Compliance
Taking the Headache Out Of a Corporate Tax Audit
Aug 16th
In November of 2009 the IRS announced the Employment Tax National Research Project (ET NRP), which is the first study of its kind in 25 years related to payroll and employment tax issues. The IRS plans to randomly audit up to 6,000 companies in the next three years, with a direct focus on employment tax, worker classification, officer compensation, benefits and expense reimbursement. The IRS has already sent out of first batch of alert letters, letting companies know that they have been selected for an audit. This short video from Pillsbury, a national full-service law firm, briefly outlines for its clients some of the major issues involved.
If your business has been audited by the IRS, you’re not alone. According to IRS statistics, anywhere from .38% to 14.55% of businesses are audited annually (see data grid below). The government’s exact method for choosing who is audited remains a well-kept secret. However, the IRS boldly warned in a 2007 report that some business types are more likely to be audited than others. The IRS report states that “While large corporate audits are down slightly, we have increased our focus on mid-market those with assets between $10 million and $50 million dollars.” See specific IRS service and enforcement tables here. Into what category does your business fall, and how likely are you to be audited? What’s your worst fear in an audit? Are you prepared for it?
The burden of proof during an audit lies with you, the business owner, and the depth of records required by the IRS can be time-consuming and onerous at best. AllBusiness.com posted an aptly titled article, “To Hell and Back: Different Types of Tax Audits”, which documents the extensive information that the IRS requires during a business audit. The IRS provides their auditors with specific guidelines to follow during a business audit that is industry specific. Do you know what your potential future auditor may ask of you? Become more prepared and look for your guide here.
Don’t be another IRS statistic
Audits are costly. The expense to your business will be massive, and the strain on your valuable employees even more so. Regardless of the kind of audit you may experience, it’s always helpful to have the information you need at your fingertips. Ascentis online payroll and HR software (HRIS) offers robust core functionality that supports the electronic documentation of most, if not all, employment and payroll related data you will need during an audit. Ascentis integrated systems include standard and customized reporting engines so HR and payroll teams can provide the specific and detailed data that audits often require.
Learn more
For more information, or to request a product demo, fill out this short form and let’s talk about how we can help your HR and payroll teams be more accelerated, efficient and compliant. Subscribe to our monthly newsletter, the Ascentis HR, Benefits and Payroll News, and stay on top of industry news, best practices and always-evolving legislation. Follow Ascentis on Twitter and “Like us” on Facebook to receive great HR, payroll and business tips.
Electronic I-9s are a go!
Jul 23rd
The U.S. Department of Homeland Security (DHS) has issued a final rule confirming that employers and recruiters who are required to complete and retain the Form I–9, Employment Eligibility Verification, may sign this form electronically and retain this form in an electronic format. “E-Verify” is the electronic system facilitated DHS for this purpose. The final rule makes minor changes to an interim final rule announced in 2006.
Under the Immigration and Nationality Act, all U.S. employers, recruiters and certain other entities are required to verify the employment authorization and identity of all employees hired to work in the United States after Nov. 6, 1986. To comply with the law, an employer, or a recruiter or referrer for a fee, is responsible for the completion of a Form I–9, Employment Eligibility Verification (Form I–9), for each new employee, including United States citizens. The completed Form I–9 is not filed with the Department of Homeland Security (DHS). Rather, the Form I–9 is retained by the employer who must make it available for inspection upon a request by Immigration and Customs Enforcement (ICE) investigators or other authorized federal officials. Employers are required to retain a Form I–9 in their own files for three (3) years after the date of hire of the employee or one year after the date that employment is terminated, whichever is later.
In this final rule, DHS makes minor modifications to 8 CFR 274a.2 to clarify certain provisions that:
• Employers must complete a Form I–9 within three business (not calendar) days;
• Employers may use paper, electronic systems, or a combination of paper and electronic systems;
• Employers may change electronic storage systems as long as the systems meet the performance requirements of the regulations;
• Employers need not retain audit trails of each time a Form I–9 is electronically viewed, but only when the Form I–9 is created, completed, updated, modified, altered, or corrected; and
• Employers may provide or transmit a confirmation of a Form I–9 transaction, but are not required to do so unless the employee requests a copy.
To view the final rule in the Federal Register, please click here. For more on the federal E-Verify system, please click here.
Interview Questions: What You Need to Know
Jul 15th
As hiring begins to rebound, many small businesses may once again be thinking about recruitment and candidate selection. And, of course, one of the most important parts of the process is conducting the interview.
Whether you are a small business owner who conducts your own interviews, manager of a department or experienced HR professional, the following is a quick “refresher” on the do’s and don’ts related to interview questions.
Questions you may ask
Interview questions should be job-related, and provide insight into the candidate’s ability to perform the essential functions of the position you are filling. They can also provide certain information about the interviewee. Some examples of acceptable job-related inquiries include:
- Job Requirements: desired position, salary, full time or part time, date of availability to start.
- Essential functions of the job: Essential functions are the fundamental job duties that the employee must be able to perform on his or her own or, in the case of a person with a disability, with the help of a reasonable accommodation.
- Willingness to travel.
- Educational background.
- Skills: word processing, computer languages, etc.
- References.
- Eligibility to in the United States
Questions to avoid
Because of the numerous federal, state, and local anti-discrimination laws that govern the employment process, direct and indirect inquiries concerning an interviewee’s race, color, religion, sex, national origin, age, disability, genetic information, military service, or any other protected class status should be avoided. In addition, some states have strict limitations on pre-employment inquiries about criminal backgrounds, in particular, arrests not leading to convictions. Questions to avoid include:
- How old are you?
- What is your nationality? Or what is the origin of your name?
- What is your race?
- Were you or are you currently disabled?
- Are you taking any medications?
- What is your religion?
- Have you ever been arrested?
- Do you have a drinking problem?
Interviewing in Compliance with the Americans with Disabilities Act
The Americans with Disabilities Act (ADA) goes one step further than the traditional civil rights laws that prohibit employment discrimination on the grounds of race, sex, age, or other protected classes. Under the ADA, it is not enough that an employer simply does not discriminate. Employers must, under certain situations, also take steps to make “reasonable accommodations” for individuals with disabilities. To avoid charges of discrimination, employers should also adhere to the following guidelines when interviewing applicants with disabilities:
- Prepare for the interview by clearly understanding the essential job functions of the position in question.
- Employers may ask about an applicant’s ability to perform specific job functions. For example, an employer may state the physical requirements of a job (such as the ability to lift a certain amount of weight, or the ability to climb ladders), and ask if an applicant can satisfy these requirements.
- Employers may ask about an applicant’s non-medical qualifications and skills, such as the applicant’s education, work history, and required certifications and licenses
- Don’t ask questions about an applicant’s disabilities.
Additionally, many state civil rights agencies have their own guidelines on pre-employment inquiries based on both federal and state nondiscrimination laws. Be sure to check on any additional restrictions your state may impose on job interview questions.
For more information on the ADA compliant interview, please click here. To view a list of state labor offices, please click here.
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Quarterlies and the New HIRE Act Credit
Jun 15th
Now that we’ve all heard about the HIRE Act and your company has decided whether to apply for the HIRE Act credit and you’ve collected the W-11 affidavit how do you go about getting the HIRE Act credit?
You may reduce your tax liability on a pay period basis by the credit, but in order to actually get the credit you need to make sure to complete the appropriate lines on your 941.
Make sure to prepare for the quarterly filing because unlike COBRA, where you could take the credit in the next quarter, the credit for the first quarter on the HIRE Act must be taken in the second quarter and the credit for the HIRE Act for each quarter after the first quarter must be taken in the quarter the wages are paid. This means if you aren’t prepared you may have to file amendments in order to receive the credit for the HIRE Act.
New Lines on the Form 941 –
Line 6a – Number of qualified employees first paid exempt wages/tips this quarter
This is simply a field which counts the number of employees that were hired and paid for the first time during the quarter you are reporting that are exempt from the employer portion of the social security tax under the HIRE Act. Basically this field lets the government know how many new employees were eligible for the HIRE Act during the quarter being field.
Line 6b – Number of qualified employees paid exempt wages/tips this quarter
This is simply a field which counts the number of employees that were paid during the quarter you are reporting that are exempt from the employer portion of the social security tax under the HIRE Act. This count would include the employees that are reported on line 6a. Basically this field lets the government know how many employees in total on the quarterly return were eligible for the HIRE Act during the quarter being field. Read the rest of this entry »
New Walking-Working Surfaces and Personal Protective Equipment Standards
May 25th
The U.S. Department of Labor’s Occupational Safety and Health Administration has proposed a rule to require improved worker protection from tripping, slipping and falling hazards on walking and working surfaces. A public hearing on the revised changes will be held after the public comment period.
The proposed rule describes revisions to the Walking-Working Surfaces and Personal Protective Equipment standards to help prevent an estimated annual 20 workplace fatalities and more than 3,500 injuries serious enough to cause people to miss work. According to OSHA, the current walking-working surfaces regulations allow employers to provide outdated and dangerous fall protection equipment such as lanyards and body belts that can result in workers suffering greater injury from falls. Construction and maritime workers already receive safer, more effective fall protection devices such as self-retracting lanyards and ladder safety and rope descent systems, which these proposed revisions would also require for general industry workers. The current walking-working surfaces standards also do not allow OSHA to fine employers who let workers climb certain ladders without fall protection. Under the revised standards, this restriction would be lifted in virtually all industries, allowing OSHA inspectors to fine employers that jeopardize their workers’ safety and lives by climbing these ladders without proper fall protection.
Comments on the proposed rule can be submitted through regulations.gov. To view the proposed rule in the Federal Register, please click here. To view the press release, please click here.
The Affordable Care Act Will Require that Employers Fully Disclose Cost of Health Coverage
Apr 30th
Starting in 2011, employers will be required to disclose the entire cost of “employer-sponsored” coverage on the employee’s Form W-2. Regardless of who pays for the coverage, the combined cost of coverage is determined by rules similar to those used to determine the applicable premiums for purposes of the COBRA continuation coverage requirements of group health plans.
Employers are required to report the total value of all policies. Applicable coverage does not include coverage for a specified disease, long-term care, accidents or disability income insurance, nor does it include salary reduction contributions to a flexible spending account or contribution to an Archer medical savings account or a health savings account of the employee or a spouse.
This provision requires only the disclosure of all coverage costs as an aggregate, and does not require a breakdown of the individual types or policies of the coverages involved. For example, if an employee has an employer-sponsored medical plan, a dental plan and a vision plan, the employer should report only the total costs of these plans, and not the costs associated with each individual plan.
Click here to read Section 9002 of the Patient Protection and Health Care Affordability Act.
Click here to read the H.R. 4872 – Health Care and Education Affordability Reconciliation Act o f2010 LEGISLATIVE NOTICE
To read more about how new healthcare legislation will affect your business, subscribe to the Ascentis HR, Benefits & Payroll News.
HIRE Act materials starting to surface
Apr 9th
Remember the HIRE Act? Well, it looks like there’s some material slowly starting to trickle out of Washington.
The IRS has released a new form that will help employers claim the special payroll tax exemption that applies to qualified newly-hired workers during 2010.
New Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, is now posted on IRS.gov, along with answers to frequently-asked questionsabout the payroll tax exemption and the related new hire retention credit. The new law requires that employers get a statement from each eligible new hire, certifying under penalties of perjury, that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for anyone during the 60-day period. Employers can use Form W-11 to meet this requirement.
For more information on the HIRE Act affidavit and exemption, including a Draft Form 941 revised for employers to use beginning with the second calendar quarter of 2010, please click here.
The Long Road to Compliance
Mar 23rd
On March 18th, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act. The act allows employers to hire qualified employees and not pay the employer part of the social security tax. As a payroll professional you may dread the new complications that will be inflicted on you but saving 6.2% may be worth the effort. So “Who qualifies?” you ask.
Qualified employees are those hired after February 3rd, previously unemployed for at least 60 days and of course not replacing existing employees. It sounds relatively simple, right? Just track these employees as they are hired and don’t pay the social security tax on their wages.
Not so fast. For starters, the bill is retroactive so unless you were politically prescient, you probably don’t have a list of qualified employees. Once you have assembled that list, you need to determine the portion of the wages that will be exempt from employer tax. To make things more complicated, only wages paid after March 19th are exempt and only up to the maximum $106,800. The 19th was a Friday, so with a little luck, if you have weekly or bi-weekly employees, this will match the end of a pay period and will make it easier to determine eligible wages. If not, tough luck! Be prepared to do some manual prorating or just forego a few days of tax exemption and start counting at the beginning of the next pay period. The latter is a good solution especially if you consider the time it will take for the seemingly small benefit you will get.
You now have a list of employees and you know the exempt amount of wages. So what’s next? Well at this point no one knows exactly: that is while the IRS works on the issue. It will probably come in the form of a change of the 941 to adjust what you’ve paid in excess in the second quarter. In all cases, don’t change anything for your first quarter payments!
Hey Ascentis said it would be easy, what’s in store for me?
We hear you. All this may sound complicated, but really at the moment your job comes down to determining who’s eligible* so that when the time comes adjustment will be a breeze. Ascentis Payroll will be updated soon to let you track qualified employees. We will then provide you with ways to compute eligible wages. As usual, your client support rep will be the most helpful contact if you have any questions.
The healthcare reform just signed into law will add many other challenges. We’re following that closely to be sure you always have tools to stay compliant. This will be the same process again:
- Read the law and prepare for change
- Wait for the IRS (in most cases)
- Implement changes in the system
- Explain changes to our clients and make sure everyone is happy.
Next time you hear that a law has 1,990 pages, keep us in your thoughts!
*Eligible employees will have to sign an affidavit stating that they haven’t worked more than 40 hours during the 60-day period preceding employment. IRS is working on a form just for that, stay tuned.
