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Payroll Forum Payroll Compliance Group August 5, 2014
Payroll Forum
Payroll ForumPayroll Compliance GroupAugust 5, 2014
1PAYROLL COMPLIANCE GROUP (PCG)Debra Cormier State Payroll Compliance [email protected] Payroll Regulatory CompliancePayroll PoliciesDebbie (Hurd) Ide Payroll Compliance [email protected] PlannerInternal Control PlansPayroll Administration Training DeliveryMicheale Lessard Payroll Compliance [email protected] AuthorizationsWage Overpayments / RepaymentsWilmington City Wage TaxDirect Deposit ParticipationFunding Reconciliations2AgendaRecords Retention presented by Kit Carson, Delaware Public ArchivesSurvey QuestionsCompliance Examination: Resident/Nonresident AliensOpen Discussions:Worker ClassificationWilmington City Wage TaxOn the Horizon3Delaware Public Archives
Presented by Kit Carson
For more information and a copy of the presentation:Contact Kit [email protected]://archives.delaware.gov/govsvcs/govsvcs.shtml4Compliance Examination
Resident vs. Nonresident Aliens
5Resident and Nonresident AliensCompliance ExaminationResident and Nonresident Alien Employees Spreadsheet Distributed 06/26/2014Responses Were Due On 07/21/201442% received To Date (Have you Submitted Yours Yet?)6The Clock is Ticking!If you have not already done soPlease complete your spreadsheets as soon as possible. PCG is reviewing tax setups for all alien employees and contacting Organizations to make necessary corrections in the PHRST system to ensure Calendar Year 2014 is reported accurately.
Payroll - The Buck Stops Here!You dont have to know all the rulesYou just have to know where to find them!PCG Bulletin 2014-002 Tax Treatment of Income Paid to AliensPCG Tax Residency Decision TreePCG Teamwww.IRS.gov
Gets CollectedCommon ErrorsJ-1 Visa OASDI/Medicare ExemptionFirst Two Calendar Years Incorrect Exempt StatusContinue Exempt Status after Two-Year PresenceCounting Years IncorrectlyNonresident Alien Invalid W-4sMay Only Claim Single or Married Filing SeparatelyMay Only Claim Zero or One AllowanceSubstantial Presence TestDays of Presence in the U.S. vs. Working DaysCommon ErrorsIncome Tax Treaties:No Federal Income Tax (FIT) Exemption Unless a Tax Treaty Exists.FIT Tax Treaty Terms Vary From Country to Country.Years of FIT Exemption Differ from OASDI/Medicare Exemption.Failure to Enforce Earnings Limitation (F-1 Visa).Failure to Maintain Records That Substantiate Tax Setup.
OPEN DISCUSSIONWorker Classification
13Worker ClassificationOrganizations Periodically Hire Workers as Independent Contractors.Circumstances of the Engagement Dictate the Appropriate Worker Classification.
14Regulatory AgenciesCongress and the IRS believe that the use of independent contractors has led to an ever-widening tax-gap in lost payroll tax revenues from misclassified workers.The U.S. Department of Labor is considering a survey to explore the extent and nature of independent contractor misclassification as part of its ongoing misclassification initiative.IRS receives employment tax referrals from agencies administering workmans compensation & unemployment.EmployeesIndividuals perform services for your Organization; and, someone at your Organization controls what is done AND how it is done.(Treas. Reg 31.3121(d)-1(c)(1))ControlIt does not matter if an employer exercises the right to control how and when the work is done; it only matters that the employer has the right to control it.
Independent ContractorEmployers/Payers have the right to control or direct only the result of the work done, not the means and methods of accomplishing the result.Wheres The Harm?IRS loses millions of dollars in uncollected income, Social Security, and Medicare taxes because of misclassification of independent contractors.Employers are generally subject to imposition of fines and penalties, and are liable for back-taxes.Misclassified Workers lose work credits used to calculate social security and pension benefits.Misclassified Workers are not eligible for health benefits (Affordable Care Act implications).Misclassified Workers are not eligible for unemployment benefits.
Correct ClassificationLook at the entire picture. There is no magic number of factors that make the determination.No one factor can stand alone. Some factors may be relevant in one scenario but not relevant in another.Document each of the factors you used to come up with the determination.Payroll - The Buck Stops Here!You dont have to know all the rulesYou just have to know where to find them!PCG Bulletin 2014-003 Worker ClassificationWorker Classification Decision ToolPCG TeamForm SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (IRS Form)
Gets CollectedOPEN DISCUSSIONWilmington City Wage Tax
23State Employees pay $3,400,000 WCWT annually.DOA receives an Annual Tax Bill for Uncollected WCWT (Average $14,000). PCG Reconciles the bill with the City.Wilmington City Wage Tax24Employers who operate within the State of Delaware have a statutory responsibility to collect and remit earned income tax to the City of Wilmington (City).Failure to collect and remit the tax to the City subjects the employer to joint liability for the tax, as well as all accrued penalties, interest and other charges.Wilmington City Wage Tax25Who is subject to the earned income tax?All residents of the City (as per Address Coding Guide). Tax is payable on all earned income, regardless of where it was earned.Any person who works in the City, and earns wages, regardless of where they live.Earned income tax is calculated as 1.25% taxable gross wages (reduced by pre-tax deductions, and increased by imputed income).
Wilmington City Wage Tax26Important:Tax set up in PHRST must be correct.Address and Work Location changes must be entered timely. Employee Self Service Monitor address changes that affect the tax setup in PHRST.PCG monitors employee records with mismatched data.
Wilmington City Wage Tax
27Untimely updates result in under/over taxation.Correcting the employee tax record involves:Determining the affected pay period(s)Submitting PHRST Correction Form One-Time General Deduction Refund/Adjustment.PCG reviews Correction Form and forwards to PHRST.PHRST corrects WCWT taxable gross and adjusts tax as appropriate on Payline.Wilmington City Wage Tax28Payroll - The Buck Stops Here!These rules are pretty simpleToughest part is determining if an address is taxable:City of Wilmington Taxpayer AdvisoryCity of Wilmington Address Coding Guidehttp://www.ci.wilmington.de.us/docs/37/EIT_flyer.pdfPHRST Proc. PRU-TAX-01 Update Employee Tax DataPCG Team
Gets CollectedQuestions
30Reminders Coming Soon!Internal Control Plan SubmissionResident/Nonresident Alien Worksheet SubmissionPayroll Repayment WorkshopNext Forum: Late Fall 2014
On the Horizon.
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