Covered establishments should electronically submit their 2017 OSHA Form 300A information between now and July 1, 2018. Too see whether your organization is a covered organization, go to www.osha.gov/injuryreporting.
Jill Scheetz, PHR, SHRM-CP
On July 1, 2018 the Diane B. Allen Equal Pay Act (new EPA) becomes effective. At first blush, you might think your company has nothing to worry about. However, when the prize for plaintiffs who win a jury’s (or the NJ Division of Civil Rights’) opinion is treble damages, employers should be doing their due diligence to ensure their pay practices comply before the law goes into effect.
The Diane B. Allen Equal Pay Act amends the New Jersey Law Against Discrimination (NJ LAD), making discrimination in wages on the basis of any protected class (not just gender) an unlawful employment practice. Under the NJ LAD, employers are prohibited from discriminating in the rate or method of wages against an individual based on race, creed, color national origin, nationality, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy, sex, gender identity or gender expression, disability or atypical hereditary cellular or blood trait of any individual, or liability for service in the armed forces. The new EPA looks not only at wages but includes benefits as well when considering “compensation.”
If you haven’t already, business owners should be working with your HR and/or payroll staff to analyze current pay rates and benefits for all employees. Ensure job descriptions and the company’s tracking system for education, training, certifications, and experience are up to date. In addition, the company should be using a tracking system for production quantity and/or quality levels if these could be used in determining pay rates. Once you determine which employees are performing “substantially similar work,” you need to look at pay rates and benefits and ensure that these employees are compensated at the same rate, unless there is a legitimate business necessity that warrants the differential. Further, the company should review their employee handbook and company policies to ensure future compensation rates are calculated equitably for employees performing substantially similar work and that any differences are well documented. The employee handbook and company policies also need to make clear that retaliation against employees who request, discuss, or disclose compensation or compensation differentials to coworkers, an attorney, or government officials is subject to corrective action, up to and including termination. This is because treble damages may be awarded to an employee who wins a claim of employer retaliation for such disclosures.
A final note on the new EPA is that the law allows for a statute of limitations of six years (versus two years for the NJ LAD), and that an unlawful employment practice occurs each time the employee experiences compensation discrimination; i.e., each paycheck paid to an employee is a separate act. Therefore, employers should take reasonable action to comply with the new EPA now to help limit your liability.
Scammers’ tactics are always evolving to try to stay ahead of the news in an attempt to catch individuals off guard. This is especially true during tax season. We hear the warnings on the evening news and in news articles. PBGW wants to remind all our clients to be aware of the tactics that have been used and to be wary of anyone—no matter how convincing or how threatening they may be—who may be trying to gain access to your personal information or bank account information.
The IRS will not contact taxpayers by way of email, text messages, or social media to request personal or financial information, and they generally won’t rely on phone contact unless they’ve already sent several notices via the United States Postal Service. When the IRS does request payment, the IRS representatives will always ask that payments be made to the United States Treasury and they will give you the opportunity to question or appeal the amount owed. The IRS will NOT call to demand payment via a prepaid debit card, gift card, credit or debit card, or wire transfer. Nor will they threaten to send the police or other law-enforcement officials to arrest you, or threaten deportation or the suspension of your business or your driver’s license. If a caller uses any of these tactics or becomes hostile or insulting, it should tip you off that he/she is trying to scam you out of your hard-earned money.
Regardless of what your caller ID shows and the personal information the caller may have about you, which might lead you to believe that he/she is the official they say they are, don’t let your guard down. The Internet has more details about you than you care to know, all accessible with a few clicks of a mouse, and scammers can use caller ID spoofing to make the number appear as “IRS” on your phone. The top area codes from which these scams are currently coming are 202 (Washington, DC), 206 (Seattle), 314 (St Louis), 315 (New York), 415 (San Francisco), 470 (Atlanta), 631 (Long Island, NY), 646 (NY City), and 786 (Miami). To report IRS phone scams, you may call the Treasury Inspector General for Tax Administration at 800-366-4484 and/or contact the Federal Trade Commission at www.FTCcomplaintassistant.gov.
Now that some taxpayers may be expecting a refund, scammers may be sending emails posing as the Taxpayer Advocacy Panel (TAP) concerning your refund. Do not respond or click the links embedded in the email. TAP does not deal with individual taxpayer’s refunds, nor will they request individual taxpayer’s information. If you receive such an email, you can make the IRS aware of it by forwarding it to [email protected].
Of course, if you have concerns about an issue with the IRS or receive an IRS notice, we encourage you to contact your accountant and let them help you resolve the issue.
The IRS has released the 2018 W-4 form, which reflects the changes in the Tax Cuts and Jobs Act. We encourage employers to have all employees complete the new W-4 form so that their employees might not have too much nor too little tax withheld from their paychecks during a year when many are uncertain of how they will be impacted when they file their 2018 individual tax returns.
You can download the new form at the IRS website https://www.irs.gov/pub/irs-pdf/fw4.pdf.
Anne Kelly, CPP
When changes are on the horizon, it’s a good time to look at current practices and how we need to change to keep up with the changing environment. The 2018 Form W-4 has not yet been released due to the recent rate and bracket changes made in the Tax Cuts and Jobs Act. (However, the new tax withholding tables are in effect, and you need to be sure that your business is using them for all payrolls dated February 15 or later.) When the 2018 form is released, employers are required to put it into use within 30 days of its release and stop using the 2017 version.
PBGW and CASI Payroll Plus strongly encourages employers to have all of their employees complete the 2018 Form W-4 when it is released, which we expect to be sometime around the end of this month or beginning of March. This will encourage employees to consider their tax situation and contemplate how next year’s tax filing might look. I’ve worked in payroll long enough to have had a number of clients’ employees complain to their HR or payroll department about owing more tax than they can afford and wanting to put blame on the company or the payroll processor for the situation. Of course, if the employer is following the employee’s current W-4, the employer is not to blame for the employee’s tax situation. We note, however, that no HR, payroll, bookkeeper or other employee or owner should give tax or investment advice to an employee, unless the advisor is a professional advisor paid by the employer to do so. Instead, employers should tell their employees to speak to their own tax advisor.
As we look for changes to the W-4 form, we take this opportunity to point out general requirements and best practices related to this important employee form:
- Make sure that the W-4 you are using with employees is the full form including instructions (currently two pages).
- A signed W-4 is required to make a change in an employee’s withholding. An employer should never make a change based on an employee’s verbal or emailed request.
- An employer is required to begin withholding according to the employee’s newly completed W-4 form no later than the start of the first payroll period ending 30 days from the day the employer receives the form. This includes time for your payroll company to process the change.
- Employers MUST have an employee who claimed exempt on their W-4 complete a new W-4 no later than February 15*, or the employer MUST withhold based on the prior valid W-4 (without an exempt status) or withhold at the single status with 0 allowances. *For 2018 only, this deadline has been extended to February 28.
- Employers must retain copies of each employee’s most current W-4, and prior forms at least 4 years after the date it was last used.
Please call Anne Kelly, Payroll Administrator, or your accountant if you have questions about your W-4 forms.
Alyssa Giulianelli, CPA, MBA
In Pennsylvania, Form 1099-MISC reporting is no longer a task to think about only at year-end. Starting in 2018, some non-employee compensation and rental payments that your organization reports on Form 1099-MISC requires PA tax withholding and regular return filings. Read on for what you may need to do now—not at year end—to be compliant and avoid penalties and interest.
Pennsylvania withholding is now required on payments of $5,000 or more paid annually as:
1) PA source non-employee compensation or business income paid to a non-PA resident individual or disregarded entity (e.g., LLC) that has a nonresident member
2) Lease payments made in the course of a trade or business to a non-PA resident lessor who is an individual, a trust, or an estate by a lessee of PA real estate.
Lease payments include rents, royalties, bonus payments, damage rents, and other payments made pursuant to a lease and is reported in Box 1 of Form 1099-MISC. Non-employee compensation are those payments that you have been reporting in Box 7 of Form 1099-MISC, such as payments to independent contractors and other payments made to individuals for services in the course of your trade or business. Tax is to be withheld at the rate of 3.07%. The state tax withheld will be added to box 16 when you file your 1099-MISC returns in January 2019, and your state withholding tax ID will be added to box 17.
If you participate in either of these two activities and you don’t already have a PA employer withholding account, you will need to complete the PA-100 (PA Enterprise Registration) at www.pa100.state.pa.us. If you already have a PA employer withholding account, which you use to file your employee withholding tax payments and reports, you can use the same account number for your 1099 withholding. If you wish to keep the two accounts separate you can do so by completing the PA-100 for an additional account. The employer withholding/1099-MISC (e-TIDES) account is needed before you can start sending the Commonwealth payments for the tax withheld or filing reports.
Tax payments are made through the e-TIDES system similar to employer withholding, on a semi-weekly, semi-monthly, monthly, or quarterly basis, depending on the amount of your total tax withholding. For new withholding accounts, payments made the first year will be remitted on a quarterly basis (due the last day of April, July, October, and January for the immediately preceding three months, respectively). Thereafter, if the annual 1099 withholding tax is over $20,000 per year ($5,000 per quarter), you will remit taxes on a semi-weekly basis. For withholding totaling $3,999 – $19,999 annually, you will be a semi-monthly filer; $1,200 – $3,999, a monthly filer; and less than $1,200, a quarterly filer. If you wish to remit your 1099-MISC withholding along with your employee withholding, under one account, then your deposit frequency will follow the same schedule as your payroll.
PA Department of Revenue just released information this week that they will not assess penalties and interest for an entity’s failure to withhold the 3.07% tax on payments made through June 30, 2018. However, if the tax is withheld from payments prior to June 30th, you must remit payments timely according to the quarterly schedule, or face penalties and interest. All payments that fall under Act 43 of 2017 provisions made on or after July 1, 2018 must follow withholding requirements noted in this article. Therefore, it’s important that you have your PA withholding account set up and ready for payments well before the October 31, 2018 filing deadline (or earlier if you withhold earlier).
As an example, if you plan to pay an independent contractor, who is a New Jersey resident, $5,000 within the year for repairs and cleaning of your PA office, your payments will gross $5,000 but will include $153.50 of PA tax withholding. Therefore the net payment would be $4,846.50. It’s important to note that tax reciprocity does not apply to 1099 payments; tax reciprocity applies only to W-2 based employee compensation. Taking the Commonwealth’s July 1st revised deadline into consideration, please remember that payments made to vendors from January 1 through June 30 still count towards the $5,000 threshold.
If you haven’t been doing it already, we strongly suggest that you make it company policy that no company disbursements be made without first getting a completed and signed Form W-9 from your vendors. As soon as you contract with a vendor, have them complete this form before you begin business with them. Enter the recipients tax ID into your bookkeeping system and keep W-9s on file. Form W-9 is available at https://www.irs.gov/pub/irs-pdf/fw9.pdf. Pennsylvania does not have their own version of the W-9 form.
If you have questions about this new tax requirement or need help completing a PA-100, please contact your accountant at PBGW.
By Jill Scheetz, PHR, SHRM-CP
Remember that work you put into verifying the exempt status of your workers and minimum salary requirements back in late 2015 and early 2016? Well, that was all for naught…kind of.
On August 31, 2017, a federal judge in Texas granted a summary judgment to numerous business groups that had challenged the 2015 Obama administration proposal, which was made rule in 2016 by the U.S. Department of Labor but blocked by a temporary injunction issued by the same Texas court last November. The August 2017 ruling makes the overtime rule invalid, unless appealed by the DOL, which seems unlikely with the current administration.
This means that the minimum salary requirements under the Fair Labor Standards Act are back to the 2004 requirements of $455 weekly ($23,660 annually). However, we may not have heard the end of this topic under the Trump administration. Actions taken by Alexander Acosta, the U.S. Secretary of Labor, indicate that they may be looking for some sort of increase, but probably not to the level proposed by the Obama administration.
I also point out that the FLSA white collar exemption tests still remain, and employers should be certain that all employees classified as salaried, or exempt, should pass the duties test, which can be found on the FLSA or DOL websites. You can also contact me at 215-997-7270 or [email protected] to assist you in determining the status of employees of whom you’re uncertain.
By Luke Wischnowski, CPA
As a business owner or employee of a business in Pennsylvania, you have the opportunity to redirect your state tax liability to an educational organization of your choice.
The Pennsylvania Educational Improvement Tax Credit (“EITC”) program allows businesses to receive a tax credit for charitable contributions made to a qualifying educational organization. Eligible businesses include any company (including partnerships, single-member LLC’s, multi-member LLC’s and S-corporations) authorized to do business in Pennsylvania that is subject to the following:
- Personal Income Tax
- Capital Stock/Foreign Franchise Tax
- Corporate Net Income Tax
- Bank Shares Tax
- Title Insurance & Trust Company Shares Tax
- Insurance Premiums Tax
- Mutual Thrift Tax
- Malt Beverage Tax
PA Act 194 of 2014 made it possible for business owners or employees of a qualified business to create a “special purpose entity” (“SPE”) solely for the purpose of making donations under the EITC program. Only shareholders, partners, members or employees of business firms can create a special purpose entity that qualifies for the EITC program. As a result of this legislation, business owners can participate in the EITC program even if other owners in their firm are not interested. In addition, employees of qualified business firms can join SPE’s and make contributions under the EITC program. There are numerous SPE’s that have already been created throughout Pennsylvania and allow certain individuals wishing to participate in the EITC program to join. Most existing SPE’s require individual members to be “accredited investors,” which includes individuals with the following:
- Earned income exceeding $200,000 in each of the prior two years (or $300,000 together with a spouse) and expects the same for the current year, or
- Net worth greater than $1 million, either alone or with a spouse (excluding the person’s primary residence).
The requirement to be an “accredited investor” derives from the Securities and Exchange Commission (“SEC”) regulations that require a company that offers or sells its securities to register with the SEC or find an exemption from the registration requirements, one of which is selling its securities to “accredited investors” as defined above. In general, a company can offer its securities to 35 “non-accredited investors” without meeting the requirement to register with the SEC. Since most established SPE’s in Pennsylvania attract more than 35 investors, these organizations prefer to only secure financing from accredited investors.
To receive tax credits, a business or SPE must fill out a short application on the PA Department of Community & Economic Development (“Department”) website (http://dced.pa.gov/programs/educational-improvement-tax-credit-program-eitc/). Applications are approved by the Department on a first-come, first-served basis until the amount of allocated funds is exhausted. For the 2017-2018 fiscal year, the application process for companies applying for the first time began on July 3rd. Once approved, the business must contribute cash, personal property or services to a qualifying Scholarship Organization, Educational Improvement Organization or Pre-K Scholarship Organization within 60 days and provide the Department proof of the payment within 90 days of the approval date. Qualifying organizations are listed on the Department’s website. Many qualifying organizations, such as private schools, include a section on their website explaining how contributions can be made to their particular institution.
The state tax benefit that a business receives varies based on the number of years the business pledges to make the contribution. The tax credits awarded to a business that makes a one-time contribution is 75% of the total contribution, up to a maximum of $750,000 per taxable year. If a business agrees at the time of its application to make a contribution for two consecutive years, the amount of the tax credit is increased to 90% of the contributions, up to a maximum of $750,000 per taxable year. Tax credits can be applied to any type of PA tax liability and are considered effective on the first day of the taxable year in which the contribution is made. Married taxpayers may file a joint PA tax return and apply the EITC credit to the couple’s joint tax liability.
The charitable contribution made in connection with the EITC program does not affect the treatment of the donation for federal income tax purposes. The business can deduct the payment on its federal income tax return if it qualifies as a charitable contribution as defined in the Internal Revenue Code. In the case of a pass-through entity (i.e. partnership or S-corporation) or SPE, the contribution would pass through to the owner’s individual income tax return as an itemized deduction.
Participating in the EITC program is a great way to give back to your local community while simultaneously reducing your effective tax rate. If you wish to participate in the program during 2017, you should start the application process as soon as possible before the allocated funds in the state budget are depleted. Even if you do not meet the deadline for 2017, understanding more about the EITC program can help you plan your charitable giving arrangements for next year. As a reminder, the program requires approval from PA lawmakers on a yearly basis in conjunction with the passage of the state budget and has been running since its inception in 2001. As your trusted advisors, we at PBGW would be happy to assist you with determining the most effective way to participate in the EITC program and support your local community.
In the Intelligencer’s annual “Best of Bucks” poll, our own Ted Landis was voted “Best Accountant / CPA”. Congratulations Ted!
If you’re anything like me, by now you have broken all of your New Year’s resolutions. Actually, if you’re like me, you’ve stopped making any New Year’s resolutions (can’t stand the failure rate).
But please don’t fret, there is still plenty of 2016 left for you to redeem yourself. You still have time to review, update or prepare your will. But what if you’re thinking that considering your will was not on your list of resolutions? What then? I really don’t care, because it should have been on your list of resolutions. It should be reviewed every few years to make sure your final directives really say what you want.
So, when is the last time you considered your will? Do you even have a will? If you have a will, do you know what it says? Does it still say what you would like it to say?
What happens if you don’t have a will? Many people are surprised to find that if you’re a Pennsylvania resident and haven’t written your own will, the Commonwealth of Pennsylvania has written one for you. If you die having written your own will (called testate), then you can appoint your own executor and dispose of your assets as you wish (as long as what you direct is allowed by law). If you die without a will (called intestate), then your estate is required to follow the Pennsylvania laws of Intestate Succession. Therefore, if you die without a will, your executor is determined by the Courts and your assets are disposed of as required by these intestate laws, none of which may be what you would have wanted.
In addition to what your will directs (or in spite of what your will directs), some assets will be transferred based on how they are titled. Real estate, bank accounts, life insurance, and retirement accounts are good examples of this. You may direct in your will that a piece of real estate gets transferred to a certain person. However, depending on how you have the real estate titled, it may go to someone else. The titling of property will generally take precedence over what your will states. Your will may also direct that your bank accounts all go to your spouse or be split evenly between all of your beneficiaries; however, if you have the account titled in joint names or as a payable-on-death (POD) account, it will follow what is on the account. Another item we see a lot is accounts with beneficiary designations. Again, generally upon your death these retirement accounts, life insurance contracts, annuity contracts, and IRA accounts will be paid to the named beneficiary no matter what your will says. A quick item related to this is to check these beneficiary designations. Are the named beneficiaries still alive and still the people you want to be beneficiaries? You may be surprised at the number of ex-spouses that are still (mistakenly) named as beneficiaries on life insurance policies.
I find that generally no one likes to talk about their final wishes and what will happen when they are gone. So why am I pushing such a grim subject? Unfortunately, a couple of years ago one of my new clients was tragically killed in an accident at work. He had a wife and three children. I was surprised to learn that he and his wife had never gotten around to preparing a will. So, unfortunately, in addition to all of the terrible problems dealing with the accident, the lack of a will caused many additional problems and issues that needed to be dealt with.
So this is now one of my soap box items for all of my clients. I want you all to have a will and know what it says. I realize that there are many more issues that may need to be considered in your will, especially if you have minor children, but please do not let this stop you from preparing a will. Even a simple will is better than no will. Although there may be plenty of 2016 left, none of us knows how much time we actually have to get this done. So do it now!
Please let us know if you would like some help with this. We may be able to help you work through some of the various options including coordinating your will with the titling of your assets and review various tax consequences and gifting alternatives.