Posts Tagged ‘Payroll Processing’

IRS Releases Form to Help Small Businesses Claim New Health Care Tax Credit

Tuesday, September 28th, 2010

Health Care UpdateIR-2010-96 Sept. 7, 2010

WASHINGTON –– The Internal Revenue Service today released a draft version of the form that small businesses and tax-exempt organizations will use to calculate the small business health care tax credit when they file income tax returns next year. The IRS also announced how eligible tax-exempt organizations –– which do not generally file income tax returns –– will claim the credit during the 2011 filing season.

The IRS has posted a draft of Form 8941 to this website. Both small businesses and tax-exempt organizations will use the form to calculate the credit. A small business will then include the amount of the credit as part of the general business credit on its income tax return.

Tax-exempt organizations will instead claim the small business health care tax credit on a revised Form 990-T. The Form 990-T is currently used by tax-exempt organizations to report and pay the tax on unrelated business income. Form 990-T will be revised for the 2011 filing season to enable eligible tax-exempt organizations –– even those that owe no tax on unrelated business income –– also to claim the small business health care tax credit.

The final version of Form 8941 and its instructions will be available later this year.

The small business health care tax credit was included in the Affordable Care Act signed by the President in March and is effective this year. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

In 2010, the credit is generally available to small employers that contribute an amount equivalent to at least half the cost of single coverage towards buying health insurance for their employees. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. Beginning in 2014, the maximum tax credit will go up to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible, tax-exempt organizations for two years.

The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less.

The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more. Because the eligibility rules are based in part on the number of FTEs, and not simply the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals.

More information about the credit, including a step-by-step guide and answers to frequently asked questions, is available on the Affordable Care Act page.

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney or an HR Professional.

Overtime Pay: You Cheated Me!

Tuesday, September 28th, 2010

Overtime Pay CalculationSeptember 2010
By: Walter J. Liszka

Over the last six years, our firm has seen a startling increase in Federal Court litigation to collect unpaid overtime pay. These multi-employee lawsuits – either of the class action or opt-in/opt-out variety – have been filed to enforce both federal (Fair Labor Standards Act) and state (for example, Illinois Wage Payment and Collection Act) concepts and are creating a potentially substantial back pay liability. It also should not go without notice that under principles of both the Fair Labor Standards Act and many state wage payment laws, successful plaintiffs’ attorneys are entitled to collect “reasonable attorneys’ fees” for their efforts in enforcing these statutory requirements. As an example, in one case that is currently pending in our Chicago office, the overtime wages due employees amounted to less than $7,000 while the claim for attorneys’ fees came to over $100,000. Of course we are fighting tooth and nail to reduce these fees but the amount of reasonable attorneys’ fees will ultimately be decided by the Federal Court Judge currently assigned the case and/or the 7th Circuit Court of Appeals.

Now entering the scene on the Department of Labor’s website is the Fair Labor Standards Act Overtime Calculator Advisor (www.dol.gov/elaws/otcalculator.htm). According to the DOL, the website has been developed “to help employees and employers understand the overtime pay requirements” by providing a “simple procedure” to calculate overtime for a sample pay period. Having attempted to use this system, there is some doubt as to how simple it is to use and the writer is reminded of the old adage “I’m from the government and I’m here to help you.” While some may claim the website is a learning tool, it is this writer’s opinion that it will only lead to greater conflict between employees and employers over the calculation of overtime hours.

It is important for employers to be aware of this website and, more importantly, to understand the accessibility of such information to employees. While this article does not address whether or not an individual employee is exempt or non-exempt (i.e. entitled or not entitled to overtime compensation), it is extremely important for employers to acquaint themselves with tools such as the Overtime Calculator Advisor because in all likelihood your employees will be familiar with the same.

In almost every case, in the calculation of overtime pay, time and one-half must be paid on the employee’s regular rate of pay for all hours worked over 40 hours in a calendar work week. The regular rate of pay includes not only the employee’s hourly wage but may include additional compensation, such as non-discretionary bonuses, attendance bonuses or more complex scenarios that include employees receiving different rates of pay for working at two or more jobs with the same employer in one calendar work week. In these situations, absent agreement to calculate otherwise, the employee’s regular rate of pay would be determined by calculating the amount of time the employee worked at each job. An hourly employee’s “regular rate” is the hourly rate of pay plus any additional compensation. For example: an employee worked in one calendar work week on a job paying $11.00 per hour for 30 hours and on a second job, paying $14.00 per hour for 20 hours. The employee’s “regular rate of pay” for that work week is:

((30 hours x $11.00) + (20 hours x $14.00))/50 = $12.20 per hour

The employee’s CORRECT PAY would be:

(50 hours x 12.20) + (10 hours x 6.10)
610.00      +          61.00           =         $671.00

If an employee has an hourly rate of pay of $10.00 per hour and receives an Attendance Bonus for that week of $100.00, if the employee works 44 hours, that employee’s “regular rate of pay” is:

((44 hours x $10.00) + $100.00)/44 = $12.27 per hour

The employee’s CORRECT PAY would be:

(44 hours x 12.27) + (4 hours x 6.14)
$539.88       +        $24.56          =         $564.44

It has been our experience that one of employers’ biggest misunderstandings is how to correctly figure and pay overtime.

It is strongly suggested that every employer become familiarized with the DOL website and do its own self audit to assure that employees are receiving the correct overtime pay entitlement before an employee, group of employees or a plaintiff’s lawyer raises this issue.

Submitted By:

Walter J. Liszka
Wessels Sherman Joerg Liszka Laverty Seneczko P.C.
952.746.1700 Office
www.wesselssherman.com

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney or an HR Professional.

DHS Issues Final Rule Amending Electronic Storage Rules for Form I-9

Tuesday, September 28th, 2010

Paper BlobBy: Kevin M. Mosher, Esq.

On July 22 the Department of Homeland Security (DHS) issued a long awaited final rule to its 2006 regulations regarding electronic storage options for the Form I-9. In the end, this final rule slightly amended the 2006 regulations to favor employer’s use of an electronic storage system for the I-9s.

In 2006, DHS issued a set of interim guidelines setting forth an employer’s ability to store its Forms I-9 electronically. Prior to this, federal law required that all employers maintain the original or a microfiche/microfilm version of the Form I-9 for the statutorily required retention period. For larger companies and businesses with high turnover this created a significant amount of paperwork. Recognizing the digital age, DHS set out a series of requirements that employers could follow to avoid this paper, film or fiche storage obligation. The 2006 rules created a framework by which employers could store the Form I-9 electronically and use electronic signatures.

The July 22 regulation finalizes the 2006 interim rule and amends it slightly in the following ways:

  • Clarifies that employers can use any combination of storage mechanisms – paper or electronic storage.
  • Clarifies that employers have 3 business days (not calendar days) in which to complete the Form I-9. This clarification was made in the general Form I-9 changes in 2007, but has now been amended with regard to these electronic storage regulations.
  • States employers may change electronic storage systems so long as the new system satisfies the regulatory requirements.
  • States employers using an electronic storage system need not retain audit trails each time the Form I-9 is viewed, but only when it is created, completed, updated, modified, altered or corrected.
  • Requires that employers provide transaction receipts to employees, but only upon the employee’s request.

Overall, the final rule offers a handful of nice clarification points for employers. The opt-in nature of the transaction receipt in particular may prove to be a significant paper and time-saving change for high-volume employers such as staffing agencies and large companies; and no longer having to retain audit trails except with certain major events is a good change. Otherwise, the changes are not incredibly substantial from the 2006 interim regulations.

If you have any questions regarding these changes or the electronic storage of the Forms I-9, please contact Kevin Mosher at kemosher@wesselssherman.com.

Submitted By:

Kevin Mosher, Esq.
Wessels Sherman Joerg Liszka Laverty Seneczko P.C.
952.746.1700 Office
www.wesselssherman.com

For more information on the 2006 interim regulations, click here.

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney or an HR Professional.