5. The Truth
Regularly, 75% of employers make payroll errors! –
HelpDesk for Payroll Professionals
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
6. 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.
32
9. Payroll Department Audit-Secure Checklist
1. Reasonable Basis File
• Professional Resources, Government Resources, Desk References
• 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 and 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 – Review Annually
• Must detail Essential Functions and BFOQs and Exempt qualifiers - especially duties
• Must be accompanied by interview checklists for EEOC compliance
6. Training
• Initial and Annual training
• Compliance and incentive
• Just in time and Just in case
• Shows you do everything possible to obey the law
Rule of 3s!
10. EMPLOYEE CLASSIFICATION
• Common Law Employees
• Statutory Employees
• Statutory Non-Employees
• Independent Contractors
The Cost of Misclassifying
Employees is HIGH!!
1
12. IRS 20 FACTOR TEST
It’s All About Control!
1. Behavioral
2. Financial
3. Relationship
2-3
13. ABC TEST
A. Control or Direction of the Work
B. Outside Service
C. Independent Business or Trade
4-5
Audit-Secure Tips
• Create your own checklist.
• Conduct an internal audit.
• Document self-corrections.
• Create SOP
• Train Payroll, HR and A/P
17. 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!
9
18. 2015’s 1099 – K
In January 2015, your Merchant Processor will send a
1099K for all of your credit card income in 2014.
You are NOT required to reconcile their numbers with your own.
If your reported CC income is greatly different from the
1099 K totals, it MAY trigger an IRS audit!
Joe Kristan, writer of Tax Update Blog at Roth & Company writes,
“The real use of the 1099-Ks will be to identify people in the
eBay/Amazon economy who aren’t reporting their income.”
29. Trainer Bonus Gifts
with any order placed today
SOP Development Guide
With samples of W-4 SOP and others
Affordable Care Act Updates
Two documents – Total 17 pages of updates/checklists
Internal Audit Checklists
W-4 and ABC Checklists
PTO Policy
Front loading
32. Science and Learning
Exemption
Must have 4 year degree – Usually
Must always need the degree for the job
---------------------------
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.
17
40. 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)
42
41. 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.
45
44. Answers: Testing Your Knowledge Workbook Page 46
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
