handled? This week’s white paper addresses 23 common areas of wage and hour law that you need to review on your own payroll to see if you are in compliance.  I am not going to provide the answers for you of course.  That would take an entire payroll manual.  Instead I am pointing out the most common areas that have compliance issues and that usually get audited by either federal or state Departments of Labor. This week on Part 1 I will be covering the first 10 areas. Next week, in Part 2, I will be discussing the last 13 areas.  Be sure to request your white paper today by going out to my website.

 

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Training Your Staff Part 2: Yes I have Tests!

Last week I blogged about and offered a white paper on how important it is to have a trained staff. I suggested that you create tests to help determine each staff member’s current level of payroll knowledge on such topics as wage and hour law, taxation and garnishments.  A whole lot of my followers requested the white paper and a whole lot of those asked me if I had any tests that I could supply to get started with.  Because there was such an abundance of requests for the testing I decided to make this white paper a 3-parter.  The first part you got last week on the basic info.  This week I am supplying two simple tests for wage and hour law.  These are culled from my student testing core questions that I use at Brandman University’s Practical Payroll Online Program and my certificate in Payroll Practice and Management offered through ed-2-go in over 100 universities nationwide.  I hope you find this week’s white paper very useful.  Next week’s white paper will be on testing for tax law both under IRS rules and state law.

Training Your Payroll Staff

There is more to running a payroll department than just producing X number of payroll checks every X number of weeks and passing them out.  Payroll not only has to meet the payday deadlines but each and every paycheck must be 100% correct.  Not just mathematically but it must also comply with every federal, state and local wage and hour or tax law that applies to it specifically.  Of course, we can’t forget that is must be process properly through the payroll system itself to ensure that all wages, taxes, employee benefits, other deductions such as garnishments, are reported and paid according to all the rules and regulations that govern them.  So how does a payroll department, whether it is a party of one or twenty, ensure that it is in compliance with this myriad of laws and regulations?  The answer to that question is actually fairly simple.  Make sure the staff is trained in every facet of their individual job duties and that the training is thorough and current.

But just saying out loud my staff needs training is not going to resolve the issue.  Questions arise as to how to set up a training program. These include:  where do I get this training, how do I pay for it with my limited budget and most critical of all, which staff member needs or should receive training on what subjects?  My white paper this week, that is available on my website, deals with  these exact questions and many more when it comes to staff training.  Please stop by and request your copy today. I know you will find it useful.

This Week’s White Paper

Our latest white paper is now available.  This week the topic is paying deceased employees.  A sad topic to be sure but one the payroll department must deal with.  And of course, during this tough time, the IRS wants things to be handle differently than a normal paycheck.  Check out our website and sign up for this white paper today.  It will be available until Friday at 5 pm pacific time.

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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What is Your CPP Story?

It is the 30th anniversary of the Certified Payroll Professional (CPP) designation.  I got my CPP in 1990 and I need to renew this year.  As I am working on getting my list of webinars and seminars assembled to submit for recertification I keep thinking about studying for and taking the test.  Of course, I have one of those “funny stories” about taking the test.  I herniated two discs in my back two weeks before the test.  Too late to back out and I really needed it.  So I had to have my brother drive me up to the door of the classroom (it was on a Cal-State Campus) and I had to crawl on all fours into the elevator.  I then had to crawl into the testing room and check in all the while on my hands and knees.  I actually took the test on the floor.  APA was so nice to arrange for a proctor so I could take the test on the floor in a separate room (this was prior to the ADA).  There is a funny part of the story as well.  The proctor had a broken leg so when it came time to use the restroom we had to flip for the handicapped stall! Despite all that I passed with flying colors but still wonder how I ever did it.

As I am relating my story I know that there are many of you out there with a similar “I had to overcome adversity or some other situation” story about studying or taking the test.  Or maybe yours is hilariously funny? Either way, how about sharing them here with us?  Let us know the agonies and the ecstasies you went through to get your CPP.