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

 

202-693-4681

Email

 

weeks.emily.c@dol.gov

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.

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.

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.