Categorizing Employees Under the FLSA–Our Latest White Paper

Should a worker be an independent contractor or an employee? Employers grapple with this question everyday.  And most think that it is all based on what the IRS wants under the tax rules.  Do they pass the three factor test on the employee side or the independent contractor side?  Do we offer training? Do we have too much control over them?  These are the questions the IRS asks in making the determination and employers must answer to the IRS’ satisfaction.  But employers must never forget there is another government agency out there that is just as interested in how you categorize a worker and have been since 1938.  It is the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL). Their rules under the Fair Labor Standards Act (FSLA) have been in play for decades.  Sitting quietly through audit after audit.  The WHD has incorporated dozens of states into its fold with its misclassification initiative. Late last summer it issued an “interpretation of these rules” that have been in place for decades. All this to reinforce the idea that they are here and they are auditing.

So what are these rules under the FLSA?  That is what our white paper is about this week.  How to classify a worker as an employee under the FLSA. What are the basic rules, the court rulings and the latest Administrator’s interpretation.  Check out our home page to request a copy this week.

 

USCIS Asking for Public Comments on I-9 Form

Whether you complete the form, sign the form, or are not involved in the form whatsoever, the I-9 is still a form that payroll needs to be familiar with. And familiarity can breed contempt or wishes to change the form.  If that is true for you now is your chance.  The U.S. Citizenship and Immigration Services (USCIS) is inviting public comment on proposed changes to the Form I-9. The public may provide comments on the proposed changes until April 27, 2016. Many of the proposed changes were designed to reduce technical errors or to help customers complete the form on their computer after they have downloaded it from the uscis.gov website.

The proposed changes are:

1. Validations on certain fields to ensure information is entered correctly;
2.  Additional spaces to enter multiple preparers and translators;
3.  Drop-down lists and calendars;
4. Embedded instructions for completing each field;
5. Buttons that will allow users to access the instructions electronically, print the form and clear the form to start over;
6. A dedicated area to enter additional information that employers are currently required to notate in the margins of the form;
7. A quick-response matrix barcode, or QR code, that generates once the form is printed that can be used to streamline audit processes;
8. Requiring employees to provide only other last names used in Section 1, rather than all other names used;
9. Removing the requirement that aliens authorized to work provide both their Form I-94 number and foreign passport information in Section 1;
10. Separating instructions from the form, in keeping with USCIS practice;
11. Adding a Supplement in cases where more than one preparer or translator is used to complete Section 1.

To view the proposed form and instructions and submit a comment, go to https://www.regulations.gov/ and enter 1615-0047 in the search box. Open the docket folder to view the supporting documents, which include the proposed form and instructions. To submit a comment, include the agency name and the OMB Control Number 1615-0047 in your comment, then send the comment to the OMB USCIS Desk Officer at oira_submission@omb.eop.gov. You may also submit comments via fax at (202) 395-5806 (This is not a toll-free number).

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.

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.

And the Battle Begins…On Overtime Rule Update

In my March 18th blog I discussed the latest on the “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees”. It has been submitted for executive  review with the Office of Management and Budget and we are hoping to hear something in 30 to 60 days. Well, the Republican lawmakers were also discussing this rule update on March 18th and they introduced legislation that would require the Labor Secretary to nullify this “controversial proposed rule.”  The bill, H.R. 4773 Protecting Workplace Advancement and Opportunity Act, was introduced by Senator Tim Scott (R-SC) and Representative Tim Walberg (R-Mich.).  The measure also would require the Secretary to conduct a specified economic analysis on employers before promulgating any substantially similar rule.  The bill has been referred to the House Committee on Education and the Workforce. So now the battle begins as to who will win out and what will the final ruling look like.  I will keep you posted.

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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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Heads Up! OT Rules May Be on the Move!

The long awaited overtime changes may finally be getting some movement.  It was hoped that we would hear something from the DOL by the first of summer.  But it appears that they are making their move now.  On March 14th the final overtime rule, known officially as “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees” was submitted for executive  review with the Office of Management and Budget.  Now, there is no official deadline for this review but a typical timeframe would result in the final rule being issued in approximately 30 to 90 days. We still don’t know if there will be any changes to the job duties tests at this time.  There is speculation that since the DOL took comments on it and published them last fall they may announce it at the same time or may then create a second ruling and issue that.  We are still waiting.

In the meantime, some practitioners have been getting restless and set up a petition on February 4th on whitehouse.gov “Tell the Department of Labor to move quickly on implementing the new overtime rule“. It currently has over 113,000 signatures. It even has its own hashtag, #TimeforOT”

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.

Already a CPP or FPC and looking for RCHs?  We are now offering our own brand of webinars.  Each one approved for 1.5 RCHs.  Check out our store to sign up today.

Contact Congress Now About Multistate Taxes!

As most payroll professionals are aware, having employees who travel to various states can be a logistical nightmare when it comes to taxation.  Even an hourly employee traveling for a two-day training on their payroll software could create a taxation situation requiring hand calculation of taxes, and the employee having to file a non-resident tax return.  This is the mobile workforce we live with today.  And it is getting worse as more and more employees are traveling for their jobs. But you have a chance to do something about this because it doesn’t have to be this cumbersome for payroll if Congress passes the Mobile Workforce State Income Tax Simplification Act. This bill establishes a 30-day threshold before taxes are required.  This ensures that state and local governments get their fair share of taxes when an employee works in a state on a regular basis, but doesn’t require an employee who only goes to that state for a 2-day conference to pay taxes.   The Government Relations Committee of the American Payroll Association is helping to promote this new bill. It is asking payroll professionals to contact their Senators and Representatives and ask for their support on this bi-partisan bill.  Because they know how busy payroll is, they have made it very simple for you.  All you need to do is to click here. This will take you to their automated page where you just fill in your contact info and it creates the letters for you.  Then your can send as an email or print and mail out yourself.  It even allows you to add your own comments. Let’s help ourselves in payroll by helping to pass this much needed legislation.

Our Webinars Are Back!

We are proud to announce that the Payroll Advisor will once again be offering our own brand of payroll training webinars in addition to the ones we do for our fine stable of vendors.  Our first webinar of the year will be on March 28th on the topic of How to Handle Abandoned Wages. The webinars start at 10am pacific and run for 90 minutes followed by a 15-minute Q & A session. To ensure that all payroll professionals can afford the training they need or want we are pricing our webinars at only $149.  However, we offer an early-bird discount making the price only $99 per registration if you sign up by March 21st. So take advantage of our information packed webinars and sign up today.  And yes…we are approved by the APA for RCHs.