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Payroll Best Practices Webinar

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Learn how your company can implement best practices with payroll for year-end planning and beyond.

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Payroll Best Practices Webinar

  1. 1. 1 Payroll Best Practices: What You Need to Know for Year-End and Beyond Presenters: Debbie Crabtree, CPA Jennifer Kramer, M.S.; PHR
  2. 2. 2 ❯ Payroll best practices ❯ Payroll tax issues ❯ Taxability of fringe benefits: common questions ❯ Preparing for year-end payroll ❯ Year-end payroll reconciliations ❯ Compliance/legal issues related to payroll ❯ Healthcare reform: the impact on payroll ❯ Reporting requirements Agenda
  3. 3. 3 Payroll Best Practices
  4. 4. 4 ❯ Payroll system & workflow ❯ Use an accounting information system with integrated payroll functionality ❯ Automations for employee deductions and employer payroll taxes reduces manual interventions and errors ❯ Linking to federal and state agency withholding tables and internal programming improves accuracy and compliance ❯ Consider setting up a separate payroll bank account with sweeping feature from operating account ❯ Improves visibility to track clearance of hard payroll checks, direct deposits and payroll tax payments Payroll Best Practices
  5. 5. 5 ❯ Payroll system & workflow ❯ General ledger ❯ Set up separate liability and expense accounts in the ledger ❯ Improves visibility and ability to track inflows/outflows of payroll information ❯ Payroll taxes and related deductions are being paid timely ❯ Easier to identify problems and mistakes ❯ I.e., if user only sees increasing balances in the liability accounts, then payments are either not being made or are linked to wrong accounts ❯ Difficult to identify errors if only one liability and one expense account Payroll Best Practices
  6. 6. 6 ❯ Verifications that employees actually exist ❯ Match employee names and Social Security Numbers (SSNs) in system to Social Security cards ❯ Addresses, pay rates and hours worked ❯ E-verify service is free and easy to use, and allows for fast verification ❯ Confirms employment eligibility by comparing Form I-9 to data from Dept. of Homeland Security & Social Security Administration ❯ www.uscis.gov/e-verify ❯ SSN Verification Service is free and easy to use, and allows for fast verification; will assist with proper W-2 reporting ❯ Enter SSN and name online for immediate results ❯ Upload 250,000 SSN and names and receive the results the next day ❯ www.socialsecurity.gov/employer/ssnv.htm Payroll Best Practices
  7. 7. 7 ❯ Time tracking ❯ Use an electronic system to track time worked vs. using manual spreadsheets ❯ Reviewed and approved by direct supervisor for accuracy ❯ Someone involved in interacting with employees on a daily basis ❯ Implement checks and balances within the payroll department ❯ Access to the payroll system should be restricted based on individual user IDs ❯ Processed payroll reports should be reviewed by someone other than person completing the process Payroll Best Practices
  8. 8. 8 Payroll Tax Issues
  9. 9. 9 ❯ Payroll taxes for consideration affecting IL employees ❯ Federal – Employee ❯ Social Security 6.2 percent ($118,500 2015 wage base limit and 2016 not announced yet) ❯ Medicare 1.45 percent (no wage base limit) ❯ Additional Medicare .9 percent over $200,000 in wages ❯ Federal Withholding Based on allowances from W-4 ❯ Federal – Employer ❯ Social Security 6.2 percent ($118,500 2015 wage base limit and 2016 not announced yet) ❯ Medicare 1.45 percent (no wage base limit) ❯ Federal Unemployment .6 percent (first $7,000) ❯ Check for non-applicability for certain types of organizations (e.g., local governmental agencies) Tax Issues Related to Payroll
  10. 10. 10 ❯ Payroll taxes for consideration affecting IL employees ❯ State – Employee ❯ Illinois withholding Based on allowances from W-4 ❯ State – Employer ❯ State unemployment Based on rates from IDES ❯ Check for non-applicability for certain types of organizations (e.g. local governmental agencies) Tax Issues Related to Payroll
  11. 11. 11 ❯ Frequency to remit payment for payroll taxes ❯ Deadlines are established by assessing the amount of payroll tax liability during a four-quarter look-back period ❯ Current look-back period is 7/1/13 to 6/30/14 ❯ Notices will be sent to employers advising of a change in their frequency to remit the payroll taxes (i.e. monthly to semi-weekly) ❯ Be alert for notices that may affect your business for 2016 Tax Issues Related to Payroll
  12. 12. 12 ❯ Review federal and IL withholding ❯ Employers should have their employees complete a Form W-4 every year for federal and state withholding ❯ Annual compliance will help an employer with capturing: ❯ Changes in filing status ❯ Exemptions and withholding allowances ❯ Staying current with employment taxes affecting your employees ❯ Collecting information that you may not even think of (e.g., address changes!) Tax Issues Related to Payroll
  13. 13. 13 Taxability of Fringe Benefits: Common Questions
  14. 14. 14 ❯ Gift cards that are convertible to a cash value and should be includible in taxable compensation ❯ No de minimis exception for cash to be excluded from taxable compensation. See below from IRS website: Gift Certificates ❯ Cash or cash equivalent items provided by the employer are never excludable from income. An exception applies for occasional meal money or transportation fare to allow an employee to work beyond normal hours. Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable. ❯ A certificate that allows an employee to receive a specific item of personal property that is minimal in value, provided infrequently and is administratively impractical to account for, may be excludable as a de minimis benefit, depending on facts and circumstances. Gift Cards
  15. 15. 15 ❯ Generally, fee-based government officials are considered employees and should receive a Form W-2 in lieu of Form 1099-Misc ❯ Any fringe benefits received should be included on the Form W-2 ❯ In some cases the W-2 may only include benefits if no cash compensation is provided ❯ Examples: ❯ Car allowance ❯ Internet usage ❯ iPad or computer provided to alderman to retain Benefits to Aldermen
  16. 16. 16 ❯ Personal use is taxable unless de minimis ❯ Daily commuting is NOT de minimis ❯ Exception for qualified non-personal use vehicle ❯ Defined in IRC Regulation 1.274-5T. Some examples: ❯ Clearly marked police and fire vehicles ❯ Unmarked vehicles used by law enforcement officers. Officers must be authorized to carry a firearm, execute search warrants and make arrests. ❯ IRS FAQ on website states, “ A police or fire vehicle is clearly marked if it has insignia or words which make it clear that it is a police or fire vehicle. A marking on a license plate is not a clear marking for this purpose.” Employer-Provided Vehicles
  17. 17. 17 ❯ Final regulation issued May 19, 2010 ❯ Clearly marked police or fire officer vehicles are treated as qualified non-personal use vehicles if the following conditions apply: ❯ The employee must be on call at all times ❯ The employee must be required to use the vehicle for commuting ❯ The employer must prohibit personal use (other than commuting) for travel outside the officer’s or firefighter’s jurisdiction Employer-Provided Vehicles
  18. 18. 18 ❯ Final regulation issued May 19, 2010: ❯ Adds “public safety officer vehicle” to the qualified non-personal use vehicle exclusion ❯ A clearly marked public safety officer vehicle is a vehicle owned or leased by a governmental unit or any agency or instrumentality that is required to be used for commuting by a public safety officer ❯ A public safety vehicle is “clearly marked” if, through painted insignia or words, it is readily apparent that the vehicle is a public safety officer vehicle. Employer-Provided Vehicles
  19. 19. 19 ❯ Final regulation issued May 19, 2010: ❯ A public safety officer is an individual serving a public agency in an official capacity, with or without compensation, as a: ❯ Law enforcement officer, with power of arrest, authority to carry firearms and execute search warrants ❯ Firefighter ❯ Chaplain ❯ Member of rescue squad or ambulance crew ❯ Any federal, state or local government public safety officer who meets the on-call and commuting requirements above, and uses a clearly-marked government owned or leased vehicle in the course of his or her duties, is excepted from the substantiation requirements. Employer-Provided Vehicles
  20. 20. 20 ❯ The IRS recently announced that if cell phones are provided to employees for non-compensatory business reasons it will not be taxable to the employee and detailed records no longer need to be maintained. ❯ Examples of substantial business reasons: • Need to contact employee at all times for work-related emergencies • Requirement that the employee be available to speak with clients at times when the employee is away from the office • Need to speak with clients located in other time zones at times outside the employee’s normal work day ❯ See IRS Notice 2011-72 Employee Cell Phones
  21. 21. 21 ❯ Should be under an accountable plan ❯ Clothing must be worn as a condition of employment ❯ Those clothes are not suitable for everyday wear Uniforms and Work Clothes
  22. 22. 22 ❯ Examples who may deduct cost: Delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes and transportation workers ❯ Clothing worn by plain clothes officers would not be deductible even if a result of a union-negotiated contract ❯ Protective clothing: An employee can deduct the cost of protective clothing required in his/her work such as safety shoes or boots, safety glasses, hard hats and work gloves Uniforms and Work Clothes
  23. 23. 23 ❯ Can exclude from income the cost up to $50,000 of group-term life insurance ❯ The IRS determined cost for coverage in excess of $50,000 is includable as wages ❯ IRS Pub 15-B includes the table to determine taxable income ❯ Not subject to income tax withholding ❯ Is subject to FICA and Medicare taxes Group-Term Life Insurance
  24. 24. 24 Preparing for Year-End Payroll
  25. 25. 25 ❯ Verify employee information ❯ Employee names and SSNs in system match Social Security Cards ❯ Addresses are current and up to date ❯ W-2 preparations ❯ Personal use of a company vehicle (taxable fringe benefit) ❯ Calculation is typically based on total mileage vs. business miles ❯ Value of personal miles is included on W-2 (57.5 cents per mile for 2015; amount not released for 2016 yet) ❯ Employer needs to have employee track business vs. personal miles with written records/mileage log Preparing for Year-End Payroll
  26. 26. 26 ❯ W-2 preparations ❯ Medical insurance premiums for S-Corp shareholders ❯ Amounts are added to gross wages on W-2 (taken as adjustment on 1040) ❯ Cost of group-term life insurance over $50,000 worth of coverage is taxable income to the employee ❯ Annual bonuses ❯ Must have 12/31 check date to count as bonus for current year ❯ Otherwise, considered as next year income to employee and next year expense for employer ❯ If company is on a bi-weekly payroll schedule, need to coordinate with payroll department or 3rd party for unscheduled payroll run in current year Preparing for Year-End Payroll
  27. 27. 27 ❯ W-2 preparations ❯ Early retirement incentives ❯ If employee is offered a health insurance option with a cash alternative, the health insurance benefit becomes taxable to the employee. ❯ Clothing purchases for employees ❯ This is taxable to employees if the clothing is suitable for everyday wear Preparing for Year-End Payroll
  28. 28. 28 ❯ 401(k) contributions ❯ November/December timeframe is an excellent time to review contribution details ❯ Amount, percentage ❯ Contribution limits ❯ 2015: $18,000 ❯ Catch-up amount if age 50+ 2015: $24,000 ❯ Employer match, if applicable ❯ If employee is receiving a bonus, need specific instructions on withholding amounts and whether to suspend 401(k) contributions ❯ Check and review language of 401(k) plan regarding deductions related to regular pay and bonuses Preparing for Year-End Payroll
  29. 29. 29 ❯ W-2 reporting of health coverage ❯ If an employer filed less than 250 W-2 Forms for 2014, that employer is exempt from the requirement for 2015. ❯ If issued 250 or more W-2 Forms for 2014, then health insurance reporting must be included on W-2’s for 2015 issued in January 2016 (see IRS Notice 2012-9 for more guidance). ❯ Reported in box 12 using code DD ❯ Employee and Employer costs are included ❯ Amount is not taxable ❯ Other reminders ❯ Employer provided cell phones ❯ Value of cell phone, provided for business reasons, is excludable from an employee’s income as a working condition fringe benefit ❯ Personal use of employer provided cell phone, provided for business reasons, is also excludable from an employee’s income ❯ Considered a de minimis fringe benefit Preparing for Year-End Payroll
  30. 30. 30 Year-End Payroll Reconciliations
  31. 31. 31 ❯ Review bank reconciliations for un-cleared paychecks ❯ Need to confirm with employee if paychecks are un-cashed or lost to reissue ❯ Un-cashed paychecks may become unclaimed property ❯ Timing varies by state and type of entity holding funds (5 or 7 years in IL) ❯ W-3 summary form (Box 3) should match total gross wages expense on financial statements ❯ Watch for 2016 annual contribution rates from IDES, delivered 3rd/4th week of November ❯ Effective for Q1 2016 payroll Year-End Payroll Reconciliations
  32. 32. 32 ❯ IRS website - www.irs.gov ❯ IRS Pub 15-A-Employer’s Supplemental Tax Guide ❯ IRS Pub 15-B-Employer’s Guide to Fringe Benefits ❯ Taxable Fringe Benefit Guide: IRS website ❯ IRS Pub 963: Joint Publication with Social Security Useful References
  33. 33. 33 Compliance/Legal Issues Related to Payroll
  34. 34. 34 ❯ Independent Contractors ❯ Exempt vs. Non-Exempt Classifications ❯ Interns – Paid vs. Unpaid Agenda
  35. 35. 35 ❯ In fiscal year 2014, Wage and Hour Division (WHD) found over $240 million in back wages for more than 270,000 workers - “another year of meaningful progress toward our goal of ensuring a fair day’s pay for a fair day’s work.”
  36. 36. 36 ❯ Greater cooperation between agencies ❯ Equal Employment Opportunity Commission (EEOC) ❯ Department of Labor (DOL) ❯ Immigration and Customs Enforcement (ICE) ❯ Internal Revenue Service (IRS) ❯ State agencies ❯ More information sharing ❯ Greater need for revenue ❯ Hiring of additional staff/auditors ❯ Savvy workforce – more resources at fingertips The Latest Trends in Wage and Hour Compliance
  37. 37. 37 ❯ Independent contractors ❯ Exempt vs. non-exempt Beware: Two Kinds of Misclassification
  38. 38. 38 ❯ Tests for independent contractors include: ❯ Behavioral control ❯ Financial control ❯ Type of relationship Independent Contractors
  39. 39. 39 ❯ Providing $10.2 million in funding to 19 states to enhance misclassification auditing programs ❯ Marks the first time the DOL has awarded state grants to this effort ❯ Grants meant to help state’s unemployment insurance programs Department of Labor (DOL) Focus on Independent Contractors
  40. 40. 40 ❯ What degree of control does the employer have over work and who exercises that control? ❯ Who has paid for materials, supplies, and/or equipment? ❯ What type of skill is required for work? ❯ Is there a degree of permanence? ❯ Is the worker an integral part of the business? Questions the Court May Ask About Independent Contractors
  41. 41. 41 ❯ Employers are liable for: ❯ Payment of back taxes ❯ Unpaid Social Security/Medicare contributions ❯ Unpaid unemployment insurance ❯ Unpaid workers compensation premiums ❯ Penalties and interest Employee Misclassification
  42. 42. 42 ❯ IRS and DOL Memorandum of Understanding ❯ Result will be an increased number of employment tax audits ❯ And an increase in revenues DOL/IRS to Coordinate on Employee Misclassification
  43. 43. 43 States Benefitting ❯ Alabama ❯ Alaska ❯ California ❯ Colorado ❯ Connecticut ❯ Florida ❯ Hawaii ❯ Idaho ❯ Illinois ❯ Iowa ❯ Kentucky ❯ Louisiana ❯ Maryland ❯ Massachusetts ❯ Minnesota ❯ Missouri ❯ Montana ❯ New Hampshire ❯ New York ❯ Rhode Island ❯ Texas ❯ Utah ❯ Vermont ❯ Washington ❯ Wisconsin ❯ Wyoming
  44. 44. 44 ❯ Compliance at significantly reduced penalties ❯ May be your lifesaver? Resource link: http://www.treasury.gov/tigta/auditreports/2014reports/201440065fr.pdf IRS Voluntary Classification Settlement Program (VCSP)
  45. 45. 45 ❯ Requirements: • Consistent treatment as non-employees • Appropriate filing of 1099’s for last three years • No current disputes with IRS/or state agencies*** • Must treat as employees previously misclassified as IC’s ***Under revised guidelines, employers under IRS audit, other than an employment tax audit, can qualify for the VCSP. Program Eligibility
  46. 46. 46 ❯ Pay only 10 percent of employment tax liability ❯ No interest or penalties ❯ Not subject to employment tax audits related to classification issues Program Benefits
  47. 47. 47 ❯ Forced payment of all employment taxes for several years ❯ Significant interest/monetary penalties Risks of Non-Participation
  48. 48. 48 ❯ Submit an application (Form 8952) to the IRS at least 60 days from the date that you wish to begin treating misclassified workers as employees To Participate in the Program
  49. 49. 49 ❯ At least 75 percent of employers are not in compliance with the FLSA – might actually be closer to 95 percent. Fair Labor Standards Act (FLSA) Compliance
  50. 50. 50 ❯ National survey (Littler Mendelson): 49 percent of employers are concerned about a wage and hour audit ❯ Conducting audits ❯ Monitoring trends in wage and hour cases ❯ Reviewing exempt positions Wage and Hour Audits
  51. 51. 51 ❯ Hourly pay equals non-exempt ❯ Responsibilities determine status ❯ Title/payment type don’t determine status ❯ Duties test ❯ Relative importance of exempt duties ❯ Amount of time spent performing exempt work ❯ Relative freedom from direct supervision Exempt vs. Non-Exempt
  52. 52. 52 ❯ Avoid job deflation ❯ Keep a current, detailed record of the day-to-day activities of exempt employees ❯ Use performance evaluations that ask employees to describe and assess their own performance ❯ Make sure job descriptions are up-to-date Defending Exempt Misclassification
  53. 53. 53 ❯ Whole-day absences due to personal reasons other than sickness or disability. ❯ Whole-day absences due to sickness or disability (including work-related accidents) if this is done in accordance with a bona fide plan, policy or practice. ❯ Salary deductions made as penalties imposed in good faith for infractions of safety rules of major significance. ❯ Salary deductions made for unpaid disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules. ❯ Paying a proportionate part of the employee’s full salary for the time actually worked in the first workweek of employment or in the last workweek of employment. ❯ Paying a proportionate part of the employee’s full salary for the time actually worked in the workweek when the employee takes unpaid leave under the federal Family and Medical Leave Act (FMLA). Docking Exempt Pay
  54. 54. 54 ❯ Fair Labor Standards Act – Safe Harbor ❯ Employer must: ❯ Have a clearly communicated policy prohibiting improper deductions which includes a complaint mechanism ❯ Reimburse employees for improper deductions ❯ Make good faith commitment to comply in future Beware: Improper Deductions from Pay
  55. 55. 55 ❯ March 13, 2014, Presidential memorandum – Updating and Modernizing Overtime Regulations ❯ “…regulations regarding exemptions from the Act’s overtime requirement, particularly for executive, administrative, and professional employees (often referred to as “white collar” exemptions) have not kept up with our modern economy” ❯ *Update, modernize, simplify Presidential Memorandum
  56. 56. 56 ❯ 3/13/14 – Presidential memo signed ❯ 3/19/14 – “It will take a few months” ❯ 7/10/14 – “Before the end of the year” ❯ 12/5/14 – Notice of Proposed Rulemaking (NPRM) projected for February 2015 ❯ 5/5/15 – NPRM to Office of Management and Budget (OMB) for review ❯ 6/30/15 – NPRM announced ❯ 7/6/15 – NPRM published ❯ 9/4/15 – Comments due ❯ Mid 2016 – Expected release of new regulations Timeline
  57. 57. 57 ❯ Road map ❯ Salary basis ❯ Salary level ❯ Duties tests Regulations and Proposed Changes
  58. 58. 58 ❯ 2004: $455 per week ❯ Equivalent to $23,600 per year ❯ Excludes lowest 20 percent of salaried workers ❯ Proposed rule ❯ $970 per week ❯ Equivalent to $50,440 per year ❯ Automatic updates, link salary level to ❯ 40th percentile of weekly earnings for full-time salaried professionals, or CPI-U Salary Level
  59. 59. 59 ❯ Nondiscretionary bonuses ❯ Currently do not count toward $455 weekly salary threshold ❯ DOL considering permitting nondiscretionary bonuses to count toward 10 percent of new salary threshold ❯ Must be paid monthly or more frequently Salary Level
  60. 60. 60 ❯ Note that these are still proposed changes. ❯ DOL plans to rely on data from the first quarter of 2016 for setting the salary level. ❯ It is estimated that nearly 11 million employees will no longer qualify as exempt workers. ❯ Most part-time salaried workers will no longer qualify as exempt employees due to the new salary threshold. ❯ Bright spot amidst the haze – the salary threshold may eliminate the need to go further with the exemption tests for many employees. What is the Impact on Employers?
  61. 61. 61 ❯ Must be a structured educational experience ❯ For the benefit of the intern; not the company ❯ No promise of a job Beware of “volunteers” in the not-for-profit world Unpaid Interns
  62. 62. 62 ❯ Training time ❯ Travel time ❯ On-call time ❯ Lunches and breaks ❯ Automatic deductions ❯ Rounding ❯ Use of personal devices during non-work hours Beware: Other Wage and Hour Issues
  63. 63. 63 ❯ Lunches and breaks ❯ Amount of rest in every calendar week ❯ Vacation pay at termination ❯ Final pay at termination ❯ Deductions from pay/permissions ❯ Direct deposit Have Knowledge of State Laws Related to Payroll
  64. 64. 64 ❯ Increased scrutiny under law ❯ Equal Pay Act ❯ Lilly Ledbetter Fair Pay Act ❯ Paycheck Fairness Act ❯ Smartphone apps ❯ Creates positive employee relations ❯ Motivates your employees Fair Pay Practices are Important
  65. 65. 65 ❯ Track exempt employees hours ❯ Wage payment regulations ❯ Vacation - “Use it or Lose it” ❯ Recordkeeping and notice requirements ❯ Paperless payday Under the Radar
  66. 66. 66 ❯ Update job descriptions ❯ Review for exempt/non-exempt status ❯ Document your classification process ❯ Review classification of all Independent Contractors (IC’s) ❯ Have IC agreements in place ❯ Review work of all interns Compensation To-Do’s
  67. 67. 67 ❯ Review payment of overtime ❯ Acknowledge Safe Harbor requirements ❯ Audit lunch breaks for non-exempts ❯ Ensure time records for all non-exempts And More To-Do’s
  68. 68. 68 Healthcare Reform: The Impact on Payroll
  69. 69. 69 ❯ Healthcare reform is here to stay ❯ Healthcare reform is very confusing ❯ Guidance is coming out regularly, but there are still many unknowns ❯ Administrative burden will likely be very significant What Do We Know Today?
  70. 70. 70 Healthcare Reform’s Impact on Payroll/HR/Benefits HR/Benefits - Plan design changes - Compliance – notification requirements - Documentation that coverage has been offered - Communications regarding options - Determining measurement periods (for variable workers) - Workforce analysis - Determining employee count - Full-time vs. part-time - Seasonal workers Payroll - W-2 reporting - Additional Medicare taxes - Tracking/reporting hours worked - Tracking measurement periods (variable workers) - Fielding questions - Automatic enrollment - Payroll/timekeeping system adjustments
  71. 71. 71 ❯ Each system is different and has varying capabilities ❯ Think about what you will need your system to do going forward ❯ Work with your current payroll system to make changes for tracking and reporting ❯ Begin thinking about process to deal with administrative burdens The Payroll Perspective
  72. 72. 72 ❯ How will my system handle: ❯ Tracking of hire dates (multiple hire dates, rehires) ❯ Documentation of employment status ❯ Reporting of hours worked ❯ Full time equivalents ❯ Managing hours worked ❯ Tracking of measurement periods and stability periods ❯ Automatic enrollment Questions to be Asking
  73. 73. 73 ❯ How will your organization determine measurement periods, administrative periods and stability periods? ❯ How will your organization track hours to determine eligibility for part-time/variable employees? ❯ Who will be responsible for handling the additional administrative responsibilities? ❯ Tracking hours/reporting requirements ❯ Enrollments ❯ Questions Administrative Concerns
  74. 74. 74 Reporting Requirements
  75. 75. 75 ❯ The IRS uses the term “Applicable Large Employer” (ALE) to define those required to file: ❯ An ALE is an organization (including related entities) that employed an average of at least 50 FTE, including full-time equivalent employees, on business days during the preceding calendar year. ❯ A special rule applies for 2015 for this determination. You may use any consecutive six-month period during 2014, rather than being required to use all 12 months of 2014. ❯ Any employer with at least 50 FTE must file for 2015. NOTE: Any employer who issued at least 50 W-2 forms in 2014 may be subject to the reporting rules and should review further to identify requirements. Who Must File?
  76. 76. 76 ❯ Special rule for seasonal workers: ❯ An employer is not an ALE if the employer had 50 or more employees during 120 or fewer days or during four or fewer calendar months during the preceding year, and the 50-employee threshold was exceeded due to seasonal workers. Who Must File?
  77. 77. 77 There are four forms that may need to be filed by an ALE: ❯ 1095-C Employer-Provided Health Insurance Offer and Coverage: Large employers will provide one to each enrollee. The form provides information on the coverage provided and to whom and when the coverage was offered. ❯ 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns: Transmittal form employers will file with IRS along with all the Forms 1095-C. ❯ 1095-B Health Coverage: Insurers and self-funded plans will provide one to each enrollee; the form provides information on the coverage provided. ❯ 1094-B Transmittal of Health Coverage Information Returns: Transmittal form insurers and self-funded plans will file with the IRS along with all the Forms 1095-B. What Must Be Filed?
  78. 78. 78 When are employer mandate penalties effective? ❯ “Transition Relief” announced February 10, 2014 ❯ Employers with 50 to 99 FTEs – delayed until 1/1/16 ❯ Employers with 100 FTEs or more – effective 1/1/15 ❯ But, transition rules for 2015 may minimize need for changes until 1/1/16 NOTE: All ALEs must still file for 2015 even though employers with fewer than 100 FTEs will not be subject to employer mandate penalties. However, penalties for failure to file may still be assessed for 2015. Transition Relief for Some Employers
  79. 79. 79 ❯ First reporting to IRS must be filed no later than February 29, 2016 ❯ No later than March 31, 2016, if filing electronically ❯ Electronic filing is required for all large employers filing at least 250 returns (each full time employee is a separate return) ❯ All are encouraged to file electronically (those under 250 return may elect to file in paper form) ❯ First reporting to employees are due by January 31, 2016 (or February 1, 2016, because the 31st falls on a Sunday) When is Reporting Due?
  80. 80. 80 ❯ Electronic filing is required for all large employers filing at least 250 returns (each employee is a separate return) ❯ All are encouraged to file electronically (those with fewer than 250 returns may elect to file in paper form) ❯ Employee copies ❯ Electronic filing is permitted only if recipient affirmatively consents to receive the statement in electronic format ❯ Consent may be obtained on paper or electronically (e.g., via email) ❯ An employee who gives consent on paper must confirm the consent electronically ❯ Two ways to provide electronically: ❯ Via email or ❯ Inform individual how to access on employer’s website Electronic Filing
  81. 81. 81 ❯ Update job descriptions ❯ Review for exempt/non-exempt status ❯ Document your classification process ❯ Review classification of all IC’s ❯ Have IC agreements in place ❯ Review policies to ensure you are addressing wage and hour issues ❯ Review wage and hour pitfalls with supervisors ❯ Keep accurate payroll records ❯ Prepare for healthcare reform Your Focus: 2016
  82. 82. 82 Questions? Contact Information: Debbie Crabtree, CPA Manager, Government Accounting Services Government Employee Benefit and Payroll Consultant 630.566.8529 dcrabtree@sikich.com Jennifer Kramer, M.S.; PHR HR Consultant HR Consulting Services 630.210.3082 Jennifer.kramer@sikich.com
  83. 83. 83 LinkedIn: www.linkedin.com/company/sikich Facebook: www.facebook.com/sikichllp Twitter: www.twitter.com/sikichllp Blog: www.sikich.com/blog www.sikich.com

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