PAYROLL LAW 2014

WELCOME!

Your Facilitator Today is Lisa Smith

Todays Slide Presentation

• New Curriculum!

• Extra information

• Page numbers on the slide

• No number = no page

• Quiz answers are at the end of this presentation.

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“Ish Time”

•Breaks – 10:15 / 2:30 ‘ish’

•Lunch – 12:20 – 1:30 ‘ish’

•Home – 3:55 ‘ish’

All the Laws

If you wanna catch the smart fish, you gotta use the Smart Bait!

- Joe Phillips

Who is An Employer?

FLSA defines and ‘employer’ as “any person acting directly or indirectly in the interest of an employer in

relation to an employee.” 29 USC §203 (d).

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Penalties can be assessed against the employer or a

‘person acting on behalf of an employer.’

2011-2013 – the courts re-defined ‘employer ‘ in all employment law issues. States also followed.

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The Truth

Regularly, 75% of employers make payroll errors! – SHRM

Approximately 1 million workers each week suffer a

payroll error = $56,000,000 per week x 52 =

$2.9 Billion/year.

- The Payroll Answer Book

Most Errors Come from FLSA Violations

2013 –Estimated 80% of employers are getting it wrong.

- Department of Labor

Maybe

Audit-Secure Your Business!

What will the Auditors find swimming in

YOUR waters?

Have you caught your fish?

Payroll Department Audit-Secure Checklist

1. Reasonable Basis File • Professional Resources

• Government Resources

• Desk References/Software/Templates

• Training Resources

• Consultant/Attorney advice in writing

2. Payroll Standard Operating Procedures • Step by step guidance for each position

• Follow a Rule of 3 + and reference your Reasonable Basis

• Must contain update and revision dates

• Include employee training dates

3. Internal Audit Documentation*KEY* • Annual audit documentation for each area

• Must include corrective action plan and outcome

4. Employee Handbook – Policies/Procedures • Must reflect federal and state laws

• Must include specific company policies when law is silent

• Must include documentation of review and updates annually

5. Job Descriptions • Not optional

• Must detail Essential Functions and BFOQs

• Must detail Exempt qualifiers - especially duties

• Must be accompanied by interview checklists for EEOC compliance

• Review annually – minimum – document

The Best Policies and Procedures

Rule of 3s

Payroll Department Audit-Secure Checklist

1. Reasonable Basis File • Professional Resources

• Government Resources

• Desk References/Software/Templates

• Training Resources

• Consultant/Attorney advice in writing

2. Payroll Standard Operating Procedures • Step by step guidance for each position

• Follow a Rule of 3 + and reference your Reasonable Basis

• Must contain update and revision dates

• Include employee training dates

3. Internal Audit Documentation*KEY* • Annual audit documentation for each area

• Must include corrective action plan and outcome

4. Employee Handbook – Policies/Procedures • Must reflect federal and state laws

• Must include specific company policies when law is silent

• Must include documentation of review and updates annually

5. Job Descriptions • Not optional

• Must detail Essential Functions and BFOQs

• Must detail Exempt qualifiers - especially duties

• Must be accompanied by interview checklists for EEOC compliance

• Review annually – minimum – document

FLSA FUN FACTS

FLSA was created in 1938

Wage was .25/hr

Created Out of Need During Depression

States May Set Their Own Minimum Wage

4 States have a LOWER Minimum Wage

Seattle’s wage is $15.00

The NEW Federal Contractor Minimum Wage is $10.10

#1 violation area for Wrongful Termination Suits/Settlements

Non-Exempt Audit Tips! 32

THE NON-EXEMPT EMPLOYEE 32

Tipped Industries 33

Mandatory Tips and Service Charges are WAGES not Tips effective January 2014.

IRS looks for a 2% difference in credit card and cash tips. Employers are often required to make up the difference when the gap is wider.

34-36

Pay Policies that Cause Trouble (or lack there of)

Voting Policy

Jury Duty Policy

Bereavement Leave

FMLA – 2013 Changes

Military Family Leave – 2013 Changes

Pregnancy Disability – 2014 Changes

Lactation Policy – 2013/2014 Changes – State to State

PTO

Time and Attendance Policy

Discipline and Standards of Conduct

W-4 FORM

11

W-4 FORM 11

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I-9 FORMS # 3 AUDIT AREA

Nationally! Are your I-9s Compliant?

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EMPLOYEE CLASSIFICATION

• Common Law Employees

• Statutory Employees

• Statutory Non-Employees

• Independent Contractors

The Cost of Misclassifying

Employees is HIGH!!

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#1 Most Audited Area!

How Do You Know?

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“Although the IRS offer no ‘bright-line’ test to determine whether a worker is an employee or an independent contractor, the IRS takes the position that the more control the employer has over the worker, the more likely it is that the worker is an employee rather than an independent contractor.”

– Payroll Answer Book, answer 6-16

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IRS 20 FACTOR TEST

It’s All About Control!

1. Behavioral

2. Financial

3. Relationship

2-3

ABC TEST

A. Control or Direction of the Work

B. Outside Service

C. Independent Business or Trade

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Audit-Secure Tips • Create your own checklist. • Conduct an internal audit. • Document self-corrections. • Create SOP • Train Payroll, HR and A/P

5 TARGETED INDUSTRIES --------------------------------------------------------------------------------

1. Construction – Broadly defined!

2. Maintenance

3. Technology / Consulting

4. Transportation / Delivery

5. Hospitality

Payroll Answer Book, Answer 6-21

Let the IRS Decide!?

HOT TIP! Forms SS-8 & 8952

Use with Care.

W-9 Guidelines 6

W-9 Guidelines 6

Section 530 – Safe Harbor 8

1099 – MISC Reporting

< $600 or more

< Used for Non-incorporated Businesses

< Always Report Attorney Fees – > $600 and Inc.

< Payments Made to Healthcare providers > $600 and Inc. NOT 3rd Party Payers!

< Payments made for the purchase of fish to anyone

engaged in the fish catching industry.

BOTTOM LINE It is better to send too many 1099s than too few!

Sending ZERO 1099’s = $10,000 Fine!

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18-19

Executive Exempt 20

Administrative Exempt 21-22

Science and Learning Exemption

Must have 4 year degree – Usually

Must always need the degree for the job

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Court in California held:

A receptionist cannot be exempt just because a degree is held in business communications or a person is highly

experienced in public relations.

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Artistic and Creative 24

Computer Professional 25

Sales Exemptions 26

Check Points!

Exempt Salary Deductions 27-28

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PERKS AND BENEFITS 40-45

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Military Pay

•Supplemental Military Pay •Compensation paid to employees while on military

duty that represents the difference between employee’s regular pay and the pay provided by the state or federal government. •Temporary assignment – FITW, FICA, Medicare and

unemployment taxes • Indefinite assignment - 1099-MISC (over $600)

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Penalties for Non-Compliance

•For amounts not properly or timely deposited, the penalty rates are as follows: • 2% - Deposits made 1 – 5 days late • 5% - Deposits made 6 – 15 days late • 10% Deposits made 16 or more days late. • 10% - Amounts (that should have been deposited) paid directly to

the IRS or paid with your tax return • 15% Amounts still unpaid more than 10 days after the date of the

first notice the IRS sent asking for the tax due

•Plus interest compounded daily

•Penalties for MISSING Deposits can lead to Jail Time.

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Big Boss

Me

2 Years Later!

Seminar Disclaimer

This seminar is from an auditor’s point of view. It is possible your company

attorney may disagree with our interpretation. That is okay. It does not mean we

are right or that we have given you wrong information.

You may have an exception to the rule that your attorney knows about.

IRS CIRCULAR 230

Any tax advice included in this written or electronic communication was not

intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed on the taxpayer by any

governmental taxing authority or agency.

Answers: You Be the Judge Work Book Page -10

•Case One – Employee

•Case Two - Employee

•Case Three - Employee

Answers: Testing Your Knowledge 1. Backup withholding – 28%

2. Yes

3. Yes

4. Depends on the amount - Keep to the end of the year – A/P reports on 945 – cannot be deposited with P/R

5. Single and zero

6. No

WB-16

Answers: Testing Your Knowledge WB-Page 30-31

1. False

2. False

3. Maybe

4. False

5. True

8. True

9. Depends

10. True

11. Full-day off for personal reasons; safety violation; FMLA; week of hire/termination

12. Jury duty; military leave; partial day

13. True

14. False

15. C - $455 per week

Answers: Testing Your Knowledge Page 39

1. False

2. False

3. True

4. 30 minutes

Answers: Taxable or Nontaxable Income? Page 45

1. Yes

2. Fair Market Value

3. No

4. Yes

5. No

6. No

Answers: Testing Your Knowledge Workbook Page 51

1. False

2. True

3. (d) Four years … and as long as valid

4. If the IRS requests in writing

5. False

6. False

7. False

8. False

9. True