Payroll

S corps lose again on reasonable FICA-taxable pay

02/03/2014

In Watson v. U.S., an appellate court ruled that the IRS can recharacterize FICA-free distributions from S corps to their owners as FICA-taxable compensation, and allowed the IRS to set the parameters for determining that reasonable FICA-taxable salary. And so far it’s nailed S corps and their owners 100% of the time. Two recent cases illustrate.

Final regs clarify the 0.9% additional Medicare tax

01/29/2014

You’ve been withholding and reporting the 0.9% additional Medicare tax for a year now. Good news: With the exception of clarifying the procedure you use to request relief from paying any additional tax if employees paid the tax with their 1040 forms, final regulations make no changes to the proposed regs.

Pay up promptly when offering severance

01/28/2014

Sometimes, it’s clear from the moment that you decide to terminate an employee that she will sue. If that’s the case, a small severance payment may prevent litigation. But if you offer to settle, make sure you follow through promptly.

Is time that an employee spends on-call compensable?

01/28/2014

Q: An employee carries a company-issued smartphone so he can respond to emergencies over the weekend. He can usually resolve an issue with a phone call. How should we pay him—for the time he’s responding to an emergency or for all the time he has the phone?

2014 standard mileage rate decreases .5¢, to 56¢ per mile

01/27/2014

Reflecting a drop in gas prices, the IRS’ standard mileage rate—which you may use to reimburse employees who drive their own cars on business—drops to 56¢ a mile for 2014, down from 56.5¢.

FLSA: Overtime and Base-Rate Pay

01/25/2014

HR Law 101: Employers must pay overtime to nonexempt employees who work more than 40 hours in a single workweek. The overtime rate is one and a half times an employee’s hourly rate. If an employee earns a fixed hourly rate with no other compensation, computing the base rate is easy. But in many cases, it’s not so simple …

IRS issues integration rules for HRAs and FSAs

01/24/2014

You can go some way toward meeting the Affordable Care Act’s requirements that your group plan provide minimum value and is affordable by setting up health reimbursement accounts or health flexible spending accounts for employees. But according to new IRS guidance, these accounts must be integrated into your group health plan.

Year-end 2013: Your last chance to dance

01/23/2014

You’re not out of the 2013 woods yet. In a Program Manager Technical Advice memorandum, the IRS explains that if you fail to provide employees with Forms W-2 and payees with Forms 1099, you can be socked with a penalty.

Status of Health Flexible Spending Accounts, Health Reimbursement Accounts and Health Savings Accounts under the Affordable Care Act

01/22/2014

The ABCs of HRAs, FSAs and HSAs: It can be difficult to pick your way through the alphabet soup of group health plan add-ons, such as HRAs, FSAs and health savings accounts (HSAs). To help you along, this chart lists the characteristics of these accounts and how the health care reform law affects each.

New employee, old debt: Is pay-back of previous Section 127 benefits taxable?

01/15/2014

Q: A new employee must now pay back money she received from her old employer as a Section 127 educational benefit. We will assume this debt as part of our hiring agreement. The hiring manager said that since this was originally a tax-free benefit, nothing is taxable. This doesn’t sound right to me. Who’s correct?