The DOL Ruling on Overtime and the President-elect’s First 100 Days

Most of the country is still buzzing over the improbable victory of Donald Trump over Hillary Clinton, but as you expect of us, we’re considering the impact his first year in the Presidency may have on business and taxes.  If you haven’t seen the President-Elects published plan for his first 100 days in office, a link to the transcript is as follows:  https://assets.donaldjtrump.com/_landings/contract/O-TRU-102316-Contractv02.pdf.

The President-elect’s proposals will impact a cross-section of American wage-earners.  We’ll wait for more concrete proposals to come out once the inauguration is completed in January, but we would like to stress one of our 2016 hot topics:  Overtime pay.

The Department of Labor has issued final regulations concerning the definitions of exempt and non-exempt employees as regards the payment of overtime rates.   These regulations must be enacted beginning December 1, 2016, and the President-elect has vowed to repeal this legislation in the first 100 days of his Presidency.

You’ve heard me speak on the subject of the HKA Informed Taxpayer Rule.  If you haven’t heard of us expound on this before, our Rule looks like this:  We believe it is our responsibility to make you aware of business and personal risk associated with positions you may want to take on your business and personal tax returns.  You, as an informed taxpayer, make an assessment of the risk associated and your tolerance for that level of risk.  We support your decisions (of course we never and you never promulgate fraud of any kind).

The DOL Overtime rule going live on December 1 (today!) would fall under this Rule.  The 100 day plan, may be better described as a wish list.  It is in no way a guarantee that all of these proposals will be adopted by this fractured and rancorous Congress.  Our advice is simple:  Adopt processes and procedures which enable you and your business to comply with the new regulations fully.  Compliance with these new rules is not easy, but penalties are stiff and should be considered before you accept the business risk of non-compliance.

Please call our office at 314-993-4285 if you have any questions.

 

Form 1099: The Do It All Form

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Form 1099 is the all-purpose player for the Internal Revenue Service. The form is used for many ordinary reporting items:

  • Rental
  • Earnings for non-employee services
  • Pension and IRA distributions
  • Interest and dividends

The key to the form, make sure you file it. Every business tax return has a question which asks if you have filed all 1099’s which were required to be filed. Not sure who would answer no to this question, but the Service is serious about yoking the threat of penalties on US business to get more income reporting forms filed. A few quick general issues to consider:

  • W2 and 1099: There is no instance where a W2 employee would also get a 1099. No the income threshold limit does not apply in this instance. No an employee cannot also have other non-employee earnings that shouldn’t have already been included in the W2. No bonuses cannot be put on a 1099 they must run through the W2.
  • Non-employee earnings vs Other income: If you are paying someone to work for your business and you are using any of the up to date accounting systems to run your business, make sure the non-employee/contractor is getting a 1099 for Non-employee earnings. The difference between Other Income and Non-employee earnings? Non-employee earnings is subject to FICA tax when they report the income on their personal return. Other Income does not require FICA tax on those earnings. (Technically it’s self-employment tax and not FICA, but it’s really the same thing).
  • Thresholds: If you are already running one 1099 for a contractor, stop stressing over the threshold limit and run it for everyone. What’s your downside, over-reporting? Allowing someone to not pick up income? Although the income does not have to be reported on a 1099, the recipient still has a responsibility for reporting it on their personal return.
  • Penalties: The penalty for failure to file a 1099 is $100 per payee statement. File everyone and don’t worry about a penalty. The penalty is the lesser worry, the bigger worry is the cost of scrutiny on your business practices and income tax returns the 1099 audit could cause. Even if the entire return is correct, the direct and intangible costs of an audit is worth avoiding.

The 1099 reporting season will be upon us soon. If you want us to assess how we can help you conform to the reporting requirement, please call us soon at 314-993-4285 so we can reserve time in our schedule.

Health Care Information Reporting: Seven Things Employers Can Think About Now

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If your organization is an applicable large employer, you must report information about the health care coverage you offered to your full-time employees. As an employer, it’s not too early to start thinking about these seven facts related to your information reporting responsibilities under the health care law.

  1. The health care law requires ALEs to report information about health insurance coverage offered to its full-time employees and their dependents as well as to the IRS.
  2. ALEs must report information about themselves, the coverage they offered – if any – and the individuals covered under the policy.
  3. ALEs are required to furnish a statement to each full-time employee that includes the same information provided to the IRS by January 31, 2017.
  4. ALEs that file 250 or more information returns during the calendar year must file the returns electronically.
  5. ALEs must file Form 1095-C, Employer-Provided Health Insurance Offer and Coverage with the IRS annually, no later than February 28, 2017 or March 31, 2017 if filed electronically. Forms 1095-C are filed accompanied by the transmittal form, Form 1094-C.
  6. Self-insured employers that are applicable large employers, and therefore are also subject to the information reporting requirements for offers of employer-sponsored health insurance coverage, must combine reporting under both provisions by filing a single information return, Form 1095-C, and transmittal, Form 1094-C.
  7. The ACA Assurance Testing System opened November 7, 2016 for tax year 2016 testing. Software developers – including employers and issuers who passed AATS for tax year 2015 – will not have to retest for tax year 2016; the Tax Year Software Packages will be moved into Production status. New participants need to comply with test requirements for tax year 2016. For more information, see Publication 5165, Guide for Electronically Filing ACA Information Returns for Software Developers and Transmitters.

Applicable large employers can find a complete list of resources and the latest news at the Applicable Large Employer Information Center. 

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Tax Tips Issue Number: HCTT 2016-75.

New Law Sets Jan. 31 W-2 Filing Deadline; Some Refunds Delayed Until Feb. 15

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A new federal law moves up the W-2 filing deadline for employers and small businesses to Jan. 31. The new law makes it easier for the IRS to find and stop refund fraud. It also delays some taxpayer refunds. Those taxpayers claiming the Earned Income Tax Credit or the Additional Child Tax Credit won’t see refunds until Feb.15, at the earliest.

Here are some key points to keep in mind:

  • Protecting Americans from Tax Hikes (PATH) Act. Enacted last December, the new law means employers need to file their copies of Forms W-2  by Jan. 31. These forms also go to the Social Security Administration. The new deadline also applies to certain Forms 1099. Those reporting nonemployee compensation such as payments to independent contractors submitted to the IRS are due Jan. 31. Employers have long faced a Jan. 31 deadline in providing copies of these forms to their employees. That date won’t change.
  • Different from past deadline. Employers normally had until the end of February, if filing on paper, or the end of March, if filing electronically, to send in copies of these forms. The IRS is working with the payroll community and other partners to spread the word.
  • Helps stop fraud or errors. The new Jan. 31 deadline will help the IRS to spot errors on returns filed by taxpayers. Having these W-2s and 1099s sooner will make it easier for the IRS to verify legitimate tax returns and get refunds to taxpayers eligible to receive them. The changes will allow the IRS to send some tax refunds faster.
  • Some refunds delayed. Certain taxpayers will get their refunds a bit later. By law, the IRS must hold refunds for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until Feb. 15. This means the whole refund, not just the part related to the EITC or ACTC.
  • File tax returns normally. Taxpayers should file their returns as they normally do. The IRS issues more than nine out of 10 refunds in less than 21 days. However, some returns may need further review. Whether or not claiming EITC or ACTC, the IRS cautions taxpayers not to count on getting a refund by a certain date. Consider this fact when making major purchases or paying debts.
  • Use IRS.gov online tools. Starting Feb. 15, the best way to check the status of a refund is with the Where’s My Refund? tool on IRS.gov.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers may need their Adjusted Gross Income amount from a prior tax return to verify their identity. They can get a transcript of their return at www.irs.gov/transcript.

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Special Edition Tax Tip Issue Number: 2016-16.

FLSA Overtime Changes

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To All:

We used to use the words, Significant Legislation, Landmark Legislation to preempt our interpretations of recent regulatory and tax law changes.  Today is more Significant Interpretation Enactment.  In 2014, President Obama directed the Secretary of Labor to update the DOL policy as regards overtime.  This is a truly a sea change!  The executive summary looks like this:  If your employee is making less than $47,476 annually, they are now required to receive overtime at 1.5X their annual rate of pay.  Do not be fooled into believing your exempt employees do not count!  This covers exempt and non-exempt employees.  Please raise a flag to your HR staff to ensure you will pass these new regulations.  Penalty per occurrence is $10,000.  The final rule takes effect December 1, 2016 and does NOT change any of the normal tests associated with employee classification testing, except add the annual income standard.

If you have any questions or would like more information, please do not hesitate to give us a call at our office, 314-993-4285.

Funding a Roth IRA With Disposable Income

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You have funded your 401(k) enough to receive a full company match (either traditional or Roth.)  You are paying all of your bills when they are due each month.  You have enough cash set aside for emergencies.  There is some cash left over.  Now you want to continue to save for retirement.  Continuing to fund your traditional or Roth 401(k) is a good idea. Even better is to fully fund a Roth IRA before moving back to your 401(k).  With a Roth IRA, you are able to take out your contributions at any time-one day…one year…ten years.  Any dollar you take out first comes out of your contributions so there is no chance that a portion of earnings will become taxable with possible penalties.  This is not the case for either a traditional or Roth 401(k).

If you are over the income levels to contribute directly to a Roth, no worries.  Contribute to a traditional IRA and then convert this to a Roth IRA the next day.  Since the first contribution was nondeductible on your tax return, the conversion is tax free.  Subsequently, any withdrawals at any time first come out of this converted amount, which will be tax free since you had basis in the full amount of the original conversion.

The only downside of doing this versus opening a taxable, non-retirement investment account, is that any growth is unable to be taken out without penalty.  This is the same downside to any retirement account.  The growth must be used for “retirement” (after you are 59 1/2 years old with a few other exceptions) to avoid penalty.

There are other nuances to Roth IRAs, such as what happens if you have a traditional IRA that has grown in value and you convert that to a Roth? Are those dollars able to be taken out of your Roth after the conversion without penalty? If you have these or any other questions, please do not hesitate to give us a call at 314-993-4285.

Understanding the “Nanny Tax” for your household employees.

Schedule H

If you employ a household employee, such as a maid, nanny, caretaker, yard worker, or driver, you could be subject to paying the “Nanny Tax”. This tax can encompass Social Security and Medicare (collectively known as FICA), FUTA, and SUI (state unemployment insurance tax).

The simplest way to pay these taxes is through filing a Schedule H at the end of the year and filing a quarterly Missouri Unemployment Tax.

Fortunately, you may not be required to pay all of these taxes – whether or not you have to pay these taxes depends on how much your household employee is earning….

If you do not exceed any of the thresholds set by the Federal and State laws, you will not pay any “Nanny Taxes”, and you will not have to file a Schedule H.

Understanding which thresholds you have exceeded can be complicated. The accountants at Hauk Kruse & Associates would like to simplify it for you:

Do I have to pay FICA?

If your employee is not

  • your spouse,
  • your child (under 21 years old),
  • your parent,
  • or under the age of 18

and you pay them more than $1,900 in a year, you DO have to pay FICA.

If you have to pay FICA, you pay a one-time amount at the end of the tax year and you will be responsible for paying a total of 7.65% of your employee’s wages. This includes the 6.2% for Social Security and the 1.45% for Medicare.

You are also responsible for making the payment for your employee’s portion of the FICA. You can do this two ways: by either withholding 7.65% from each of their paychecks or simply by adding it to your balance due on your Schedule H.

Do I have to pay FUTA?

If you employee is not

  • your spouse,
  • your child (under 21 years old),
  • or you parent

and you pay them more than $1,000 in a quarter, you DO have to pay FUTA. Once one quarter passes this threshold, all wages are subject for the entire tax year.

If you have to pay FUTA, you pay a one-time amount at the end of the tax year and you will be responsible for paying 0.6% of up to $7,000 in your household employee’s wages.

Your household employee will not have any withholdings on their paycheck in regards to FUTA.

Do I have to pay the SUI?

If you live in MISSOURI, you become liable for state unemployment when you meet any of the following requirements:

  • you pay your employee $1,000 in cash wages in a calendar quarter
  • you become liable under FUTA
  • you are determined to be a successor to a liable Missouri employer by DES staff

Unlike FICA or FUTA, the Missouri Unemployment Insurance Tax is filed and paid quarterly on MODES-4-7.

If you are required to pay the Missouri Unemployment Insurance Tax, you will pay quarterly and you will be responsible for paying 3.51% of up to $13,000 in your household employee’s wages.

Your household employee will not have any withholdings on their paycheck in regards to the Missouri Unemployment Insurance Tax.

If you live in a state other than Missouri and would like to know if you are required to pay your state’s SUI, please call our office at 314-993-4285.

If you have household employees and would like help filing your tax forms or understanding the “Nanny Tax”, please contact us at 314-993-4285 or at office@hkaglobal.com.


You must file all tax forms using an EIN. If you do not have one, you can apply for one online or we can file for one on your behalf.

Why funding a Roth IRA with disposable income first makes sense.

 

You have funded your 401(k) enough to receive a full company match (either traditional or Roth.)  You are paying all of your bills when they are due each month.  You have enough cash set aside for emergencies.  There is some cash left over.  Now you want to continue to save for retirement.  Continuing to fund your traditional or Roth 401(k) is a good idea.  A great idea would be to fully fund a Roth IRA before moving back to your 401(k).  You are able to take out your contributions to a Roth IRA at any time.  One day…One year…Ten years.  Any dollar you take out first comes out of your contributions so there is no worry that a portion of earnings will become taxable with possible penalties.  This is not the case for either a traditional or Roth 401(k).

If you are over the income levels to contribute directly to a Roth, no worries.  Contribute to a traditional IRA and then convert this to a Roth the next day.  Since the first contribution was nondeductible on your tax return, the conversion is tax free.  Subsequently, any withdrawals at any time, first come out of this converted amount, which will be tax free since you had basis in the full amount of the original conversion.

The only downside of doing this versus opening a taxable, non-retirement investment account, is that any growth is unable to be taken out without penalty.  This is the same downside to any retirement account.  The growth must be used for “retirement” (after you are 59 1/2 years old with a few other exceptions) to avoid penalty.

There are other nuances to Roth IRAs, such as what happens if you have a traditional IRA that has grown in value and you convert that to a Roth?   Are those dollars able to be taken out of your Roth after the conversion without penalty?  If you have this or any other questions, please do not hesitate to give us a call at (314) 993-4285.

The Year In Review 2013- The Color Run

As we approach the end of 2013, we thought it would be a good time for reflection.  We are proud to look back at some of the many charitable organizations we’ve supported in 2013. Each event that we participated in was unique in its own way.  Looking back, these events were fulfilling and ultimately led the HKA team to participate in more events that supported causes that were near and dear to our hearts.

“With malice toward none, with charity for all, with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in, to bind up the nation’s wounds”

– Abraham Lincoln.

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On April 27th, 2013, we put their best foot forward by participating in The Color Run – St. Louis in support of the Autism Speaks organization. The color run is an event series and 5K paint race takes place all over the world.  It is an untimed event, has no winners or prizes but runners are showered with colored powder at stations along the run.  Autism Speaks is an autism advocacy organization in the United States that sponsors autism research and conducts awareness and outreach activities aimed at families, governments, and the public. Autism affects 1 out of every 88 children.  It is a developmental disability that most families have been faced with.  Although there is no cure for ASDs, awareness is key to empower the families to better understand prevention and treatment for autistic children.

“The Color Run is a great time. The company is “for-profit”, but it selects a local organization as its charity partner for each race. The St. Louis charity partner was Autism Speaks which is awesome because I have a cousin who has severe autism. It’s good to know that while having a fun time you are helping others in the community.”- Brian Godefroid, HKA Global

The New IRS and Contracted Employees

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The new IRS and Contract Employees!

2012 is a new year. The same technology which has aided each of us in accomplishing amazing personal and business goals in 2011 is no longer the same in 2012, it continues to change. Technology is more interactive, capable of intuitive manipulation and interwoven into the very framework of our personal and business lives.

As we consider these grand marches, please do not believe the Internal Revenue Service (IRS) has stayed connected with the past. The IRS continues to progress in a massive installation and upgrade of it’s technology and the people who use it. No longer a cost center, the IRS is now a profit center for “the people”.

Small business should prepare itself to be more diligent with filing informational and tax forms. The most important area of consideration is in employment taxes. The IRS is increasing their technological scrutiny of forms and their interconnectivity. Payroll forms 940, 941, and W2 should all tie together, but often enough they do not.

This scrutiny involves all aspects of employment, including and of special interest, contract employees. If you or your business rely on contract labor, check your facts of employment against the contractor test to make sure you are claiming them appropriately.

Do not believe the IRS is the same entity of 2011 or 2010. The Service is faster, smarter, and better equiped to do their job than ever before. The newer smarter IRS has a voracious appetite to assess penalty and interest and is reluctant to abate after assessment.

Comparing the IRS of today with that of five years ago would be like comparing my first Radio Shack computer in 1984 to my son’s Xbox-Live.