Saturday, October 12, 2019

U.S. Department of Labor Issues Notice of Proposed Rulemaking for Tipped Employees

WASHINGTON, DC – The U.S. Department of Labor announced a proposed rule for tip provisions of the Fair Labor Standards Act (FLSA) implementing provisions of the Consolidated Appropriations Act of 2018 (CAA). The proposal would also codify existing Wage and Hour Division (WHD) guidance into a rule.
The CAA prohibits employers from keeping employees' tips. During the development of those provisions, the Department provided technical assistance to Members of Congress. The Department's proposed rule would allow employers who do not take a tip credit to establish a tip pool to be shared between workers who receive tips and are paid the full minimum wage and employees that do not traditionally receive tips, such as dishwashers and cooks.
The proposed rule would not impact regulations providing that employers who take a tip credit may only have a tip pool among traditionally tipped employees. An employer may take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (currently $2.13 per hour) and the federal minimum wage. Establishments utilizing a tip credit may only have a tip pool among traditionally tipped employees.
Additionally, the proposed rule reflects the Department's guidance that an employer may take a tip credit for any amount of time an employee in a tipped occupation performs related non-tipped duties with tipped duties. For the employer to use the tip credit, the employee must perform non-tipped duties contemporaneous with, or within a reasonable time immediately before or after, performing the tipped duties. The proposed regulation also addresses which non-tipped duties are related to a tip-producing occupation.
"The proposed rule shows the Department's commitment to ensure that employees' tips are not stolen," said Wage and Hour Administrator Cheryl Stanton. "This proposal offers a clear pathway for both employers and employees to legally operate a tip pool. The Department is also seeking to add further guidelines in order to complement congressional action and solidify current guidance with the benefit of public input through notice and comment rulemaking."
This NPRM is available for review and public comment for 60 days. The Department encourages interested parties to submit comments on the proposed rule. The NPRM, along with the procedures for submitting comments, can be found at the WHD's Proposed Rule website.
WHD's mission is to promote and achieve compliance with labor standards to protect and enhance the welfare of the Nation's workforce. WHD enforces Federal minimum wage, overtime pay, recordkeeping, and child labor requirements of the FLSA. WHD also enforces the Migrant and Seasonal Agricultural Worker Protection Act, the Employee Polygraph Protection Act, the Family and Medical Leave Act, wage garnishment provisions of the Consumer Credit Protection Act, and a number of employment standards and worker protections as provided in several immigration related statutes. Additionally, WHD administers and enforces the prevailing wage requirements of the Davis Bacon Act and the Service Contract Act and other statutes applicable to Federal contracts for construction and for the provision of goods and services.
The mission of the Department of Labor is to foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.
Agency
 
Wage and Hour Division
Date
 
October 7, 2019
Release Number
 
19-1800-NAT
Contact: Emily Weeks
Phone Number
 

Friday, October 11, 2019

Breaking: DOL finalizes $35K overtime threshold

The U.S. Department of Labor (DOL) announced today it will publish a final overtime rule, setting the minimum salary threshold for overtime eligibility at $35,568. The regulations implement the Fair Labor Standards Act (FLSA)'s overtime mandate and, according to a senior DOL official, will make an estimated 1.3 million additional U.S. workers eligible for overtime pay. The final rule will be effective January 1, 2020.

The threshold is slightly higher that the $35,308 proposed in the initial draft of the rule and also will allow employers to count non-discretionary bonuses, incentives, and commissions as up  to 10% of an employee's salary level, as long as those bonuses are paid annually. The FLSA's exemption threshold for highly-compensated employees will be set at $107,432, lower that in DOL's initial draft but still higher than the previous threshold of $100,000.

What is it?

The FLSA finalized a new rule that would increase the minimum salary requirement for exempt employees.

What does this mean for business owners?

Any employee on a salary less than $38,568 will now be eligible for overtime. Clients that don't want to raise their employee's salaries to the new minimum will need a system to track their hours and overtime.

Friday, September 13, 2019

Tax Withholding Estimator helps retirees; figures tax on Social Security benefits


WASHINGTON — The new Tax Withholding Estimator, launched last month on IRS.gov, includes user-friendly features designed to help retirees quickly and easily figure the right amount of tax to be taken out of their pension payments. 

The mobile-friendly estimator replaces the Withholding Calculator. The estimator has features specially tailored to the unique needs of retirees receiving pension payments and Social Security benefits.

The new tool offers retirees, as well as employees and self-employed individuals, a more user-friendly way to check their withholding. Whether they receive wages or pension payments, it helps taxpayers estimate if the right amount is being withheld from their income to cover their tax liability. The estimator uses a simple, six-step question-and-answer format using information like marital or filing status, income, withholding, adjustments, deductions and credits.

To help people use the tool most effectively, the IRS is holding a free two-hour webinar on Thursday, Sept. 19 at 2 p.m. Eastern time. Among other things, the webinar will feature step-by-step instructions on how to use the new estimator and a live question-and-answer session. To sign up, visit the webinar page on IRS.gov.


Special help for retirees

A retiree can use the estimator to enter any pension income or Social Security benefits they or their spouse receive. The tool then automatically calculates the taxable portion and incorporates it into an overall estimate of their projected tax liability and withholding for the year. If a withholding change is needed, the retiree can choose a tax due of close to zero or a refund amount. The estimator will then link to Form W-4P, Withholding Certificate for Pension or Annuity Payments, and give the retiree a specific withholding recommendation based on the option chosen. It also gives instructions on how to fill in each line of the form.



Enhancements for everyone    

The enhancements for retirees are just a few of the many new features offered by the Tax Withholding Estimator. Others include:

  • Plain language to improve taxpayer understanding.
  • Mobile-friendly design.
  • A new progress tracker to help taxpayers know how much more information they need to enter.
  • The ability to go back and forth through the steps, correct previous entries and skip questions that don’t apply.
  • Tips and links to help users quickly determine if they qualify for various tax credits and deductions.
  • Automatic calculation of taxes on self-employment income.
The IRS urges both pension recipients and wage-earners to do a Paycheck Checkup now and review their withholding for 2019. This is especially important for anyone who faced an unexpected tax bill or penalty when they filed earlier this year. It’s also a critical step for those who made withholding adjustments in 2018 or had a major life change, such as marriage, the birth of a child, adoption or buying a home.

People most at risk of having too little tax withheld include those who itemized in the past, but now take the increased standard deduction. They also include households with two wage earners, employees with non-wage sources of income and those with complex tax situations.

Also, anyone who changes their withholding in the middle or latter part of this year should do another Paycheck Checkup in January. That will help ensure that they have the right amount of tax withheld for all of 2020.

Treasury, IRS release final and proposed regulations on new 100% depreciation

WASHINGTON — The Treasury Department and the Internal Revenue Service today released final regulations and additional proposed regulations under section 168(k) of the Internal Revenue Code on the new 100% additional first year depreciation deduction that allows businesses to write off most depreciable business assets in the year they are placed in service by the business.

The regulations released today on IRS.gov have been submitted to the Federal Register and may vary slightly from the published documents due to minor editorial changes. The documents published in the Federal Register will be the official documents.

The final regulations finalize the proposed regulations issued in August 2018 which implement several provisions included in the Tax Cuts and Jobs Act (TCJA). The proposed regulations contain new provisions not addressed previously.

The 100% additional first year depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.

The deduction applies to qualifying property acquired and placed in service after Sept. 27, 2017. The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property. The final regulations also provide rules for qualified film, television and live theatrical productions.

Additionally, in the proposed regulations, the Treasury Department and IRS propose rules regarding (i) certain property not eligible for the additional first year depreciation deduction, (ii) a de minimis use rule for determining whether a taxpayer previously used property; (iii) components acquired after Sept. 27, 2017, of larger property for which construction began before Sept. 28, 2017; and (iv) other aspects not dealt with in the previous August 2018 proposed regulations. The proposed regulations also withdraw and repropose rules regarding application of the used property acquisition requirements (i) to consolidated groups, and (ii) to a series of related transactions. 

For details on claiming the deduction or electing out of claiming it, see the final regulations or the instructions to Form 4562, Depreciation and Amortization (Including Information on Listed Property). For tax years that include Sept. 28, 2017, see Rev. Proc. 2019-33 for further information about making a late election or revoking an election.

Taxpayers who elect out of the 100% depreciation deduction must do so on a timely-filed return. Those who have already timely filed their 2018 return and did not elect out but still wish to do so have six months from the original deadline, without an extension, to file an amended return.

For more information about this and other TCJA provisions, visit IRS.gov/taxreform.

Friday, August 9, 2019

Tax tips for summertime employment


Summertime workers often qualify for tax credits or deductions. Taxpayers working summer jobs should file a return regardless of whether they earn enough to owe federal income tax. Filing a return provides a refund for taxes withheld when they file next year.

For more information, see: Have a sunnier tax season with these summertime IRS tax tips.

IRS launches new Tax Withholding Estimator online tool


The Internal Revenue Service is alerting the small business and self-employed community about its recent launch of a new IRS Tax Withholding Estimator online tool. It replaces and expands the previous IRS Withholding Calculator.

The new tool offers a mobile-friendly, step-by-step way for employees, self-employed individuals, and retirees to tailor the amount of income tax withheld from their wages, self-employment income and pension payments. Other features include:
  • The ability to more effectively project either a tax due amount close to zero, or a refund amount during filing time.
  • Self-employment tax for individuals who have self-employment income in addition to wages or pensions.
  • A new progress tracker to help users see how much more information they need to input.
  • The ability to move back and forth through the steps, correct previous entries and skip questions that don’t apply.
  • Tips and links to help the user quickly determine if they qualify for various tax credits and deductions.
  • A mobile-friendly design.
The IRS continues to urge everyone to do a Paycheck Checkup and review their withholding for 2019. This is especially important for those who faced an unexpected tax bill or a penalty when they filed earlier this year. 
For more information, see: IRS launches new Tax Withholding Estimator; Redesigned online tool makes it easier to do a paycheck checkup.

Friday, May 4, 2018

For Small Business Week: Tax credit can help employers hiring new workers; key certification requirement applies


With many businesses facing a tight job market, the Internal Revenue Service reminds employers to check out a valuable tax credit available to them for hiring long-term unemployment recipients and other categories of workers with employment barriers.

During National Small Business Week — April 29 to May 5 — the Internal Revenue Service is highlighting tax benefits and resources designed to help new and existing small businesses.

The Work Opportunity Tax Credit (WOTC) is a long-standing income tax benefit that encourages employers to hire designated categories of workers who face significant barriers to employment. For any employer considering this option, the WOTC may be able to help.

For those who haven’t claimed the WOTC in a while, the IRS noted that legislation enacted in recent years has both expanded and modified the credit. For example, legislation effective Jan. 1, 2016, added a new category for long-term unemployment recipients who had been unemployed for a period of at least 27 weeks and received state or federal unemployment benefits during part or all of that time.

Here’s how it works.

The credit, usually claimed on Form 5884, Work Opportunity Credit, is generally based on wages paid to eligible workers during the first two years of employment. To qualify for the credit, an employer must first request certification by filing IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, with the state workforce agency within 28 days after the eligible worker begins work. Other requirements and further details can be found in the instructions to Form 8850.

There are now 10 categories of WOTC-eligible workers. Besides long-term unemployment recipients, the other categories include certain veterans and recipients of various kinds of public assistance, among others.

The 10 categories are:
  • Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients
  • Unemployed veterans, including disabled veterans
  • Ex-felons
  • Designated community residents living in Empowerment Zones or Rural Renewal Counties
  • Vocational rehabilitation referrals
  • Summer youth employees living in Empowerment Zones
  • Food stamp (SNAP) recipients
  • Supplemental Security Income (SSI) recipients
  • Long-term family assistance recipients
  • Qualified long-term unemployment recipients.
Eligible businesses claim the WOTC on their income tax return. The credit is first figured on Form 5884 and then becomes a part of the general business credit claimed on Form 3800, General Business Credit.

Though the credit is not available to tax-exempt organizations for most categories of new hires, a special rule allows them to get the WOTC for hiring qualified veterans. These organizations claim the credit on Form 5884-C, Work Opportunity Credit for Qualified Tax Exempt Organizations Hiring Qualified Veterans. Visit the WOTC page on IRS.gov for more information.

How the Employer Credit for Family and Medical Leave Benefits Employers


During National Small Business Week, the IRS focuses on educating employers about the employer credit for paid family and medical leave created by the Tax Cuts and Jobs Act passed last year. Employers may claim the credit based on wages paid to qualifying employees while they are on family and medical leave.


Here are some facts about this credit and how it benefits employers:
  • To claim the credit, employers must have a written policy that meets certain requirements:
    • Employers must provide at least two weeks of paid family and medical leave annually to all qualifying employees who work full time. This can be prorated for employees who work part time.
    • The paid leave must be not less than 50 percent of the wages normally paid to the employee.
  • A qualifying employee is any employee who:
    • Has been employed for one year or more.
    • For the preceding year, had compensation that did not exceed a certain amount. For 2018, the employee must not have earned more than $72,000 in 2017.
  • For purposes of this credit, “family and medical leave” is leave for one or more of the following reasons:
    • Birth of an employee’s child and to care for the newborn.
    • Placement of a child with the employee for adoption or foster care.
    • To care for the employee’s spouse, child, or parent who has a serious health condition.
    • A serious health condition that makes the employee unable to perform the functions of his or her position.
    • Any qualifying event due to an employee’s spouse, child, or parent being on covered active duty – or being called to duty – in the Armed Forces.
    • To care for a service member who is the employee’s spouse, child, parent, or next of kin.
  • The credit is a percentage of the amount of wages paid to a qualifying employee while on family and medical leave for up to 12 weeks per taxable year. 
  • An employer must reduce its deduction for wages or salaries paid or incurred by the amount determined as a credit.  Any wages taken into account in determining any other general business credit may not be used toward this credit.
  • The credit is generally effective for wages paid in taxable years of the employer beginning after December 31, 2017. It is not available for wages paid in taxable years beginning after December 31, 2019.
More Information:

Employer Credit for Family and Medical Leave FAQs

For Small Business Week, IRS offers tips to small business owners about the overlooked home office deduction


The Internal Revenue Service today reminded small business owners who work from a home office that they may be overlooking a common deduction.

The IRS encourages small business owners to explore the guidelines surrounding home office deductions so they understand the legal guidelines and options available. More details are available in Publication 587.

As part of National Small Business Week (April 29-May 5), the IRS is highlighting a series of tips and resources available for small business owners. For someone considering claiming the home office deduction, there are two options available:

Regular method

The first option for calculating the home office deduction is the regular method. This method requires computing the business use of the home by dividing the expenses of operating the home between personal and business use. Direct business expenses are fully deductible and the percentage of the home floor space used for business is assignable to indirect total expenses. Self-employed taxpayers file Schedule C, Profit or Loss From Business (Sole Proprietorship), and compute this deduction on Form 8829, Expenses for Business Use of Your Home.

Simplified method

The second option, the simplified method, reduces the paperwork and recordkeeping burden. The simplified method has a prescribed rate of $5 a square foot for business use of the home. There is a maximum allowable deduction available based on up to 300 square feet. Choosing this option requires taxpayers to complete a short worksheet in the tax instructions and enter the result on the tax return. There is a special calculation for daycare providers. Self-employed individuals claim the home office deduction on Schedule C, Line 30, and farmers claim it on Schedule F, Profits or Loss from Farming, Line 32.

Regardless of the method used to compute the deduction, business expenses in excess of the gross income limitation are not deductible. Deductible expenses for business use of a home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs. In general, expenses for the parts of the home not used for business are not deductible.

Deductions for business storage are allowed when the home is the only fixed location of the business, or for regular use of a residence for daycare services; exclusive use isn't required in these cases.
Further details on the home office deduction and the simplified method can be found in Publication 587, Business Use of Your Home, on IRS.gov.

IRS urges small businesses: Protect IT systems from identity theft

The IRS, state tax agencies and the nation’s tax industry are warning small businesses to be on-guard against a growing wave of identity theft attempts against employers.

Small business identity theft is big business for identity thieves. When businesses and their employees have their identities stolen, their sensitive information can be used to open credit card accounts or file fraudulent tax returns for bogus refunds.

The Internal Revenue Service, state tax agencies and the private-sector tax community -- partners in the Security Summit -- are marking “Small Business Week” with a series of reminders to taxpayers and tax professionals. The week concludes with warnings about small business identity theft.

In the past two years, the Internal Revenue Service has noted a sharp increase in the number of fraudulent filings of Forms 1120, 1120S and 1041 as well as Schedule K-1. The fraudulent filings apply to partnerships as well as estate and trust forms.

Identity thieves are displaying a sophisticated knowledge of the tax code and tax industry filing practices as they attempt to obtain valuable data to help file fraudulent returns. To help counter this, Security Summit partners have expanded efforts to better protect business filers and identify suspected identity theft returns.

Identity thieves have long made use of stolen Employer Identification Numbers (EINs) to create fake Forms W-2 that they would file with fraudulent individual tax returns. Fraudsters also used EINs to open new lines of credit or obtain credit cards. Now they are using company names and EINs to file fraudulent returns.

As with fraudulent individual returns, there are certain signs that may indicate identity theft. Business, partnerships and estate and trust filers should be alert to potential identity theft and contact the IRS if they experience any of these issues:
  • Extension to file requests are rejected because a return with the Employer Identification Number or Social Security number is already on file;
  • An e-filed return is rejected because a duplicate EIN/SSN is already on file with the IRS;
  • Received 5263C or 6042C Letters;
  • An unexpected receipt of a tax transcript or IRS notice that doesn’t correspond to anything submitted by the filer;
  • Failure to receive expected and routine correspondence from the IRS because the thief has changed the address.
Steps to protect businesses

The IRS, state tax agencies and software providers also share certain data points from tax returns, including business returns, that help identify a suspicious filing. The IRS and states ask that business and tax practitioners provide additional information that will help verify the legitimacy of the tax return.

Respond to the “know your customer” questions when prompted by software:
  • Who signed the return – including name and SSN
  • Tax payment history of the company
  • Parent company information
  • Additional information based on deductions claimed
  • Tax filing history of the company
Sole proprietorships that file Schedule C and partnerships filing Schedule K-1 with Form 1040 also will be asked to provide additional information items, such as a driver’s license number. Providing this information will help the IRS and states identify suspicious business-related tax returns.

For small businesses looking to enhance their security, the National Institute of Standards and Technology (NIST) produced Small Business Information Security: The Fundamentals. NIST is the branch of the U.S. Commerce Department that sets information security frameworks followed by federal agencies.

The United States Computer Emergency Readiness Team (US-CERT) has Resources for Small and Midsize Businesses. Many secretaries of state also provide resources on business-related identity theft as well.

The IRS, state tax agencies and the tax industry continue to work together to fight against tax-related identity theft and to protect business and individual taxpayers. Everyone can help. Take steps recommended by cyber experts and visit the Identity Protection: Prevention, Detection and Victim Assistance for information about business-related identity theft.