by Afilliated HR & Payroll | Aug 29, 2022 | HR Administration, Regulatory Compliance
On August 12, Congress passed the Inflation Reduction Act, over 700 pages of economic changes. What does the act do? And just as important, what does it not do?
To start with the name, the act’s proponents say the new law will fight inflation with deficit reductions — which makes most people ask, “Does it raise my taxes?” The good news is that for the vast number of people, the answer is no. Taxes are changing, but not for average individuals. The two major tax provisions are for corporations:
- 15% minimum tax on corporations with over $1 billion in revenue.
- 1% excise tax on corporate share buybacks.
A statement released by the Senate Democratic leaders said, “There are no new taxes on families making $400,000 or less and no new taxes on small businesses.”
On the plus side
Indeed, according to an analysis by USA Today, there are some definite benefits for individuals, including:
- An Affordable Care Act subsidy extension through 2025.
- Permission for Medicare to negotiate drug prices.
- A cap on Medicare recipients’ drug expenditures at $2,000 per year.
Climate change offerings
The new act also provides:
- Tax credits for buying a new or used electric vehicle, extended until December 2032.
- Tax credits on electric commercial vehicles up to over a certain size.
According to USA Today, the net result could be a benefit for small businesses, as they avoid the tax hike the giant corporations now face. Also, the climate-change benefits likely will encourage homeowners to upgrade to energy-efficient systems, and this work is typically done by small companies.
Fighting the rumors
A key provision in the act is substantially increased funding for the IRS, which the bill’s opponents say will be used to investigate all taxpayers to squeeze every last dime to fill federal coffers. However, the administration has denied this is the case. Treasury Secretary Janet L. Yellen sent a letter to IRS Commissioner Charles P. Rettig with the following paragraph:
“Specifically, I direct that any additional resources — including any new personnel or auditors that are hired — shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels. This means that, contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited.”
Indeed, some conservative activists have said that the IRS will be spending substantial sums to create a de facto army of gun-wielding agents. Although a relatively small number of agents, only in the IRS’s criminal investigation division, are armed, the new influx of cash isn’t expected to change that.
For the future
This is just a broad summary of the act’s many complex provisions. There are exceptions and exceptions to the exceptions. As with any large act, lawyers and accountants will be poring over the details and implications in the coming weeks and months. More guidance likely will follow. Meanwhile, if you have any questions about how this act may affect you or your business, be sure to contact a qualified professional.
by Afilliated HR & Payroll | Aug 22, 2022 | Benefits & Compensation, Regulatory Compliance
Paid time off is offered in various ways, such as vacation days, sick leave, personal time, family and medical leave, parental leave, federal holidays, floating holidays, military leave, and bereavement leave. How it should be administered depends on company policy and applicable laws.
According to the Fair Labor Standards Act, there are no requirements in place that require private-sector employers to offer PTO to their employees. Even so, you’ll still need to consider a handful of other applicable laws, including Equal Employment Opportunity requirements as well as state or local statutes that may apply, which can impose restrictions on employer PTO policies and practices. Let’s take a look at some of the most popular and widespread PTO restrictions.
Equal Employment Opportunity Commission
A major requirement of PTO policies is that they must be in compliance with related laws that are enforced by the EEOC. In other words, your PTO policies cannot discriminate against or judge potential job candidates and applicants on the basis of their race, skin color, sex, gender identity, religion, age, disability or other protected classes regarding details about them.
In terms of age, the EEOC states, “In some situations, an employer may be allowed to reduce some employee benefits for older workers, but only if the cost of providing the reduced benefits is the same as the cost of providing benefits to younger workers.”
State restrictions
State-level restrictions on PTO typically address the following scenarios:
- Whether PTO is considered wages.
- Whether employees are subjected to a use-it-or-lose-it PTO policy.
- Rates by which PTO payouts can be calculated.
- Whether there is a PTO payout option upon being terminated as an employee.
Family and medical leave
Many states have programs for family and medical leave. Interestingly enough, some of these programs offer employees additional protections beyond the ones set forth by the federal Family and Medical Leave Act.
Some examples of state-level restrictions pertaining to family and medical leave include the following:
- Whether the leave is paid or unpaid.
- Whether all employees are covered.
- Acceptable reasons for taking leave.
- The duration of family and medical leave.
- Whom employees can take time off to care for.
Paid sick leave
Sick leave mandates are common in every state in the country, and they dictate the requirements employers must uphold when it comes to offering paid sick time to employees who are eligible for it.
While the exact paid sick leave restrictions will vary based on the particular jurisdiction, some of these details may address the following:
- Which employers must provide paid sick leave.
- Eligible employees, including full time versus part time.
- Acceptable reasons for taking paid sick leave.
- Current accrual rates for paid sick leave.
- Waiting periods employees can expect before paid sick leave is typically approved.
The state may also provide employers with the power to set limits on the number of paid sick leave days an employee can use, not only in total but consecutively.
Other types of state-mandated PTO
When researching PTO restrictions, you may need to consider various other types of state and local PTO laws as well. For example, certain states require that companies offer PTO to employees for voting and parental, bereavement and jury duty leave. In these cases, PTO restrictions are more state-specific than anything else.
A word of caution
When looking into PTO restrictions, be mindful of compensatory time off, which is paid time off offered to employees in place of overtime pay. In most, though potentially not all, cases, it is typically illegal to offer compensatory time off rather than overtime to nonexempt employees.
by Afilliated HR & Payroll | Aug 9, 2022 | Alert, Regulatory Compliance
Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, may be your key to getting all the Covid relief your business is entitled to. It’s a 30-page form and the rules are complex, but here are the basics.
First, understand how to use Form 941-X. According to the IRS: “Generally, you may correct overreported taxes on a previously filed Form 941 if you file Form 941-X within 3 years of the date Form 941 was filed or 2 years from the date you paid the tax reported on Form 941, whichever is later. You may correct underreported taxes on a previously filed Form 941 if you file Form 941-X within 3 years of the date the Form 941 was filed. We call each of these time frames a ‘period of limitations.’ For purposes of the period of limitations, Forms 941 for a calendar year are considered filed on April 15 of the succeeding year if filed before that date.”
Claiming the ERC
With that in mind, consider the special instructions for Form 941-X—and the worksheets it contains—as they relate to the ERC.
Worksheet #2: You must use this worksheet if you claimed the employee retention credit for qualified wages paid after March 12, 2020, and before July 1, 2021, on your original Form 941 and you correct any amounts used to figure the employee retention credit for qualified wages paid after March 12, 2020, and before July 1, 2021. You’ll also use this worksheet to figure this credit if you’re claiming it for the first time on Form 941-X. If you’re a third-party payer, you must complete this worksheet for each client for which it is applicable, on a client-by-client basis.
Worksheet #4: You must use this worksheet if you claimed the employee retention credit for qualified wages paid after June 30, 2021, and before January 1, 2022, on your original Form 941 and you correct any amounts used to figure the employee retention credit for qualified wages paid after June 30, 2021, and before January 1, 2022. As above, you’ll also use this worksheet to figure this credit if you’re claiming it for the first time on Form 941-X. If you’re a third-party payer, you must complete this worksheet for each client for which it is applicable, on a client-by-client basis.
These are just the basics. The details can get complicated, and the IRS estimates the recordkeeping involved takes over 31 hours. Call us so we can help you get everything you’re entitled to. Meanwhile, you can download Form 941-X and its extensive instructions from the IRS site.
by Afilliated HR & Payroll | Jun 23, 2022 | Regulatory Compliance, Reminder
Can a part-time employee be exempt?
Yes, a part-time employee may be classified as exempt. The minimum salary and duties requirements must still be met, of course. And the minimum salary cannot be prorated when an exempt employee works part-time. In other words, the federal requirement to pay $684 per week (or the higher state minimum salary) will apply even if the person is working less than full time.
That said, “part-time” and “exempt” usually don’t go well together. The point of classifying an employee as exempt—from the employer’s perspective—is that the employee can be paid a set salary and asked to work extra hours without being entitled to overtime pay. But employees who are hired into part-time roles often seek them because they have other obligations (or even other jobs). They generally expect to work an exact number of hours each week or at least keep to part-time hours.
While the nature of exempt status is that employees can be expected to work the number of hours necessary to get the job done, if the job is actually a full-time job, it should be classified as such. If you start to lean heavily on your ability to require an exempt part-time employee to work extra hours without extra pay, potentially upending other plans, morale is likely to suffer. However, you can mitigate this by being clear upfront about what kind of commitment may be required and by advertising and describing the job accurately. Additionally, referring to a part-time exempt employee as 50% FTE (rather than telling them they’ll be working 20 hours weekly) can help establish an expectation that salary isn’t linked to an exact number of hours.
If a part-time employee’s hours will fluctuate dramatically, you should carefully consider whether “exempt” is the right classification. If you reclassify an employee as nonexempt, they must be paid overtime where applicable.
Content courtesy of the HR Support Center – https://affiliatedpayroll.myhrsupportcenter.com
by Afilliated HR & Payroll | Jun 16, 2022 | Alert, Benefits & Compensation, Regulatory Compliance
The Internal Revenue Service (IRS) has announced that its optional standard mileage rate will increase to 62.5 cents per mile driven for business purposes. The increase takes effect on July 1, 2022.
Use of this rate is optional, though it is widely used by employers as a standard rate for calculating mileage reimbursement for employees who use their personal vehicle for business purposes. If your organization uses the IRS rate to calculate mileage reimbursement, be sure to update your systems to account for this change.
by Afilliated HR & Payroll | Jun 8, 2022 | Regulatory Compliance
Employment benefits that improve quality of life, increase flexibility, and enable people to attend to their personal needs rank high among both employees and job-seekers. And yet, according to the Bureau of Labor Statistics (BLS), while 79 percent of employees have access to paid sick leave, only 23 percent have access to paid family leave.
What’s the difference between these benefits? Sick leave typically entitles people to take time off work when they or a family member are sick or need to see a doctor for preventative care. State-mandated sick leave benefits often top out around 40 hours per year, but paid sick leave is a common benefit that many companies offer even when it’s not required by law. Employees appreciate being able to rest and recover without a ding to their paycheck. Employers win because employees don’t come to work while sick and risk infecting coworkers and customers.
Paid family leave programs, whether funded by the state or offered by an employer out of the goodness of their heart, generally cover more lengthy illnesses and life events. For example, California’s state-sponsored program provides up to eight weeks of wage replacement benefits in a 12-month period. Benefits can be collected when taking time off for the birth of a child or adoption or foster care placement of a child; to care for an employee’s family member with a serious health condition; and to participate in a qualifying event as a result of a family member’s military deployment to a foreign country.
Unsurprisingly, not many companies offer their own paid family leave benefit. It is expensive, which is why states that provide paid family leave benefits typically fund it through payroll deductions. For employees, unpaid leave is better than no leave, but unpaid leave isn’t always a realistic option. In many cases, people who need time off to care for a family member can’t afford to take it—or they don’t take as much of it as they’d like. They feel they have no choice but to work. Paid leave, on the other hand, gives people a real option to take time off. It makes it possible for them to balance their obligations at work and at home.
Paid family leave can have an upside for your business too. When people feel needed at home, but can’t afford to take time off, they are distracted, extra stressed, fatigued, and prone to burnout. Their mind isn’t on the job—it’s on the loved one that needs them. When a business offers paid time off, it makes an investment in its people, a small short-term loss for a big long-term gain. Paid leave gets people back to work when they’re actually ready and able to work effectively, and it generates feelings of loyalty toward the company that was there for them when they needed it. That’s why employers keen on attracting and retaining skilled people often choose to offer various paid leave benefits when they’re not legally required to do so.
If you determine a paid family leave benefit is something your company would like to offer, here are some of our recommended practices:
- Clearly communicate what your paid family leave policy covers—how much money and time is offered and for what reasons. A lot of different benefits can be put under the “family leave” umbrella. To avoid confusion or misunderstanding, be clear about what you offer. Paid leaves to consider include baby bonding, bereavement leave, taking care of an ill or injured family member, and military family leave. Clarify what each leave can be used for. For example, if you offer paid time off for bereavement, your policy might specify that it can be used following the death of an immediate family member or the loss of a pregnancy.
- Be sure that you aren’t creating a leave program that’s discriminatory. To avoid a gender discrimination complaint, provide baby bonding leave for both parents in equal amounts. Baby bonding leave should also be available for an employee who is adopting or fostering a child.
- Along similar lines, if you also provide paid short-term disability benefits, treat paid leave for baby bonding completely separate. In other words, a pregnant employee would get disability benefits when they’re disabled during and after pregnancy. Then, once they’re no longer disabled (or when their disability benefit runs out), their paid family leave for baby bonding starts. Collapsing pregnancy disability and baby bonding leave together could give rise to complaints of disability discrimination or gender discrimination.
- Encourage use of your paid leave programs. Sometimes employees are nervous about taking time off—or too much of it—even when it’s offered to them. They may feel that they’re inconveniencing their coworkers or irritating their boss—as though paid leave is allowed but may be frowned upon. This is a cultural problem, and it has a cultural solution. First, regularly talk to your employees about the importance of taking time off—for whatever reason. Second, when people do take time off, talk about it as a good thing. Third, if the situation calls for it, offer additional support. Let the employee know you’re there for them if needed.
- Ensure that employees aren’t penalized for using paid family leave. Often there is a disconnect between what HR and company executives want to offer and what managers actually tolerate. For example, if you were to see a trend that employees who use the paid family leave benefit are less likely to be promoted, you’d want to look at why that is and take steps to correct it. If employees discover that use of their benefits puts their career development at a disadvantage, this may discourage them from reaping the benefits of paid time away and expose the company to discrimination claims.
You can learn more about paid family leave and related compliance obligations on the platform. Select “Leaves and Accommodations” under the Topics tab at the top of the page or use the search bar if you have a specific question in mind.
