Critical Payroll and Tax Compliance Updates

March 2015

NY Attorney General Introduces the Payroll Card Act

On February 13 New York Attorney General Eric T. Schneiderman announced his introduction of legislation to regulate the use of paycards as a method of payment to employees. The proposed legislation would protect the rights of employees who receive paycards, clarify ambiguities in the law, and ensure that payroll cards offer a convenient and beneficial method for workers to access their pay.

After receiving complaints from employees that paycard programs were in violation of state labor laws, the Office of the Attorney General launched an investigation into paycard program practices. The investigation revealed unfair fee practices that resulted in loss of pay to many employees. The Attorney General Labor Bureau Report recommended a number of reforms to the system which are included in the legislation and protect workers’ rights to access their pay.

“Workers should not have to pay unfair fees in order to cash their paychecks,” Attorney General Schneiderman said. “While payroll cards can be helpful for employees without bank accounts, programs often impose fees that chip away at people’s hard-earned wages. The Payroll Card Act will ensure that workers have free and clear access to their wages, while providing clarity to employers about how to offer payroll cards in compliance with the law.”

BDB will continue to monitor the status of this proposed legislation as it proceeds through the State Legislature.

For more information please click here.


IRS Releases ACA Publication

The IRS has released a publication containing helpful information on employer reporting requirements under the Affordable Care Act.

To view the publication please click here.


President’s New Budget Proposal Affects Payroll Items

On February 2, President Obama released the 2016 fiscal year budget proposal which includes several payroll items including the following:

  1. The proposed budget would eliminate the Employer FICA tip credit for years beginning after December 31, 2015. Under current law, employers can claim a business tax credit for the employer portion of FICA paid on employee tips in excess of $5.15 per hour. The current budget proposal would abolish this credit.
  2. The proposed budget would reinstate the FUTA 0.2% surtax that had expired on July 1, 2011, and make it permanent. This would effectively increase the FUTA rate from 0.6% of the wage base, to 0.8%.
  3. The proposed budget would increase the FUTA wage base for 2017 from $7,000 per employee to $40,000 per employee, and be indexed to wage growth for subsequent years.
  4. IRC Sec. 6051 would be revised to require employers to include an “identifying number” for each employee, rather than an employee’s SSN, on Form W-2.
  5. The group of employers who are eligible for the small employer health care credit would be expanded to include employers with up to 50 full-time equivalent employees and would begin the phase-out at 20 full-time equivalent employees.

These are currently only proposals. The 2016 budget has yet to be finalized.

For more information please click here.


CMS Identifies Limited ACA Error

On February 20, the Centers for Medicare and Medicaid Services (CMS) announced that approximately 800,000 taxpayers who received health care coverage through the federal insurance marketplace (Healthcare.gov) were sent the wrong information on their Form 1095-A and are being urged to wait to file their taxes until the first week of March when they receive the correct information from the federal government. For affected individuals who have already filed their taxes, the IRS and Treasury are currently reviewing the issue and will be providing additional information shortly.

One piece of information included on the 1095-A is the premium amount for the “second lowest cost Silver plan” in the taxpayer’s area. This premium amount represents the benchmark plan used to determine the amount of premium tax credit they were eligible to receive. For many taxpayers, that information was calculated incorrectly.

Affected taxpayers whose forms were affected will receive a phone call about the problem from the Marketplace by early March, in addition to letters and emails with additional information about the status of their forms. In addition, taxpayers can find out if they are affected by logging in to their account at HealthCare.gov. They will see a notice message that will let them know if their form was or was not affected.

Although this issue does not directly affect payroll, employees may turn to payroll departments with questions, and BDB will continue to monitor developments so that you are equipped to offer answers.

For more information, please click here.


New York Minimum Wage for Tipped Employees to Increase

The Cuomo Administration announced that effective 12/31/2015; minimum wage for tipped employees in the hospitality industry will increase to $7.50 per hour.

Commissioner of Labor Mario J. Musolino announced the increase after accepting the recommendations of the 2014 Hospitality Wage Board to increase tipped minimum wage and simplify classification of tipped employees.

Currently food service employees, service employees, and service employees in resort hotels receive a minimum wage of $5.00, $5.65, and $4.90 respectively. These rates have not changed since 2011. As of 12/31/15, all these tipped employees will be consolidated into one class and receive a minimum wage of $7.50 per hour. The Order also accepts the recommendation that if New York City enacts their own tipped minimum wage legislation, the cash wage for tipped workers in New York City will increase by $1.00 to account for the high cost of living in New York City.

The Cuomo Administration will continue to review the recommendation to abolish the cash wags and tip credit system all together, resulting in all employees receiving a cash minimum wage of $8.75 in 2015 and $9.00 in 2016.

BDB can automatically update your employees’ pay rate to be in compliance with the new minimum wage. We will contact you with more information.

For a copy of the Order please click here.