CompuPay Insights and Innovations

Expanding Operations Across State Lines

Business opportunities don’t stop at your state’s border, and pursuing them may require extra layers of government compliance to ensure your entity’s limited liability protections remain intact.

Successful corporations and limited liability companies often share a common characteristic—they provide value by economically solving customers’ problems. Over time, such a reputation may open possibilities for new markets of potential customers. When those markets are located outside of a company’s state of formation, a series of compliance tasks must be completed in order to legally interact with those customers.

“Foreign qualification” is at the top of that list. This is the process by which businesses register with government authorities in other states. States mandate foreign qualification for a number of reasons, including:

to provide transparency to the public at large about who is operating a business within the borders (since the entity’s formation information is out-of-state with authorities from the state of formation)
to subject the business to the state’s legal system and facilitate service of process
to ensure equal treatment and taxation of all businesses within a state, whether foreign or domestic

If a company’s operational activities meet a state’s definition for “conducting business,” the company must foreign qualify and make annual filings to remain in “good standing.” In exchange for completing these duties, states allow businesses to engage in commerce, to participate in the state legal system, and to preserve the limited liability protections gained when they originally formed entities in their home states.

Defining “Conducting Business” In Other States
This distinction often comes down to the difference between interstate and intrastate commerce: Doing business in a state versus just passing through. Interstate commerce is exempted from state foreign qualification requirements; intrastate commerce is localized activity requiring foreign qualification. Every state has its own rules for defining this distinction. Although most are based on the Model Business Corporation Act, there are some significant exceptions introduced state-by-state.

Further complicating this issue, state statutes do not specify the intrastate activities triggering the need for foreign qualification—they list only the activities exempt from the requirement to foreign qualify. The exemption list usually covers activities considered to be transacting business in federally controlled interstate commerce, such as soliciting or shipping goods that require delivery outside the home state. In addition, certain other actions, such as maintaining bank accounts, holding owners’ meetings, owning real estate, and securing credit or mortgages, are exempted from foreign qualification by most states.

Ultimately, if an entity has a facility and/or payroll employees located in a state, it is likely conducting business in that state. If the state is not the one in which the business was formed, foreign qualification with that state’s authorities must be filed. Be sure to check with a knowledgeable professional or organization to see which foreign qualification requirements apply to your business.

Applying for Foreign Qualification
The foreign qualification process is not all that different from the steps taken to form an entity in the home state of formation. Usually, the business pays a fee and files an application for authority with the state’s business entity authorities (commonly the secretary of state). Once approved, the business receives a certificate allowing it to operate as a foreign entity.

The application for authority usually requires:

information on the entity’s legal name and principal address
the date and state/jurisdiction of formation
the names and business addresses of current directors, officers or managers
the name and business address of the entity’s registered agent for service of process

Many states also require proof of formation and good standing in the home state. A certificate of existence from home state government officials provides evidence the entity is validly formed and up-to-date on its filings and taxes.

Failure to foreign qualify may expose an entity and/or its owners to state penalties and fines. In addition, the entity will not be able to engage the state’s legal system and file suit until it has properly registered.

Maintaining a Registered Agent and Office
A foreign qualified business entity must also name and maintain at all times a registered agent and registered office within the state’s borders. This registered agent is authorized to receive service of process on the entity’s behalf.

Again, this requirement is not all that different from the home state of formation requirement, but it is absolutely vital to efficient state regulation, because service of process can be more difficult on foreign entities and their owners. If the service of process rules are not properly followed, the service could be declared invalid, further complicating legal proceedings. Moreover, an entity and its owners will want to know as soon as possible that they are being drawn into a legal battle. The registered agent requirement helps guarantee adequate notification and timely legal action. Failure to maintain a registered agent office can result in the termination of the company’s foreign qualification.

Filing Annual Reports & Paying Franchise Taxes
Many states require the filing of annual reports for both domestic and foreign business entities. The due dates for such reports vary by state—they could be due on a specified date for all entities, or on the anniversary of a particular company’s formation or foreign qualification. Some states mandate annual filings; other states may require them only periodically. This compliance task provides an opportunity to update state authorities on the entity information they already have on file, if changes occurred since the previous filing. In addition, the state collects a filing fee when the report is submitted.

Moreover, some states also require that annual franchise taxes be paid, in order to keep enjoying the state-granted privilege (or franchise) of conducting business within the state. A franchise tax is always independent of state business income taxes: An entity may owe a franchise tax even if it does not have a business income tax liability. Franchise taxes may be based on a flat fee, on business income or assets, on the number and value of company shares of stock, or some combination of them all. Check with each state’s authorities to see which requirements apply to your business entity.

Obtaining Business Licenses
Depending on the types of activities that will be conducted in the state, the foreign entity may need to obtain business licenses, and then renew them periodically. This requirement may not be limited to state authorities. Many local jurisdictions within the state may require licensing as well. The entity will need to complete an extensive audit of licensing requirements under state and local laws, and then institute procedures to ensure ongoing compliance in subsequent years. Penalties and fines for non-compliance range from minor to severe, including the loss of business privileges.

Completing Transactional Filings
Besides formation and foreign qualification (and the duties associated with them), other transactional filings with state authorities may be required of an entity. As a company grows and evolves, it may need to file restatements about the nature of its business and the people who manage it. It may convert from one entity type to another. It may change its name or begin operating under a “doing business as” (DBA) moniker. Mergers and acquisitions also require new information reports to be filed. And finally, when a business looks to wind down its operations and close, state filings must be completed before the process is considered official.

Foreign Qualification Checklist

	Do an extensive audit of the types of operational activities the company will be doing in each new state
	Match these activities to the state’s legal requirements for activities that require foreign qualification
	Seek a certificate of existence (and/or a tax clearance) from formation state authorities, showing the entity is currently in good standing
	Apply for applications for authority from the new states where the company will be expanding operations
	Select and maintain a registered agent and registered office for receiving service of process in each state where the entity will be qualified to conduct business
	Investigate annual report filings and franchise tax due dates for each new state of foreign qualification
	File annual reports and/or franchise taxes in those states by the entity’s due date
	Conduct an extensive audit of business licensing obligations in all new state and local jurisdictions
	Obtain these required business licenses and renew them as required by law
	Make updated transactional filings with the states as the entity’s ownership or operations change
	Submit withdrawal filings when the entity seeks to cease conducting business in a state where it has foreign qualified

Printed with permission from BizFilings.

About BizFilings
BizFilings is a full-service, online incorporation service provider, offering small business owners a fast, easy, and economical way to form a corporation, limited liability company (LLC), or other business structure online or by phone. Please visit their website for more information on BizFilings.

CompuPay is one of the leading payroll, tax filing and HR-related service providers in the country. For 30 years, we have established relationships with thousands of accounting professionals, allowing them to better attract, serve and retain business clients.

The material contained in this document is for informational purposes only and is current as of the date of publication. CompuPay is not a legal advisor or financial advisor and makes no claims as such. For financial or legal advice, please seek the advice of a professional.

Wage Garnishments

Wage garnishments, sometimes referred to as levies, wage assignments or earnings withholding orders, are legal orders or equitable procedures requiring an employer to withhold a specific portion of an employee’s wages for payment of debt. Most garnishments are made by court order; however, the IRS and state tax collection agencies can garnish wages by issuing a levy for unpaid taxes. As an employer, it is important to understand wage garnishments as garnishment orders are issued to the employer to withhold from payroll; it is the employer’s responsibility to ensure that the payment is made in full and on time to the appropriate court or agency requiring the garnishment.

Restrictions on Garnishments
Title III of the Consumer Credit Protection Act (CCPA) limits the amount of earnings that can be collected in one work week or pay period and protects the employee from being terminated if pay is garnished for any one debt regardless of the number of levies for that one debt. Although state laws on the matter vary, the CCPA does not prohibit discharge for separate garnishments for two or more debts. Title III does not have authority over any other issues regarding garnishment.

Questions regarding a specific garnishment order that do not pertain to Title III coverage should be directed to the court or agency issuing the withholding order.

Pay subject to garnishment is based on an employee’s disposable earnings (the amount remaining after required deductions, such as federal, state and local taxes, are withheld). Unemployment insurance, Social Security and Medicare withholdings are not included in disposable earnings. Any voluntary wage deductions, including health insurance, union dues, etc., are not usually subtracted from gross earnings when calculating disposable earnings.

For garnishments other than child support, bankruptcy or state or federal tax, the weekly amount of a garnishment must be equal to or less than either:

25 percent of the employee’s disposable earnings
The amount that the employee’s disposable earnings are greater than 30 times the federal hourly minimum wage.

If a state does not allow garnishment or if the maximum amount that a state allows to be subject to garnishment is lower than the federal maximum, the state law will apply.

The following chart outlines the maximum amount that can be garnished under normal circumstances. It is important to note that the restrictions in the chart do not apply to garnishments for child or spousal support, bankruptcy, levies for state or federal taxes or individual state laws.

*Chart courtesy of the U.S. Department of Labor website.

Multiple Garnishments
If an employee has multiple garnishments and does not make enough earnings to cover the debt owed, the employer must determine which debts take priority. State laws normally dictate which claims are to be paid first. Most state laws rule that existing garnishments take priority over wage claims issued thereafter, as long as garnishments are issued in accordance with their specific requirements.

State and federal garnishment limits apply regardless of the number of garnishments received for an employee. Once the maximum garnishment has been reached, no further wages may be withheld for any additional garnishments.

Administrative Fees
In some states, employers are allowed to charge administrative fees for garnishment processing. As individual states determine the guidelines for wage garnishment, it is a best practice to check with the state in which you operate to ascertain whether an administrative fee may be charged, if the fee is to be charged to the employee or to the creditor and to determine the amount allowed by law for the administrative fee.

As individual state garnishment laws vary, it is best to check with your state’s Department of Labor (DOL) to ensure that you are compliant in the states in which you operate. The U.S. Department of Labor has a convenient list of state DOL offices on its website.

Child Support and Alimony
Child or spousal support orders are always given priority over any other wage garnishment. As much as 50 percent of disposable wages can be garnished for child support or alimony if the employee is supporting another spouse or child; up to 60 percent can be garnished if the employee is not supporting another spouse or child.

An additional 5 percent can be garnished for support payments that are 12 or more weeks in arrears. Current family support payments are generally given priority over any payment(s) in arrears.

Nontax Debts Owed to Federal Agencies
Federal agencies, or collection agencies under contract with them, may garnish up to 15 percent of disposable earnings to repay debts owed to the U.S. government. The Department of Education’s guaranty agencies may garnish up to 10 percent of disposable earnings to repay federal student loans. These withholdings are subject to the requirements of the federal wage garnishment laws, but not state garnishment laws.

Exceptions
Garnishment restrictions do not apply to certain bankruptcy court orders or debts due for federal or state taxes. If Title III is different from the state wage law, the law with the smaller garnishment must be observed.

Additional information on wage garnishments is available on the U.S. Department of Labor website.

Employees Vs. Independent Contractors

When hiring workers to perform services for their business, it is crucial that an employer correctly determine the appropriate classification of each worker. A worker can be classified as an employee, independent contractor, statutory employee or statutory nonemployee, based on the business relationship with that worker.

Employee
Generally, an employee is a worker with whom the employer maintains a continuous relationship, who the employer has the right to terminate from employment and for whom the employer provides a workplace, training and tools with which to perform his or her job. Additionally, the employer determines the work to be performed as well as how it will be done. Payments to workers classified as employees require employers to withhold taxes and report wages subject to taxation; employers are also responsible for employment taxes such as unemployment, Social Security and Medicare.

Independent Contractor
Independent contractors usually provide services to individuals or other businesses and have the autonomy to choose how, where and when the work will be performed. Payments to workers classified as independent contractors generally do not require any withholding and are reported annually using a Form 1099-MISC.

Statutory Employee
Some workers who qualify as independent contractors can be treated as statutory employees for certain employment tax purposes. Statutory employees have a contract that states or implies that they will personally perform all services, perform the services on an ongoing basis for the same business and do not have a substantial investment in property or equipment used to do the work necessary. These workers also fall into one of four categories as determined by the IRS:

1. A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission.

2. A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.

3. An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.

4. A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson’s principal business activity.*

Although payments made to statutory employees are not subject to federal income tax withholding, if a worker meets the conditions above, Social Security and Medicare taxes should be withheld from wages paid and the employer is subject to the employer’s portion of those taxes. Additionally, if the worker’s job falls under category 1 or 4 above, the employer is also responsible for FUTA taxes for that statutory employee.

Statutory Nonemployee
Independent contractors who are considered statutory nonemployees include direct sellers, licensed real estate agents and companion sitters who are not employees of a placement service. Statutory nonemployees work under a contract that specifies that they will not be considered employees for tax purposes and are paid based on services performed, not based on hours worked. They are treated as self-employed for tax purposes.

Common Law Rules
The IRS has established the common law test to make the classification of workers easier for employers. The common law test asks seven questions to help determine status:

Who controls the work?
What work will be done?
How will the work be done?
Who supplies the tools required to complete the work?
When will the work be done?
Where will the work be done?
Does the worker have the liability to make a profit or suffer loss?

Generally, if the employer is in control of all or most of these factors, then the worker is an employee. However, there is no set number of answers that determine control versus independence; the work relationship as a whole must be examined before a true determination can be made.

Assistance with Determining Worker Classification
Employers who are unable to easily make a determination on the classification of a worker can utilize IRS Form SS-8, Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding, to assist them in making that decision. The completed form is submitted to the IRS which will notify the employer of the decision. However, while awaiting the IRS’ determination, the employer must treat the worker as an employee, including withholding taxes and reporting wage and tax information.

IRS Voluntary Classification Settlement Program
The U.S. and individual state departments of labor, state unemployment agencies, workers’ compensation bureaus and the U.S. Citizenship and Immigration Services closely monitor the classification of workers. Misclassification of workers can cost a business large sums of money due to penalties and fines imposed as well as the payment of back wages.

In an effort to encourage businesses to correctly classify workers, the IRS has launched a program designed to allow employers to resolve past worker classification issues and qualify for substantial relief from overdue federal payroll taxes by voluntarily reclassifying their workers. Under the Voluntary Classification Settlement Program, employers with workers currently categorized as independent contractors voluntarily reclassify those workers as employees for future tax periods. In return, the employer will be liable for only 10 percent of the employer tax liability and the IRS will not subject the employer to penalties or interest that otherwise would have been due if the reclassification had not been voluntary. Additionally, the IRS will not perform an employment tax audit concerning workers reclassified under the program. Employers that wish to participate in this program must complete IRS Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days prior to treating reclassified workers as employees. The IRS also recommends that employers provide the name of an authorized representative and submit a power of attorney (Form 2848) with the application.

The IRS website contains a wealth of information including specifics on determining the proper classification of workers. Complete details on the Voluntary Classification Settlement Program are also available on the IRS website.

* Source:
Internal Revenue Service, “Statutory Employees,” http://www.irs.gov/businesses/small/article/0,,id=179118,00.html, Feb. 15, 2012.

2012 Tax Changes

During 2011, hundreds of new laws or extensions of existing laws were enacted that affect all Americans; many of the significant legislative changes were to tax laws that will have a direct effect on employers across the country in 2012.

Social Security Wage Base
The Social Security wage base is the maximum amount of earnings against which the Social Security tax can be applied. It has been increased from $106,800 in 2011 to $110,100 for 2012. This means that any wages earned in excess of $110,100 in 2012 are not subject to Social Security taxes.

Temporary Payroll Tax Cut Continuation Act of 2011
In December of 2011, Congress, by unanimous consent, passed the Temporary Payroll Tax Cut Continuation Act of 2011. The act, which is funded by an increase in mortgage guaranty fees, extends not only a payroll tax cut, but also unemployment benefits through the end of February 2012.

In 2011, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 reduced the employee portion of the Social Security tax from 6.2% to 4.2% on the first $106,800 of wages earned. The Temporary Payroll Tax Cut Continuation Act of 2011 extended the reduction of the employee portion of the Social Security tax through February 29, 2012. Because the extension only covers two-twelfths of the year, the tax reduction applies only to the first $18,350 (two-twelfths of $110,100) in wages earned in 2012. A Congressional conference committee is tasked with determining whether the act should be extended through the end of 2012. If it is not extended, a recapture of excess benefits clause in the existing act allows for a 2% tax on any wages over $18,350 previously taxed at the reduced rate.

Income Tax Withholding Tables Updated
The IRS has posted Notice 1036, Early Release Copies of the 2012 Percentage Method Tables for Income Tax Withholding on its website. The IRS recommends checking regularly for updated information on Notice 1036 and the status of the extension of the tax holiday and actions taken by Congress on their website.

Many states have also updated their withholding tables for 2012. Be certain to check your individual state’s website for information on state income tax rates and tables. The American Payroll Association’s website has a page of links to individual state government websites.

Tax Rate for Vehicle Use
The standard mileage rate for business use of a vehicle was increased to 55.5¢ per mile on July 1, 2011. The rate remains unchanged for 2012.

The fair market value limit amounts for cars and trucks, for use when utilizing the cents-per-mile rules to determine the value of an employee’s personal use of a company vehicle, increased from $15,300 to $15,900 and from $16,200 to $16,700, respectively. The value of the employee’s use of a company car is a taxable fringe benefit and must either be reimbursed to the employer or included in the employee’s wages on Form W-2.

Specific information on fringe benefit valuation rules is outlined in IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits.

Commuter Tax Benefits
A temporary increase in the amount employers may provide workers in tax-free transit and vanpool benefits expired on December 31, 2011. As a result, the maximum amount was reduced from $230 per month in 2011 to $125 per month for 2012. On the other hand, the qualified parking benefit exclusion increased from $230 per month to $240 per month.

Elective Deferral Plan Limits
The limit for elective deferral plans, such as 401(k), has been increased to $17,000 for 2012. The SIMPLE plan limit remains unchanged at $11,500.

IRS Form W-2
Beginning with 2012 Form W-2 (generally issued to employees in January of 2013 for the 2012 calendar year), businesses that file more than 250 Forms W-2 are required to report the cost of employer-sponsored health coverage on the forms.

General instructions for 2012 IRS Forms W-2 and W-3, available on the IRS website, specify listing the cost of employer health coverage in box 12 with code DD.

Employers that file fewer than 250 Forms W-2 are not required to report this information for 2012. According to IRS Notice 2012-9, this exemption is expected to continue in 2013 and subsequent years until further guidance is issued.

Work Opportunity Tax Credits (WOTC)
The Work Opportunity Tax Credit program was established to encourage businesses to employ workers from economically challenged groups including ex-convicts, long-term recipients of benefits from the Temporary Assistance for Needy Families (TANF) program, veterans with disabilities and Supplemental Security Income benefits recipients. Although the nonmilitary WOTC programs expired on December 31, 2011, Congress passed the American Jobs Act in November 2011, which provides incentives to businesses that hire unemployed veterans.

The “Returning Heroes” tax credit provides a credit to employers of up to $2,500 for hiring veterans who have been unemployed for more than four weeks, or up to $5,600 for hiring veterans who have been out of work for over six months. The “Wounded Warrior” tax credit continues the previous WOTC credit to employers of up to $4,800 for hiring veterans with service-connected disabilities; however, it now provides a new credit of as much as $9,600 to businesses that hire a veteran with a service-connected disability who has been unemployed for more than six months.

Additional information on the Returning Heroes and Wounded Warriors Tax Credits is available on the White House website.

Small Business Health Care Tax Credit
Small employers with the equivalent of fewer than 25 full-time workers who pay an average wage of less than $50,000 per year and pay at least 50% of single health coverage for employees may be eligible for the Small Business Health Care Tax Credit. Small business employers may be able to apply up to a maximum of a 35% credit; small tax-exempt employers may be eligible for up to a 25% credit.

IRS Form 8941, Credit for Small Employer Health Insurance Premiums, must be used to calculate the credit. Small businesses should include the amount of the credit as part of the general business credit on their income tax return. Tax-exempt employers should file the tax credit amount on line 44f of IRS Form 990-T, Exempt Organization Business Income Tax Return. The credit can be taken for tax years 2010 through 2013. Employers that did not take the credit for 2010 can still file an amended return and take it now.

For more information on the Small Business Health Care Tax Credit, is available on the IRS website.

FUTA Credit Reductions
Unemployment insurance (UI) is a program established by the Federal Unemployment Tax Act (FUTA) that is jointly financed through federal and state employer payroll taxes. Currently, the FUTA tax rate is set at 6.0%; however, most employers do not pay a FUTA rate of 6.0%. Historically, employers who pay their state unemployment tax on time receive an offset FUTA credit of 5.4%, resulting in a net FUTA tax rate of 0.6% for those employers.

In 2011, businesses in 20 states and the U.S. Virgin Islands found themselves paying a higher FUTA tax rate because their FUTA offset credit was reduced. This happened because states that borrow money from the federal government to fund their state unemployment programs have two years to repay their loan in full. If the loan is not paid in full on or before November 10 of the second tax year, employers in that state lose 0.3% of their available FUTA credit, resulting in a higher FUTA tax rate.

A full explanation of FUTA credit reductions for 2011, including details regarding which states are affected, is covered in the January 2012 issue of Insights and Innovations..

Tax Update Resources
The IRS Small Business and Self-Employed Tax Center is an excellent resource for state and federal legislative and tax changes. Payroll and tax professionals will also benefit from visiting the Payroll Professionals Tax Center and the Issue Management Resolution System (IMRS) “Hot Issues” page of the IRS website on a regular basis.

The Payroll News page of the CompuPay website is updated regularly with payroll, tax and industry news affecting employers across the country and is an excellent source for up-to-date information.

FUTA Credit Reductions in 2011

While the country begins to see positive changes in the economy, many aspects of the troubled economic times we have recently experienced will be with us for years to come. One will certainly be the effects of high numbers of unemployed workers, extended unemployment benefits and the correlating insolvency of many state unemployment funding programs.

Unemployment insurance (UI) is a program established by the Federal Unemployment Tax Act (FUTA) that is jointly financed through federal and state employer payroll taxes. It is designed to provide individuals with emergency income in times of involuntary unemployment and to encourage employers to effectively manage their workforce. In general, most employers must pay both state and federal unemployment taxes if they pay wages to employees of $1,500 or more in any quarter of a calendar year or if they had at least one employee during any day of a week during any 20 weeks, consecutive or not, in a calendar year. In New Jersey, Alaska and Pennsylvania, both employees and employers are required to pay unemployment taxes.

Calculating FUTA Taxes
The FUTA UI tax rate was originally set at 6.0%. For over 30 years, a temporary surcharge of 0.2% made the effective FUTA UI tax rate 6.2%. The surcharge expired on June 30, 2011, and the rate reverted to 6.0% as of July 1, 2011. However, it is important to understand that most employers do not pay employers that pay their state unemployment tax on time receive an offset FUTA tax credit of 5.4%, resulting in a net rate of 0.6%.

There are three ways that employers can lose FUTA tax credits:

If an employer does not pay their state UI taxes on time, they receive a 90% offset credit for the amount of the late payment.
If the state’s UI law does not conform to federal law, all employers in that state lose the entire 5.4% FUTA tax credit.
State UI tax programs are based on forward-funding. When they have exhausted their reserves, states borrow from the federal government in the form of a Title XII loan to fund UI. However, if the state has an outstanding loan balance on January 1 for two consecutive tax years, the full amount is due to be paid no later than November 10 of the second tax year. If the loan is not paid in full by that date, the state is then considered a “credit reduction” state; employers in that state lose available FUTA credit by 0.3%, cumulatively, each year there is an unpaid balance owed the federal government.

The FUTA wage base is the maximum annual amount of earnings on which unemployment taxes may be levied. Because the federal wage base is currently set at $7,000, the maximum FUTA tax expense in 2012 for employers that pay their state unemployment tax on time is $42 per employee annually if they are not in a credit reduction state.

FUTA Credit Reduction
In November, the U.S. Department of Labor announced the final list of states that have outstanding federal loans for 2011. Because the states involved have not paid their Title XII loans in full, the conditions of those loans require all employers in those states to lose a portion of the credit against the full FUTA tax for 2011. In 2011, 20 states plus the U.S. Virgin Islands failed to pay their loans in full. Because their FUTA credit has been reduced, employers in those states are now subject to higher unemployment taxes retroactive to January 1, 2011.

The following chart outlines states in which employers must pay additional FUTA taxes for 2011:

Consider this example:

Michigan employers have received a FUTA credit reduction for three years. In that state, the total credit reduction is now at 0.9%, resulting in a net FUTA tax rate for Michigan employers of 1.7% as of January 1, 2011.

A Michigan employer had 15 employees throughout 2011. All employees earned over $7,000. The employer has paid FUTA throughout the year at .8%. So far this year, the employer has paid a total of $840 in FUTA tax:

15 employees x $7,000 =$105,000 (total FUTA taxable wages)
$105,000 x .8% =$840.00 (total FUTA liability for the year).

With a credit reduction of .9%, the employer must pay an additional .9% in FUTA tax for the year:

$105,000 x .9% =$945.00 (additional FUTA liability for 2011).

The same concept applies to the other states; the difference is the amount of the credit reduction. Assuming the same total FUTA taxable wages for the year:

An Indiana employer would pay:

$105,000 x .6% =$630.00 (additional FUTA liability for 2011).

Whereas an Arkansas, California, Connecticut, Florida, Georgia, Illinois, Kentucky, Minnesota, Missouri, North Carolina, New Jersey, Nevada, New York, Ohio, Pennsylvania, Rhode Island, Virginia, or Wisconsin employer would pay:

$105,000 x .3% =$315.00 (additional FUTA liability for 2011).

You can keep up with legislative changes in your state and the federal government by visiting the IRS Small Business and Self-Employed Tax Center. CPAs and other payroll professionals may also find the small business articles found on the IRS website to be valuable.

Tipped Employees

Payroll can be a unique challenge for businesses that employ tipped workers. Complex regulations that change from federal to state and local levels make handling payroll for tipped employees a complicated undertaking for many small businesses. By understanding government regulations concerning tipped employees, employers can take appropriate steps to reduce risk and ensure compliance.

Minimum Wage for Tipped Employees
Federal law determines the minimum wage rate at which employees can be paid. Although individual states set their own minimum wage rate, unless the state rate is higher, employers must pay their employees based on the federal minimum wage. This is true for tipped employees as well.

As of July 24, 2009, the federal minimum wage rate is set at $7.25 per hour. However, federal law also allows employers to count employee tips as part of their wages by taking a credit against the minimum wage requirement. The maximum amount of credit that the employer can apply is $5.12 per hour resulting in a tipped employee federal minimum wage of $2.13 per hour when the maximum credit is applied. This credit applies only to tipped employees, and many states have regulations concerning these credits. The Wage and Hour Division of the U.S. Department of Labor (DOL) maintains a table of minimum hourly wages for tipped employees, segmented by state, on their website.

Although employers can take advantage of the tip credit, it is still the employer’s obligation to ensure that, when wages and tips are combined, the employee rate of pay is meeting or exceeding the equivalent of minimum wage. In states where the minimum wage is higher than $7.25, employers must be sure employees are receiving the equivalent of the state minimum. If an employee’s tips do not bring the total up to minimum wage, the employer must pay the difference to the employee. A list of state minimum wage rates can be found on the DOL website.

Overtime for Tipped Employees
In a state that allows the employer to take the full $5.12 tip credit, there is a special overtime rule. For any overtime hours worked the maximum tip credit is still only $5.12. In other words, the employer cannot calculate the employee’s overtime rate as $2.13 x 1.5, or $3.19. Instead, the overtime rate should be calculated as indicated below:

$ 7.250 minimum wage
3.625 plus 1/2 minimum wage
$10.875 hourly overtime rate
-5.120 less tip credit
$ 5.755 overtime rate for tipped employees being paid federal minimum wage

If an employee’s hourly rate is higher than minimum wage, the overtime rate is time and one-half the hourly rate actually paid.

Pooled Tips
In some establishments, employees who regularly and customarily receive tips are required to contribute a portion of their tips to a pool, which is then divided among a group of employees. Employees may only contribute any amount in tips received that are in excess of minimum wage when combined with their hourly wage. Tips from a pool cannot go to employees, like chefs and dishwashers, who don’t usually receive tips. Employers, and in some states managers or supervisors, are prohibited from receiving funds from pooled tips.

Reporting Tips
Employees receiving more than $20.00 per month in tips must report the total amount of their tips to the employer by the 10th day of the following month. The IRS provides Form 4070, Employee’s Report of Tips to Employer, for this purpose, although employees may use anything similar to complete this reporting. The report must include the employee’s name, address, Social Security number, employer’s name and address, the period that the report covers and the total tips received.

Tips reported must include both amounts received directly by the employee and charged tips paid over to the employee. Generally, employees report their tips to their employer at the end of each night on paper or through the restaurant management software.

Additional information about tip withholding and reporting, including W-2s, tip allocation and voluntary compliance programs is located on the IRS website.

Legislative Update:
Effective May 5, 2011, a tip credit regulation under the Fair Labor Standards Act requires employers to provide oral or written notice to each employee that the employer is taking the tip credit and how the employee’s tips will be applied to their wages. Notification must include the following:

The hourly rate the employer is paying the tipped employee (at least $2.13/hour)
The amount the employer is claiming as a tip credit (not more than $5.12/hour)
The tip credit cannot exceed the actual tips received by the employee
All tips received by the tipped employee remain the property of the tipped employee (except in a valid pooling arrangement).
The tip credit will not be applied to any employees’ wages unless the employee has been notified of the tip credit provisions.

If an employer fails to notify the worker, use of the tip credit is prohibited and the employer must pay the employee at least minimum wage and allow the employee to retain all tips. Should the employer not inform the employee and take the tip credit, the business is subject to criminal and civil penalties from the U.S. Department of Labor in addition to any lawsuit the employee may file.

The DOL has issued a fact sheet titled Tipped Employees Under the Fair Labor Standards Act (FLSA) that is available for download from their website. The fact sheet covers the application of the FLSA laws to tipped employees, including wage rates, tips and pooling, service charges, dual jobs and gives examples of typical issues employers and employees may encounter when handling tip income.

Preparing Payroll for Year-End

December and January are very busy months for payroll processing. As one year comes to a close and the new year begins, several payroll-related tasks need to be accomplished by employers. Some activities need to occur prior to the new year and others after the new year has begun.

In an effort to organize payroll activities and plan for the new year, several questions may arise:

What do I need to do before my last payroll of the year?

Confirm accuracy of current data - It is important that all employee information is checked for accuracy and updated if necessary. Employee names, addresses and Social Security numbers (SSN) are information required on Form W-2 that must be updated prior to the final payroll processing for the year. Incorrect or mismatched employee names or Social Security numbers can result in penalties imposed by the Internal Revenue Service (IRS) as well as some states. (If an employee does not have an SSN, information on how to apply for a Social Security number is available through the Social Security Administration’s website.) It is recommended to have each of your employees verify that their SSN is recorded correctly in your system. SSNs can also be verified online through the Social Security Number Verification Service or through E-Verify on the U.S. Citizenship and Immigration Service’s website.
Employer identification numbers (known as EIN or FEIN) should be checked for accuracy. Please note that tax identification numbers (TIN) should not be used for payroll purposes. Information regarding EINs and how to apply for one can be found in IRS Publication 1635.
Schedule any special or bonus payrolls.
Ensure that all year-end adjustments are recorded in the payroll.
Review federal holiday schedules and adjust your payroll date(s) as necessary.
Verify that proper withholdings for taxable fringe benefits have been made.

What do I need to do after my last payroll of the year, but before the first payroll of the new year?

Inform employees of the need to complete a new Form W-4 if their taxing situation has changed or if they are claiming exemption from federal withholding in 2012. Some employees may also need to complete a state Form W-4 if they claim differently for federal versus state withholdings.
Make any necessary changes to employee deductions for benefits such as medical, dental, 401(k), life insurance, etc.
Verify that any extra taxing or blocked taxes that are no longer desired have been removed.

It is also recommended that you verify your state unemployment tax rate as soon as possible, but no later than the end of the first quarter in the new year. In the last few years, state unemployment tax rates have changed dramatically in some states. Be sure to check with your state to ensure that you are calculating this tax at the appropriate rate for 2012.

My pay period end date is December 30, 2011. My pay period check date is January 5, 2012. In what year do I include these wages on Form W-2?
Wages are reportable in the year in which they are actually received (i.e. check date of January 5, 2012). Therefore, these wages should appear on the Form W-2 for the 2012 tax year.

When do I need to mail Form W-2 to my employees?
By federal law, all Forms W-2 must be postmarked on or before January 31 of each year for the previous year’s data.

An employee has requested a duplicate copy of his W-2. Do I need to create a new one?
If an employee’s Form W-2 has been lost, destroyed or misplaced, you may make a copy of that employee’s W-2 from your employer reference copy. Type “Reissued Statement” at the top before presenting it to the employee.

I have a worker who is an independent contractor, not an employee. Do I need to issue a Form 1099 to this worker?
Earnings of $600.00 or more must be reported to the IRS through Form 1099 for all nonemployees. Earnings less than $600.00 are not required to be reported.

Workers’ Compensation

Workers’ compensation programs in the United States provide for the needs of employees who incur work-related injuries or illnesses. Benefits can include compensation for wages lost while recuperating from an injury, medical and rehabilitation costs, disability benefits, as well as survivor and death benefits. In return for coverage under a workers’ compensation program, covered employees relinquish their rights to sue their employer in the case of work-related illness or injury.

History of Workers’ Compensation Laws in the United States

Before the Supreme Court upheld the constitutionality of compulsory workers’ compensation programs by the states in 1917, workers had little recourse if they were injured while on the job. An employee who became hurt had to turn to the courts for restitution. Most workers did not have the financial resources to sue the employer; those who could, faced a difficult time, as the onus was on the employee to prove negligence on the employer’s part. As a result, very few employees received any compensation. Additionally, employees and employers alike faced an unpredictable system where the settlement might be less than the employee’s legal costs or an exorbitant amount that might be more than the employer could afford to pay.

Initially, the concept of workers’ compensation was not widely embraced. In addition to resistance from employers, unions opposed workers’ compensation laws, as they feared that the necessity of unions would decline if the states controlled worker benefits. Between 1902 and 1910, four states introduced compulsory workers’ compensation statutes; all four were challenged in the courts and were deemed unconstitutional as violating due process. In 1911, Wisconsin passed the first workers’ compensation law that survived legal challenges; in the next ten years, all but eight states passed legislation that made workers’ compensation insurance compulsory. Passing its statute in 1948, Mississippi was the last state to implement workers’ compensation legislation.

How Does Workers’ Compensation Affect Employers?

Workers’ compensation laws are different in every state. Although all states require most businesses to carry workers’ compensation insurance, some workers, such as farm and domestic workers, are exempted in many states. It is also important to know whether you need to carry workers’ compensation insurance based on the number of workers your business employs. In most states, if you employ any employees, they all must be covered. However, there are a handful of states that impose a higher threshold:

The chart above outlines the states in which a business is not required to provide workers’
compensation coverage if they employ fewer than the threshold number of employees listed.

Four states, Ohio, North Dakota, Washington, and Wyoming, are considered monopolistic for the purposes of workers’ compensation. In those states, you can only purchase coverage from the state agency that administers workers’ compensation. To find out more about coverage in these states, please visit the state website. A list of state websites for workers’ compensation is available at the end of this article.

Who is Covered?

In most states, only employees need to be covered by workers’ compensation insurance. However, the workplace determines whether a person is an employee or an independent contractor for workers’ compensation purposes. Even persons who are issued a 1099 rather than a W-2 and those who sign independent contractor agreements may be subject to workers’ compensation laws. Employers that incorrectly designate an employee as an independent contractor may find themselves unexpectedly billed by an insurer for premiums, facing compliance actions by the state, or possibly being sued by an injured worker.

When determining employee versus contractor status, several elements need to be considered. For example, in general, an employee is a worker with whom the employer maintains a continuous relationship, who the employer has the right to terminate from employment and for whom the employer provides a workplace and tools with which to perform his or her job. Conversely, a contractor maintains an independent business that is available to provide services to the public. Contractors chose whom they work for and how the work is to be performed. Because rules vary by state regarding employee and independent contractor designations, be sure to check with your state to ensure compliance. A list of state websites for workers’ compensation is available at the end of this article.

Under certain situations, owners of small businesses have the ability to elect to be exempted or included in the application of workers’ compensation laws. Exempt persons are not covered by workers’ compensation policies and do not pay premiums. Specific state statutes govern who those persons are and what filing requirements are necessary to authenticate an inclusion or exemption. For example, most states automatically exempt sole proprietors and partners in nonconstruction businesses; however, in some states (AR, IL, LA, MS, NM, TX & WV) they are automatically included. Furthermore, in the state of Connecticut, partners, rather than sole proprietors, are automatically included. All states allow a change to the automatic inclusion or exclusion, but it must be made in writing. The specific method prescribed for the written request varies by state; therefore, it is best to check with your state agency to ensure that your request is in an acceptable form.

Although in most states corporate officers generally must request to be exempt, in ID, NE and OK, they need to file a request to be included. States have specific ownership percentages and rules governing which officers or how many officers can file for inclusion or exclusion; rules regarding members of limited liability companies (LLCs) can be even more specific. It also is important to note that businesses engaging in some type of construction generally are subject to a separate set of rules in most states.

Duties

In most states, employers have responsibilities associated with workers’ compensation in addition to providing coverage. Most often, they have to do some or all of the following:

post notice of workers’ compensation regulations in a specified location available to all employees
report accidents to their insurer in a timely manner
assist an injured worker to obtain medical care if they are unable to do so themselves
keep logs of accidents and respond to their insurance company
respond to state requests for information related to workers’ compensation claims

It is important to know your responsibilities as an employer in your state. Check with your state agency or workers’ compensation insurance provider to ensure that your business complies with your state’s regulations. The table below provides links to the workers’ compensation Web pages for each state:

Alabama	Indiana	Nebraska	South Carolina
Alaska	Iowa	Nevada	South Dakota
Arizona	Kansas	New Hampshire	Tennessee
Arkansas	Kentucky	New Jersey	Texas
California	Louisiana	New Mexico	Utah
Colorado	Maine	New York	Vermont
Connecticut	Maryland	North Carolina	Virginia
Delaware	Massachusetts	North Dakota	Washington
Florida	Michigan	Ohio	West Virginia
Georgia	Minnesota	Oklahoma	Wisconsin
Hawaii	Mississippi	Oregon	Wyoming
Idaho	Missouri	Pennsylvania
Illinois	Montana	Rhode Island

What Employers Need to Know About Visas

A History of Immigration
The first United States federal immigration law was passed on March 26, 1790, and established a two-year residency requirement for naturalization. Since then, over one hundred immigration statutes have been enacted to facilitate and control the entry of noncitizens, also known as aliens, into the U.S. A major policy update was made via the Immigration Act of 1990 that has provided the framework for today’s immigration policy.

Visas allow individuals who are citizens of a foreign country to enter and work in the United States. The U.S. Department of State regulates visa policy and issues visas. There are two basic types of visas: nonresident visas are granted to individuals who are on a temporary stay in the U.S, while resident visas are granted to those desiring permanent residency. There are over 70 temporary and permanent visa types, which are largely determined by the reason for the individual’s visit to the U.S.

How Do Visas Affect Employers?
All workers, regardless of visa status, are required to have a Social Security number (SSN) for the reporting of wages and must complete a Form W-4 upon hire. However, nonresident aliens are only allowed to claim single status with one (1) dependent exemption. Residents of Canada and Mexico who commute to work are not restricted to the single/one dependent status.

Each individual visa type corresponds to a specific set of employment restrictions and tax requirements that employers must manage through payroll.

Employees whose visas qualify them for a permanent resident card (Form I-551, formerly known as a “green card”) are taxed in the same manner as U.S. citizens.

As outlined in IRS Publication 901, treaties with certain countries have been established and may exempt that country’s citizens from tax withholding. For those individuals, IRS Form 8233 must be completed before beginning work. This form can be downloaded from the IRS website. For those who do not fall under a tax treaty with a foreign country, tax requirements vary by visa type.

The following table outlines the taxing requirements on wages paid to nonresident aliens with various visa types:

Key:
FICA = Social Secuity & Medicare taxes
FIT = federal income tax
SIT = state income tax
SUTA = state unemployment tax
FUTA = federal unemployment tax
TAX = taxable
EX = exempt

Note that those exempt from Social Security and Medicare (FICA) and federal unemployment (FUTA) taxes may be subject to state unemployment insurance (SUI) taxes, except in the following states: Arkansas, Colorado, Florida, Maryland, Pennsylvania, and Washington.

A list of immigration classifications and visa categories is available on the U. S. Citizenship and Immigration Services website.

Additional information on visas can be found on the U.S. Department of State website.

Guidelines on tax withholding are detailed in IRS publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, and can be downloaded from the IRS website.

Payroll Management for Small Business: Part 2 - Paying Employees

Every business owner or manager faces a multitude of challenges on a daily basis. In addition to the day-to-day operations of the business, the processes involved with paying workers can often be overwhelming, and mistakes made can result in sizeable financial penalties and fines. In the second of a two-part series on managing payroll for small businesses, Jean Domaingue, area director of sales for CompuPay, outlines essential information that every employer should know when paying employees.

Minimum Wage
As of July 24, 2009, the minimum wage that employers are required to pay their employees was set by the federal government at $7.25 per hour. However, each state has its own minimum wage requirement. If the state minimum wage is set below the federal rate, employers in that state must use the federal minimum wage amount. If the state minimum wage exceeds the federal rate, employers in that state must pay their employees at the state minimum wage. A list of state minimum wage information contacts is available on the U.S. Department of Labor’s website.

Federal law requires that tipped employees be paid $2.13 per hour in direct wages so long as the amount received in tips plus the direct wages paid equals or exceeds the federal minimum wage. In a case when the total amount is less than the federal minimum wage, the employer must make up the difference when paying direct wages to the employee. It is important to note that many states have direct wage amounts for tipped employees that exceed the federal minimum. In those states, the employer must observe the state’s rules for paying tipped employees.

The U.S. Department of Labor has created a downloadable fact sheet on their website about paying tipped employees.

Exempt vs. Nonexempt Employees
The Fair Labor Standards Act (FLSA) provides exemption from minimum wage and overtime requirements for some categories of employees. Nonexempt employees are not eligible for the exemptions and must be paid at a rate that meets or exceeds minimum wage. They must also be paid overtime when they work more than 40 hours in a work week. A work week is defined as seven consecutive 24 hour periods.

The Code of Federal Regulations, title 29, volume 3, part 541 defines a worker that qualifies for exempt status as ``Any employee employed in a bona fide executive, administrative, or professional capacity (including any employee employed in the capacity of academic administrative personnel or teacher in elementary or secondary schools), or in the capacity of outside salesman.’’ Additionally, in order to be considered exempt, employees generally must be paid a salary of $455.00 or more per week and meet certain tests regarding job duties.

Because the specifics on exemption are narrowly defined based on an employee’s specific salary and job duties, employers should consult their local U.S. Department of Labor Wage and Hour Division office. A list of local offices is located on the U.S. DOL’s website.

Paying Employees
How often employees are paid is generally up to the employer to determine. As many states have specific requirements regarding pay frequency, employers should check with the state department of labor for clarification. Common frequencies include weekly, biweekly, semimonthly and monthly pay periods. Generally, if workers are paid weekly, they will be paid 52 times during a calendar year; biweekly workers 26, semimonthly 24 and monthly 12 times in a year. When paying salaried employees, the annual salary is divided by the number of pay periods in a year to determine the gross amount for the pay period. However, in some years, there may be an additional pay period. In a year with an extra pay period, employers will need to decide if they will recalculate salaried employees’ gross pay per period or choose to pay the employee funds beyond their annual salary.

The period end date is defined as the last day of the pay period worked. The period end date is not to be confused with the pay day, which is the date when employees are paid. It is not unusual to have a payroll where the period end date falls in one calendar quarter and the pay day falls in the next calendar quarter. It is important to keep in mind that, for tax purposes, the pay day determines which calendar quarter or calendar year the payroll falls in, not the period end date.

Today’s employers have several options for issuing payment to employees. In addition to the traditional method of paying employees by issuing checks, employers can take advantage of payment by direct deposit or pay cards. Pay cards allow unbanked employees to access funds deposited to a bank account corresponding to the pay card. Pay cards work much like debit cards but do not require the setup of a formal bank account. Like direct deposit, pay cards allow employers to electronically deposit earnings into an employee’s account, eliminating lost or stolen checks and thereby reducing risk to both the worker and employer.

Pay statements provide workers with valuable details about earnings, accruals, deductions and withholdings. Generally, they are issued to the employee along with their pay check, or as a statement of direct deposit. Although federal law does not require employers to provide their employees with pay statements, most states do and it is generally a prudent decision to provide employees with this information. Check your individual state’s requirements to ensure you are in compliance.

Calculating Overtime
When nonexempt employees work more than 40 hours in a workweek, defined as seven consecutive days, federal law requires that they be paid overtime at a rate equaling or exceeding one and one half times their normal rate of pay for any hours worked over 40 in that workweek.

Most people, when asked to calculate overtime, will use what is termed the “time and a half” method. If an employee works 47 hours at a $10 per hour rate, the calculation would look like this:

40 X $10 = $400
7 X $10 X 1.5 = 105
Total pay $505

Because overtime is a premium based on an individual’s regular rate of pay, a second method of calculating overtime, called “premium pay” is often used by professionals. In this method, all hours worked are calculated at straight time, and any hours worked beyond 40 per week are calculated at one half times the straight time. The premium pay method makes calculating workers’ compensation premiums easier as workers’ compensation is paid based on straight time only; overtime work and rates are not included. Using the same information as in the example above, the premium pay calculation looks like this:

47 X $10 = $470
7 X $10 X .5 = 35
Total pay $505

If an employee has multiple pay rates, the regular rate of pay is calculated prior to calculating over time wages. An employee who worked 30 hours at $10 and another 20 hours at $20 in the same week would have an average per hour rate of $14. Using the premium method, the worker would receive $700 in straight time pay and an additional $70 in premium pay:

30 X $10 = $300
20 X $20 = 400
Straight time= $700 / 50 hours = $14 per hour average rate
10 X $14 X .5 = 70
Total pay $770

Accruals
In payroll, an accrual is a benefit that employers provide wherein paid time off is accumulated for future use by the individual employee. Vacation, sick time, jury leave, bereavement leave and personal leave are common examples of paid time off accruals. Usually, the employer’s written policy determines the rate at which an employee accrues time off. However, in some states, benefits, such as sick time, are accrued at a rate governed by law. Employers should consult their state department of labor office to ensure they are in compliance with accrual laws. A list of local and national DOL offices for each state can be found on the U.S. DOL website.

Deductions from Pay
There are two types of deductions from pay, voluntary and involuntary. Voluntary deductions are those which the employer or employee has control over and, as the name suggests, volunteers to have deducted from his or her pay. Examples of voluntary deductions include health insurance, credit union deductions, charitable contributions and Christmas club savings account deductions, to name a few.

Deductions from pay over which an employee or employer has no control are termed involuntary deductions. Involuntary deductions require the employer to withhold wages from the employee’s pay and remit that amount to a person or government agency in order to fulfill the employee’s personal debts. Types of involuntary deductions include bankruptcy orders, tax levies, child support withholding orders, creditor garnishments and student loan collections, among others.

Fringe Benefits

Section 125 Pretax Benefits
IRS Code Section 125 allows employers and employees alike to save money by deducting the cost of specific benefits pretax. Utilizing a Section 125 Cafeteria plan, employers allow their employees to reduce their taxable income by the amount of the deductions, resulting in higher take-home pay for the employee and a reduction in matching federal unemployment taxes for the employer. Pretax benefits covered under Section 125 include health insurance, dependent care, flex spending accounts, health savings accounts, health reimbursement arrangements and group-term life insurance premiums.

IRS Publication 15-B, Employers’ Guide to Fringe Benefits, details the ins-and-outs of Fringe benefits, including Section 125 Cafeteria plans.

Payroll Taxes
Generally, employers are required by law to withhold payroll taxes from an employee’s earnings, and then remit the taxes to the appropriate federal or state agency. In addition to federal and state taxes, employees may also be subject to tax withholding from their city or county for various local taxes.

Federally mandated payroll taxes include federal income tax, Social Security tax and Medicare tax. Information on federal income, Social Security and Medicare taxes can be found on the IRS website.

Many states also demand withholdings for income tax and unemployment tax; some states also levy a disability tax. Employers should be familiar with the payroll tax laws in their individual states. A list of links to state government websites can be found on USA.gov.

Paying employees is a very detailed and often confusing duty for employers. Because of the complexities of payroll, many employers rely on an accounting professional or outsourced payroll provider to handle their payroll and tax processing. CompuPay not only offers full-service outsourced payroll and tax management service, but also several tools, including payroll calculators and white papers, that are available as a resource to the public on the CompuPay website.

Additionally, the IRS and U.S. DOL have an abundance of tools and advice available on their respective websites.

As there are usually significant fines and penalties assessed against employers who are not in compliance with federal and state employment laws, business owners should consult with their legal and/or accounting professional to ensure that they are in compliance with all laws.

About Jean Domaingue
Jean A. Domaingue, CPP, is the area director of sales for CompuPay Inc. Jean has been involved with payroll for over 30 years, working in public accounting, banking, retail management, and the service bureau industry. Jean joined CompuPay in January of 2005 and is a Certified Payroll Professional.