The IRS has announced the 2014 maximum contribution levels for Health Savings Accounts (HSAs), and out-of-pocket spending limits for High Deductible Health Plans (HDHPs) that must be used in conjunction with HSAs.
Should student interns be a part of your payroll? Some employers think it’s not necessary, reasoning that interns are still in school, live with their parents, receive valuable experience and may even drive their own new cars to work. These employers believe using unpaid interns is a smart financial move that allows their companies to save money on wages. However, this line of thinking has become much riskier in the wake of a recent court decision and the filing of new lawsuits.
A spate of legal actions have been taken by former interns who are accusing employers of violating the federal Fair Labor Standards Act and state laws by not paying them. Some law firms have put up websites offering services to former unpaid interns who want to try and recover back wages. “If you have held an unpaid internship during the past six years, even if you received school credit for the internship, we would like to talk to you,” the law firm representing the plaintiffs in a recent law suit.
Employment attorneys and HR professionals expect there will be a lot more of these cases in the future — and they won’t be limited to the entertainment and publishing sectors. Consequently, businesses that use unpaid interns, or interns who are paid less than the minimum wage, need to familiarize themselves with the relevant state and federal labor laws so they are in compliance.
All unpaid internships are not illegal but an organization must meet strict requirements in order to have a legal internship and pay nothing or less than minimum wage. If you continue to use unpaid interns, ensure you meet the six-point test from the U.S. Department of Labor:
1. The work performed (the DOL refers to it as training) is an extension of a trade studied by the student. Even though the intern works on, or from, the business or organization worksite, the work must be “similar to training which would be given in an educational environment.”
2. The training is for the benefit of the student intern.
3. The intern does not replace regular employees, but instead works under close observation of employees.
4. The employer derives no immediate advantage from the student intern’s activities. In fact, “on occasion [the employer’s] operations may actually be impeded.”
5. The intern is not necessarily entitled to a job at the conclusion of the internship. The employer holds out no promise of future employment.
6. The employer and the intern both understand that the intern is not entitled to wages for the time spent in the internship.
So before you exclude interns from your payroll service, consult with your HR department, your attorney, or a qualified payroll service provider.
On December 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011 (H.R. 3765). The Act includes a two-month extension of the reduced employee Social Security tax rate, maintaining the employee portion of the social security tax rate at 4.2% through February 29, 2012.
According to the Act, the employee tax rate for social security will revert to 6.2% on March 1, 2012, unless the federal government acts to further extend the law or change the rate. Due to this change, Ashgrove Payroll will be making the necessary modifications to support the employee portion of the Social Security tax 6.2% rate.
You will not have to do anything because our payroll service will automatically revert to the new (6.2%) rate. It might be a good idea however, to let your employees know that after March 1st, they will notice an additional 2% tax deduction on their gross wages.
If the federal government passes a new law that extends the date or changes the tax rate, Ashgrove Payroll will implement the changes to comply with the new law.
According to the 2011 Mercer Workplace Survey, health benefits play an increasingly pivotal role in the employer-employee relationship. 91% of employees participating in the survey agreed that getting health benefits through work is just as important as getting a salary. Almost as many (76%) say that benefits make them feel appreciated by their company.
An increased emphasis on benefits, especially when managed by a payroll service provider, can be a differentiating strategy, leading employees toward more personal accountability and greater overall satisfaction.
Classifying a worker as independent contractors provides many small businesses with needed flexibility. Unfortunately not all workers can be classified in such a way and according to IRS payroll laws, they need to be reclassified as a W-2 employee, not a 1099 subcontractor. Yet even as the economy grows more reliant on temporary or flexible 1099 labor, regulators are becoming increasingly vigilant about getting employers to classify these mislabeled workers.
I was working with a payroll services client in Raleigh last week and learned that six months ago their business triggered an IRS audit because of a misclassified carpenter subcontractor. The penalties were significant.
When these reclassifications are enforced, small businesses have to start withholding federal income, Social Security, Medicare, and unemployment taxes. Adding to the cash flow strain is the possible payment of fees and penalties for previous misclassifications. Additionally, such firms would have to start paying for the same employee benefits and workers’ compensation that they currently do for full-time employees.
As I’ve said before, federal and state governments are facing budget deficits, and tax regulators see a huge pool of potential back taxes, fees, and penalties to be gleaned from the detection of employee-classification errors. The IRS estimates that 15% of all employers have misclassified a total of 3.4 million employees as independent contractors, resulting in an estimated annual revenue loss of $3.4 billion dollars.
If you’re unsure of the specific rules that regulate 1099 subcontractor or independent contractor classifications, seek help with a payroll service such as Ashgrove Payroll. As the state departments of revenue continue to share more and more information with the IRS, the odds of being detected continue to increase.
The IRS released new guidance on the requirement that employers provide information to employees on the cost of employer-provided group health plan coverage (Notice 2012-9). The guidance comes in the form of 39 questions and answers. The IRS made this requirement optional for all employers for 2011, to give employers and payroll service providers more time to update payroll systems.
Employer-sponsored coverage includes coverage under any group health plan that an employer makes available to the employee and that is excludible from the employee’s gross income, but it excludes long-term-care coverage, any coverage under a separate dental or vision policy, or similar coverage (e.g. disability insurance, supplemental liability insurance, etc.). It also excludes amounts contributed to an MSA , HSA, or salary reduction contributions to a health flexible spending account.
The total reportable cost includes both the portion of the cost paid by the employer and the portion paid by the employee, regardless of whether the employee paid through pretax or after-tax contributions.
Employees continue to feel stuck in their jobs and want to find new employment elsewhere, according to a new poll of more than 1,000 employees in North America by the Manpower Group.
84% of the workers polled said they plan to look for a new position in 2012, which is the same level of discontent in the workplace in 2010. In 2009, 60% of employees said they planned on looking for something new.
Only 5 percent said they intend to remain in their current position.
National Payroll Week recognizes all of the hard work by America’s 156 million wage earners and the payroll service companies who pay them. Together, through the payroll withholding system, they contribute, collect, report and deposit approximately $1.7 trillion, or 71.9%, of the annual revenue of the U.S. Treasury. Think about that for a minute, $1.7 trillion on an annual basis. It’s what keeps the US government alive.
Effective for tax year 2011 and forward, the Wisconsin Department of Revenue will automatically waive the requirement of employers to submit Federal Form W-2 and the Wisconsin Form 9b to the department if you have no Wisconsin withholding to report, and if you submit Federal form W-2, 1099-R and 1099 -Misc to the IRS.
The department receives this information from the IRS.
What this means for you
As an employer, if you:
For more information on withholding tax, please click the following link for: Wisconsin Employer’s Withholding Tax Guide (Publication W-166).
The North Carolina Department of Revenue is making it easier for individuals and businesses to resolve payroll tax as well as other tax obligations with the state. The agency is making changes to the Voluntary Disclosure Program (VDP) that will allow more taxpayers to participate.
VDP was established more than 10 years ago to promote compliance among small business and individual taxpayers who discover—on their own—they have not filed necessary tax returns and paid taxes due. In exchange for taxpayers voluntarily coming forward, NCDOR waives penalties in certain circumstances and allows taxpayers an expedited process for filing certain tax types.
Previously a taxpayer who had ever been registered or had filed a return for a particular tax (ex: payroll tax, sales tax) would not be eligible for VDP for that tax type. Now, taxpayers who may have previously registered and submitted returns may qualify to participate.
Beginning Nov.1, taxpayers will only be required to file past due returns and pay taxes due for a back period of three years for taxes filed annually, or 36 months for those that do not have an annual filing frequency (ex: sales tax)—unless they collected but failed to remit the tax. Prior to the VDP changes, taxpayers were required to file and pay at least four years or 48 months of returns.
For detailed information about eligibility and participation visit www.dornc.com/practitioner/voluntary.html, call NCDOR Discovery & Special Projects at 1-877-919-1819 ext. 10215 or email Cale.Johnson@dornc.com.
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