Affordable Care Act Information Reporting | Payroll get ready!

ACA health insurance reporting 8-6-2014_Page_1

Under the Affordable Care Act (ACA) and starting next year (for filing in 2016), large employers are required to provide information statements to employees and information returns to the IRS that contain details about employees’ health coverage benefits.

This new information reporting effort is substantial in scope and requires a coordinated effort between payroll departments, benefits enrollment and insurance plan administrators. On the other hand, the reporting infrastructure necessary to produce employee statements and IRS returns is similar to the annual filing of federal Forms W-2. Consequently, while payroll departments will be dependent on data from other internal and external systems to meet the reporting requirements, they will likely be integral in the compliance effort.

In this publication we explain the returns that will be required and the data they will contain.$FILE/EY-affordable-care-act-health-insurance-information-reporting-are-you-ready.pdf


August 20 – Learn about payroll tax onboarding and earn RCH or CPE credit

tape measure and hard hat

Ernst & Young LLP and the Institute for Professionals in Taxation (IPT) are pleased to present an affordable webcast on August 20, 2014 that explains the payroll tax considerations when hiring a new employee.

Participants are eligible for 1.0 RCH or CPE credits

Registration is available with IPT at:

IPT registration fee:

$50 for IPT members
$65 for individuals who personally do not hold IPT membership
Details concerning the program is included below.

So you hired an employee? Let’s talk employment tax
August 20, 2014: 1:00 –2:00 p.m. E.S.T.
Once a worker is hired a number of essential employment tax decisions and processes are triggered. Gaps in this critical component of the employment life cycle can present a personal risk to owners and officers and to the business as a whole. In this session we will provide participants with information about the critical tax steps in the employee onboarding process and shine an important light on where oversights and errors frequently occur.

Learning Objectives:

  •  Recognize the key differences between employees and independent contractors and how their onboarding requirements differ
  • Know the differences in the onboarding requirements for US and nonresident alien employees
  •  Identify the federal and state tax forms employees must submit and how to implement them
  • Know what steps to take to head off notices about invalid Social Security Numbers
  • Reduce employment tax risk through proactive identification of state and local taxing jurisdictions and compliance with their registration and tax filing requirements
  •  Avoid common employment tax pitfalls in employee hiring agreements that provide for fringe benefits such as cars, cell phones, sign on bonuses, relocation reimbursement, loans, etc.
  • Consider some leading practices in managing employment tax

Pennsylvania ends same-gender marriage ban – are you taxing benefits correctly?

On May 20, 2014, a US District Court judge overturned Pennsylvania’s 1996 ban on same-gender marriage ruling it unconstitutional. (Deb Whitewood, et al, vs. Michael Wolf, 1:13-cv-1861) Governor Tom Corbett chose not appeal the ruling making it the 18th state plus the District of Columbia that now allows the issuance of marriage licenses to same-gender couples. Pennsylvania has never recognized civil unions or registered domestic partnerships, and until now, was the only state in the northeast region that prohibited same-gender marriage.

The May 20th ruling ends a wave of legal challenges that began in September 2013. Guidance has not yet been issued by the Pennsylvania Department of Revenue; however, it is assumed that fringe benefits provided to a same-gender spouse will receive the same state and local tax treatment that was extended to a lawful spouse under prior law.

State and local taxation of same-gender partner benefits isn’t as easy as it seems. That’s because a state’s civil laws governing marriage do not necessarily govern the income tax and unemployment insurance coverage rules. Take Missouri for instance. The state prohibits marriage between a couple of the same gender; however, a same-gender couple lawfully married in another state is treated as married for Missouri income and unemployment insurance tax purposes.

Speak to a trusted employment tax advisor about the payroll tax treatment of same-gender partner benefits.

President’s budget would accelerate W-2 filing due dates


On March 4, 2014, the Administration’s Fiscal Year 2015 Budget was released to Congress, less than a     week after the House Ways and Means Committee published a discussion draft on proposed tax reforms.

From an employer’s perspective, the 2015 budget is very similar to previous years except for the noteworthy additions of an accelerated due date for filing information returns (e.g., Forms W-2 and 1099-MISC), provisions that further eliminate the filing of paper tax returns, and an expansion of income subject to the self-employment tax.

 January 31 deadline for filing Forms W-2 and 1099  

In 2011, as a response to the increase in tax refund scams, the IRS unveiled its vision for a “Real Time Tax System” where Forms W-2 and 1099 are available at the start of the tax filing season.   Under the current system, individual taxpayers receive their information statements on January 31, but information returns aren’t due until as late as March 31. This filing regime forces the IRS to use a look back method for matching Forms W-2 to individual tax returns.

Throughout 2012, the IRS solicited commentary from stakeholders about the feasibility of accelerating the filing deadline for information returns to January 31.   Business groups, such as the National Payroll Reporting Consortium (NPRC) identified numerous challenges businesses would face in meeting this earlier fling deadline, including the likely increase in Forms W-2c because of eliminating the essential gap between when employees receive their information statements and when information returns are filed.

The 2015 budget proposal is the first since 2011 that the administration makes a formal proposal to change the due date for filing information returns. Specifically, Forms W-2 would be due to the Social Security Administration and Forms 1099 to the IRS no later January 31, whether filed on paper on electronically.

At the same time, it is also proposed that the Treasury and IRS be given latitude to lower the 250-return threshold at which electronic filing is mandatory.

For other budget provisions potentially affecting employers, click here

President flexes executive muscles to increase workers’ wages

Farrington Headshot 


by Brian Farrington, esq, Cowles & Thompson

President Obama has announced that as part of his effort to increase job protections for workers, he will ask the Department of Labor to propose revisions to the rules on who can be a salaried exempt employee, exempt from the payment of overtime. This follows an Executive Order the President issued in February 2014 directing the executive branch to increase the minimum wage to $10.10 per hour for employees on new federal contracts starting in January 2015.

A little bit of background

The federal wage hour law is the Fair Labor Standards Act, 29 USC 201, et seq. (“FLSA”). The Act requires that employees who work more than 40 hours per week get time and a half for their overtime hours. There are a number of exemptions from the overtime requirements, however, and the most important is the exemption for certain classifications of (typically) salaried employees—executive, administrative, and professional employees, and outside salespeople.

Unlike the minimum wage, which cannot be raised for employees other than federal contractors except by an Act of Congress, the FLSA delegates to the Secretary of Labor the duty to define by regulation who is an executive, administrative, or professional employee, or outside salesperson. This means that it doesn’t take an Act of Congress to change the exemption rules. It only takes a regulatory change by the US Department of Labor.

In order to be exempt under the terms of 29 CFR 541, employees generally have to be paid on a salary basis (there are some exceptions, such as outside salespeople, and doctors, lawyers, and teachers).  Exempt employees also have to meet some duties tests, which are laid out in the Regulation.

The current minimum salary for exemption is $455 per week, or $23,660 per year. (The current poverty threshold for a family of 4 is $23,550 per year). This rate has been in effect since 2004, and is 156% of the current minimum wage for 40 hours.

Since salaried exempt employees often work more than 40 hours, it’s clear that the current salary level is fairly minimal. This is particularly so in light of the fact that the President would like to increase the minimum wage to $10.10 per hour, which for a 40 hour week would be $404.

How exempt employee rules may change

  • The weekly salary test.  The simplest and most obvious change in the current rules is an increase in the minimum salary exempt employees are required to be paid. At least one progressive think tank has proposed $984 per week, which seems unlikely. But a significant increase is certainly possible.
  • The duties test.  Another area rankling employee groups is the duties tests under the current regulation. Until the Bush administration changed the Regulation in 2004, employees had to have exempt work as their “primary duty,” and the term “primary duty” generally meant that duty in which employees spent over half their time.  Under the Bush Administration, the definition of     “primary” was changed from the most consuming to the most important. As a result, courts have routinely allowed the exemption for employees who spend 60, 70, even 80% of their time in routine duties; as long as they can make a plausible argument that the exempt work they do is the most important.

For example, store managers who spend 75% of their time in stocking, waiting on customers, etc., have still been found to be exempt managers. This is an area where a return to the previous standard would be anticipated. That is, it’s likely that the Department of Labor will propose changing the regulations to require that employees spend over half their time in exempt work in order to be exempt from overtime pay.

  • Learned professionals’ definition.  Also possible is a change involving the definition of learned professional employees. Under the current regulation, a college degree is not required in meeting the learned professional exemption. Instead, an employee must merely show that the work requires that level of knowledge, and that he/she has achieved the ability to do that kind of work through a combination of education and experience. Employee groups would like to see the regulation changed to require formal academic credentials as a prerequisite for exemption as a learned professional.

 The wheels of change will be slow to turn

Any changes to 29 CFR 541 won’t happen overnight.  First, the Department of Labor must draft the changes and issue a notice of proposed rulemaking in the Federal Register. A public comment period would follow. Once the comment period is closed, the Department would have to review and take into consideration the public’s comments, and then issue a final rule.

In a nutshell, even if the President is able to make the changes he wants, there’s a long road ahead to implement them. Further, the oversight committees in Congress, particularly the relevant sub-committees of the Committee on Education and the Workforce in the Republican-controlled House of Representatives, are certain to be vehemently opposed.

About Brian Farrington

Brian Farrington is an experienced employment law attorney who previously served as Assistant District Director with the US Department Labor, Wage and Hour Division and is a contributing editor to EY’s Payroll Perspectives and EY’s Principles of Payroll Administration published by Thomson Reuters.  He is currently with the Dallas-based firm COWLES & THOMPSON, where he assists employers with employment law issues. Brian can be reached at

Additional Medicare Tax: 6 facts employers need to know

6 key factsApril 15 is just around the corner and employees are certain to raise numerous questions about the Additional Medicare Tax that first took effect in 2013.   Here’s 6 facts you will need at your finger tips in the weeks ahead.

For the complete article go to: