Payroll Taxes, ObamaCare and 2013

As 2013 approaches, the Advi$or thought we would outline what is in store for individuals regarding new ObamaCare taxes that kick in and how they relate to payroll.

Starting Jan 1, 2013, for those individuals who earn $200,000/yr ($250,000 married) the medicare payroll tax will increase.  For the first $200k, the medicare tax will remain at 1.45% 2.9% for self employed. After reaching that threshold, employee’s medicare payroll tax will increase to 2.35% , 3.8% for self employed.

A surtax of 3.8% on investment income will kick in in Jan 2013 for those earning $200,000 ($250,000 household). As a result, capital gains taxes will increase from 15% to 23.8%. Dividend and other unearned income such as interest, annuities, royalties and net rents can be taxed a the new rate of 43.4% as opposed to the 35% current maximum rate.

Currently those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5% of a persons AGI. In 2013 this threshold will increase to 10% of AGI before the deduction is allowed. This new threshold is waived for taxpayers 65+ but only up to 2016.

In 2013, ObamaCare also imposes a cap on FSA’s  limiting them to $2,500.  And it eliminates the tax deduction for employer provided retirement drug coverage in coordination with Medicare Part D.

Obamacare in 2014

The Advi$or also wants to remind you that in 2014, both the individual and the employer mandate tax kick in. On the individual side, starting in 2014, anyone not buying qualifying health insurance must pay an income surtax according to the higher of the following:

2014:  1 Adult-  1%AGI or $95
2 Adults- 1% of AGI or $190
3+ Adults- 1% of AGI  or $285

2015: 1 Adult-  2%AGI or $325
2 Adults- 2% of AGI or $650
3+ Adults- 2% of AGI  or $975

2016: 1 Adult-  2.5%AGI or $695
2 Adults- 2.5% of AGI or $1390
3+ Adults- 2.5% of AGI  or $2085

The employer mandate (currently set to apply to all employers with 50 or more employees) specifies that if an employer does not offer health coverage and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductable tax of $2,000 ea. for all full time employees. If an employee receives coverage through the government exchange, the penalty increases to $3,000. If the employer requires a waiting period of 30 to 60 days to enroll in the company plan, they will be subject to a $400 tax. This increases to $600 if the period is more than 60 days.

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Extra Income Payments and Overtime

Payroll departments need to be aware of the requirements regarding additional income paid to employees and overtime regulations regarding overtime pay. That income could include bonuses, commissions, even regular payments for other circumstances. If additional payments are made to hourly or non-exempt employees, it could have an effect on how overtime pay is calculated.

First, lets look at the payments that are involved.  The regulations distinguish between discretionary and non-discretionary payments made to employees in determining if they will have an effect on OT pay. A discretionary payment is one-time payment made to an employee on a non-regular schedule basis at the whim of management. An example may be a year-end bonus where management specifies that a bonus may be paid as long as certain criteria are met after a certain time frame. They have no idea until the certain time frame has passed that the criteria will be met and thus have no idea that the bonus will be paid until that time period has passed and the criteria met.  Even then they could choose not to pay the bonus. Thus a discretionary bonus. It is up to management’s discretion if this rarely paid payment will be made.

Non-discretionary payments are those that management has specified will be paid on a regular basis based on certain criteria. Examples may include monthly bonuses based on performance standards or commissions based on sales achieved. Employees come to expect these payments to be paid on a regular basis.  They know they will be getting this extra income and when they will get it. At this time, only non-discretionary payments can have an effect on OT calculations.

The issue with non-discretionary payments is that for non-exempt employees who are subject to overtime, the FLSA notes that this additional income, in essence, changes the employee’s rate of pay per hour and thus changes their OT premium pay.  For example:

  • Employee Suzy Goodworker earns $10/hr. She is paid weekly.
  • She works 45 hours in the pay period. Thus she would normally be paid 40 hrs at $10 plus 5 hrs at $15 (her overtime wage at 1.5 x $10)
  • But that pay period, her employer also pays her the monthly $200 bonus for good performance.

In this situation, employers unaware of this regulation will  simply calculate Suzy’s gross wage at (45  x  $10) + (5  x  $5) + $200 = $675.00. But because of the $200 non-discretionary bonus, this amount is incorrect.

Because of the  non-discretionary bonus, her gross wage needs to be calculated taking into account the additional $200 of income in order to comply with the FLSA:

  • Employee Suzy Goodworker earns $10/hr. She is paid weekly
  • She works 45 hours in the pay period.
  • But that pay period, her employer also pays her the monthly $200 bonus for good performance.
  • Thus instead of earning $10/hr, she is really earning $14.44/hr –  (45 x $10) = $450 + $200 = $650/45 = $14.44/hr)
  • Thus her overtime premium is really $14.44 /2 = $7.22.
  • Thus her gross wage for the period will be (45 x $10)  +  (5 x $7.22) + $200 = $686.10.  Note the difference.
This can be confusing and tedious to calculate, but if you are not in compliance with FLSA, you may be paid a visit by a representative of the Dept. of Labor. The next time you want to consider making additional payments to your employees, keep in mind the distinction between  discretionary and non-discretionary and the role those additional payments may play in determining OT pay.
Feel free to contact us if you have any questions regarding this topic.
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7th Annual Time & Pay Blood Drive In October

“There is no greater gift than the gift of life”

Time & Pay has teamed up again with the American Red Cross to sponsor our 7th annual Time & Pay Blood Drive. As Gwen Hunter, Director of Donor Resources Development notes. “We appreciate Time & Pay’s commitment.  By sponsoring blood drives, Time & Pay is helping save and improve the lives of individuals in need of blood.”

“We are very pleased that we can work with the Red Cross on this important community event”, said Steve Scheu, CEO of Time & Pay. “The fact that this is our 7th annual event shows that we are having success with the drives.”

All donors during the October drive are eligible to win a 3 day 2 night Aquarium package in Gatlinburg, a prize provided by Time & Pay. The prize includes 3 days and 2 nights at the Edgewater Hotel (includes their large breakfast buffet), 2 tickets to the Ripley Aquarium and dinner for two. Drawing for the prize will be held in November at the conclusion of the drive.

Time & Pay’s sponsored blood drives will be held every Tuesday 2:30pm – 7:00pm and Wednesday 8:00am – 1:00pm; Thursday, Oct 4 and Oct 11, 2:30pm – 7:00pm; and Saturday, October 20th 8:30am – 1:00pm. Each blood drive is open to the public. Donors must be at least 17 years of age, weigh a minimum of 110 pounds and be in general good health.  Donors must have a form of positive identification in order to donate. Donations are to be made at the American Red Cross Donor Center, 818 Sunset Dr., Johnson City, TN 37604

Donors may also schedule an appointment by going to www.RedCrossBlood.org.  For more information or to schedule an appointment to donate blood call  1-800-GIVE LIFE.

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States Announce New Minimum Wage Rate Increases

As of January 2013, the minimum hourly wage rates in 4 states will increase. Effective January 1, 2013 the minimum wages in  Montana, Ohio, Oregon, and Washington have been legislated to increase. An increase to the wage rate in Colorado has also been proposed. In Montana, the minimum wage rate is to increase to $7.80 an hour from $7.65 an hour. In Ohio, the rate is to increase to $7.85 an hour from $7.70 an hour for non-tipped employees and to $3.93 an hour from $3.85 an hour for tipped employees. The increased rate is to apply to employees of businesses with annual gross receipts of more than $288,000 a year. In Oregon, the rate is to increase to $8.95 an hour from $8.80 an hour. In Washington, the rate is to increase to $9.19 an hour from $9.04 an hour.

Colorado’s Department of Labor and Employment proposed an increase in the minimum wage to $7.78 an hour from $7.64 an hour for non-tipped employees and to $4.76 an hour from $4.62 an hour for tipped employees, effective Jan. 1, 2013. A hearing on the proposal is scheduled for Nov. 1, 2012.

There is a push in Congress to increase the Federal minimum wage for both non-tipped and tipped employees.

 

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Automate Time & Attendance to Save your Business Money!

In this challenging economic environment, one of the best ways to control the cost of doing business is to control your cost  of labor.  One of the easiest, quickest, most cost effective ways to control your cost of labor is to automate your time and attendance systems. Automating your time and attendance tracking system can provide your business with a minimum 100% annual return on investment, if not more. There is no other more affordable, cost effective investment you can make in your business that can provide you with that kind of return!

As you know, your cost of  labor is an important part of your cost of doing business. Manufacturers in general have a labor cost of 15% or more.  Service companies can have a labor costs of 35% or more.  Any methods you can implement to control this significant cost item can have a considerable impact on your bottom line.

Manual timekeeping systems are fraught with inefficiencies. If your employees write in their times on a time sheet, odds are, any discrepancies between actual time and the time recorded on the sheet will favor the employee. (For example, if your employee shows up at 8:05, there is a very good possibility that he will write down 8:00 if he feels he can get away with it.)  Then you have to add up the time sheets to calculate hours worked.  A punch time clock takes away  the employees ability to “fudge” their time, but you still have to add up hours worked and then calculate payroll. According to numerous public and private studies, employees will be overpaid 1 to 8% of their annual wages  due to errors in calculating hours worked. Just 5 minutes a day (1%) of fudged time is costing your company more than you think. Check out this table. The numbers will surprise you!

In the simplest terms, an automated time and attendance system (ATA) system takes away all the subjectivity of tracking employee hours at work and eliminates all the calculating errors.  So how do you get 100%+ ROI on our ATA system? Assume you have 10 employees and you are manually tracking their time at work. Their average wage is $9.50/hr. Looking the the “Just 5 Minutes” table, a very conservative .5% error rate (just 2.5 minutes a day!) is costing your company $1020 a year! Time & Pay’s ATA system will eliminate that error rate and cost you only $330 a year! That means Time & Pay’s ATA system will save your business $690 a year, a 200% ROI!!

Not only will our ATA systems help reduce labor costs, but Time & Pay’s systems can do so much more for your business! It will:

  • Eliminate all the work involved in calculating hours worked.
  • Help you control overtime costs by allowing you to monitor and manage employees who are approaching OT.
  • At the same time, our ATA system will help ensure you are FLSA compliant eliminating expensive penalties.
  • Provide you with the capabilities to define where your labor costs are occurring.
  • Provide you with the systems you  need to track and manage absenteeism.
  • Provide you systems to track, monitor and accrue PTO, sick and vacation hours eliminating the need for multiple tracking data bases
  • And much more!

Another great aspect of our ATA system is that it is so easy and affordable to implement. All our systems are web based so there is no expensive equipment to buy, no expensive software to purchase or maintain, and easily expandable both within your facility or in multiple locations. You let us know that you are ready to better manage your labor and start saving money, and we can have you set up in a matter of days!

As you can see, if you have not looked at an automated timekeeping system and all the benefits it can generate for your business, you need to do so.  You can visit our ATA pages on our web site to learn more.  Give us a call and we would be glad to learn about your situation and let you judge for yourself if our ATA system will be right for your business. It costs you nothing to make the call and there is no obligation. We assume that  if we can’t save you money and help you better control and define your labor costs, you probably do not want to do business with us. We fully understand that. We just want to give you the opportunity to look at a way to save your company money. In this economic environment, you need all the help you can get.

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“We had been doing payroll in-house for years and was looking for a cost effective alternative. Your systems and services have been able to provide us with information and reports we were not able to produce with our old system. You have freed our time to concentrate on more important accounting aspects of our business. With the excellent services you provide, we would not consider any other payroll processing system.”
-Kwick-Way Transportation Co, Gray, TN

“We had been doing our payroll in-house. When we reviewed your products and services, we found them to be both affordable and cost-effective. The transition to Time & Pay went very smoothly. We are very confident our payroll tax issues and confidentiality issues are now a thing of the past.”
-S T – D & S Dental, Johnson City, TN

“Time & Pay does a great job handling both our corporate and independent store accounts. The flexibility of their on-line capabilities gives us the information we need when we need it. Their response to our diverse needs has been excellent.”
-B G – HobbyTown USA, Omaha, Nebraska

Time & Pay is a  godsend for a small business like mine. I no longer have to worry about paying my employees or my payroll taxes accurately or on time!  Time & Pay takes care of everything for me!
-B M – Stellar Studios, Johnson City, TN

“We find your integrated timekeeping and payroll easy to use and more accurate than the time sheets we were using. My time is now freed up to take care of my patients and other aspects of my business. Thanks for making the transition to outsourcing my payroll easy and cost effective.”
-B W – Westmoreland, DDS, Johnson City, TN

“As a former customer of one of those big national firms, not only does Time & Pay perform better in the payroll processing area with better products and services, but you are also way ahead of them in the customer service area. It is a pleasure working with your staff knowing that any help we need is readily available.”
-C – Comprehensive Community Services, Johnson City, TN

“From the start, Time & Pay has worked with us in many aspects of payroll and HR as we have grown from a single facility to a multi-state operation. They have allowed us to concentrate on that expansion while they have focused on keeping us compliant with payroll and timekeeping regulations. There customer service is exemplary! They are great to work with.”
-J G – Prime Choice Foods, Denver, CO

A while back, the state came to our office to audit our payroll records. When the auditor found out Time & Pay did our payroll, she stopped, packed her briefcase and informed us there was no need for the audit. She was very confident we were compliant.
-K B – GR&P Co. Bristol, TN

“We have been using Time & Pay for a number of years. Their customer service is outstanding. I would recommend their products and services to anyone looking to get the most out of the payroll process and stay compliant with federal and multi-state payroll regulations.”
-M W – Royal Brass, Knoxville, TN

“After working with one of the national firms, the transition to Time & Pay was easy and beneficial. Their products and services exceeded what we were getting, were more cost effective, and their customer service goes above and beyond. We are very happy we made the change.”
-R V – Mountain Treasure Corral, Kingsport, TN

1-26-2016

Tennessee UI Wage Base Decreases for 2016!

Good news for Tennessee employers! The Tennessee Department of Labor and Workforce Development announced on Jan. 25 that effective Jan 1, 2016, the state’s unemployment-taxable wage base was reduced from is $9,000 to $8,000,  This decrease indicates an increase in … Continue reading

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1-25-2016

Employees and the Earned Income Credit Notification

Now that W-2 season is upon us, it is important that you notify certain employees about their eligibility to the Earned Income Credit. As per the IRS: Employers “must notify employees who have no federal income tax withheld that they may … Continue reading

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12-29-2015

IRS Extends ACA Reporting Deadline for 2015.

After consulting with key stakeholders, Treasury and IRS officials have determined that additional time is needed for employers, insurers and other providers of minimum essential coverage to adapt and prepare their systems and procedures to gather, analyze, and report information … Continue reading

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