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Payroll Surfing 101: BACK TO THE BASICS

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Payroll Surfing 101: BACK TO THE BASICS Agenda 2016 Limits The Additional Medicare Tax Regular Rate of Pay Piece Rate Gross-ups Regular Social Security Limits Relocation Educational Assistance Agenda Adoption
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Payroll Surfing 101: BACK TO THE BASICS Agenda 2016 Limits The Additional Medicare Tax Regular Rate of Pay Piece Rate Gross-ups Regular Social Security Limits Relocation Educational Assistance Agenda Adoption Assistance Flexible Spending Arrangement Dependent Care Gifts Sick Pay Life Insurance Group Term Life Dependent Life Whole Life Insurance Awards 2016 Limits 2016 Limits for Social Security 2016 OASDI Wage Base 2016 Tax Rate Social Security -Employee Share $ 118, % Social Security- Employer Share $ 118, % Maximum Employee Share $ 7, Maximum Employer Share $ 7,347.00 2016 Limits Medicare Tax 2016 Wage Base 2016 Tax Rate Medicare - Employee Share No Limit 1.5% Medcare- Employer Share No Limit 1.5% Additional Employee Medicare Tax on wages paid over $200K No Limit 0.9% 2016 Limits SOCIAL SECURITY/MEDICARE THRESHOLD DOMESTIC EMPLOYEE COVERAGE $2,000 Election Workers $1,700 2016 Limits Retirement Plans Qualified Benefit Plan 2016 Maximum limitation for $210,000 defined benefit plan Maximum contribution limitation for defined $53,000 contribution plan 2016 Limits Retirement Plans Qualified Benefit Plan 2016 Elective deferrals for 401(k) $18,000 Elective deferrals for 403(b) $18,000 Elective deferrals for 457(b) $18,000 2016 Limits Retirement Plans Qualified Benefit Plan 2016 Elective deferrals for 408(p) $12,500 Catch-up (401(k), etc.) $6,000 Catch-up (SIMPLE) $3,000 2016 Limits Retirement Plans Qualified Benefit Plan 2016 Highly compensated employee $120,000 Annual compensation limit $265,000 Annual compensation limit collectively bargained $265,000 2016 Limits Retirement Plans Qualified Benefit Plan 2016 Annual compensation limit for certain governmental $395,000 plans Minimum annual compensation amount SEP $600 2016 Limits Standard Mileage Rates Business Charitable Medical and Moving (54 Cents) 0.14 (14 Cents) 0.19 (19 Cents) 2016 Limits Medical Flexible Spending Accounts 2016 Limits Federal Supplemental Withholding Rates Tax Type Optional Flat Rate Method Mandatory Flat Rate Tax Rate 25% (Less than $1 Million 39.6% (Above $1 Million) The Additional Medicare Tax The Additional Medicare Tax Effective wages paid after January 1, 2013 Additional Rate in excess of$200, % No employer match The Additional Medicare Tax Employee is liable, if employer does not withhold Employer is still liable for penalties for failure to withhold The Additional Medicare Tax Threshold Amounts Filing Status Threshold Amount Married Filing Jointly $250, Married Filing Separately $125, Single $200, Head of Household (with qualifying person) $200, Qualifying Widow(er) with Dependent Child $200,000.00 Example #1 Example #2 Example #3 Regular Rate of Pay ~ What is Included/Excluded and How to Calculate What is a Workweek? 7 consecutive 24 hour periods Totals 168 hours Does not matter when it starts What Constitutes Hours Physically Worked? Counts towards overtime Actual hours worked in excess of 40 hours Does not count towards overtime Hours not physically worked, but paid for FLSA places no limit on the number of hours and employee may be required to work Check state laws Employee Classification Exempt No issues with regular rate of pay Non-Exempt Regular rate of pay calculation must be considered What is Regular Rate of Pay? It is the hourly rate determined by calculating the total compensation earned for a workweek divided by the total number of hours worked. Remember there are exceptions to this. Nonexempt Employees Regular rate of pay has to be considered for all types of nonexempt employees: Paid hourly Paid Salary Paid commission Paid piece rate What is Included in Regular Rate of Pay? Base pay for all hours worked Nondiscretionary bonuses Production Bonuses Fair market value of noncash compensation Shift differential premiums What is Included in Regular Rate of Pay? Retroactive pay On call pay Supplemental disability payments Sick leave buyback payments Per diem pay All payments not specifically excluded by law What is Excluded from Regular Rate of Pay? Gifts Paid time Off Vacation, holiday and sick pay for un-worked hours Reimbursed business expenses Discretionary Bonuses Volunteer work counted toward group s bonus What is Excluded from Regular Rate of Pay? Employer benefit plan contributions Stock Options Overtime in excess of FLSA requirements Premium for extra days worked with qualifications Premium pay under a union contract for extra hours Exceptions to Overtime Hospitals and Nursing Homes 14 day period for OT Referred to as the 8/80 rule Police Officers and Firefighters 7 28 Consecutive Days Police No OT is due until the ratio of 171 hours to 28 days Fire Fighters - No OT is due until the ratio 212 hours to 28 days What is Needed to Calculate Pay? Hours worked Hourly rate Any additional payments / recordings What About Multiple Rates of Pay? MULTIPLE RATES IN THE SAME PERIOD Regular rate of pay must be the weighted average of all rates used Exceptions Can be the highest rate in the week Employer can always pay higher than FLSA requirements Examples Example 1 Nonexempt No Additional Earnings Example 1 Nonexempt No Additional Earnings Example 2 Nonexempt with Nondiscretionary Bonus Example 2 Nonexempt with Nondiscretionary Bonus Example 3 Nonexempt Salaried Employee No Additional Earnings Example 4 Nonexempt Salaried Employee No Additional Earnings Example 5 Nonexempt Salaried Employee OT and Nondiscretionary Bonus Example 5 Nonexempt Salaried Employee OT and Nondiscretionary Bonus Piece Rate Piece Rate Payments OVERTIME 2 methods to choose from By the hour (Method #1) By the piece (Method #2) Employee has to agree to the method used Should be consistent Piece Rate Payments No matter which way chosen, the employee must be paid minimum wage FLSA rules apply for overtime Piece Rate Example Method #1 Jane receives $1.50 for every doll she assembles, plus $0.30 bonus for every doll over 360 that she assembles in a regular 45-hour workweek. In one workweek, Jane assembles 400 dolls. Piece Rate Example Method #1 Piece Rate Example Method #2 Jane receives $1.50 for every doll she assembles. She agrees to be paid 1 ½ times her piecework rate for each piece made during her overtime hours. In one 45-hour workweek, Jane assembles 355 dolls in the first 40 hours and 45 dolls in the next 5 hours. Piece Rate Example Method #2 Gross Ups Basic Gross-up Calculator Basic Gross-up Gross-up Crossing the SS Limit Gross-up Crossing the SS Limit 2016 SS limit $118, YTD Wages $109, Wages to limit $8, Calculate SS to limit Wages to limit $8, SS Rate 6.20% SS W/H to limit Gross-up Crossing the SS Limit Gross-up Crossing the SS Limit Gross-up With 401(k) Gross-up With 401(k) Gross-up With 401(k) Gross-up With 401(k) Relocation Accountable vs Non-accountable Plans Accountable Plan Expenses must be business connected Account for all expenses Return of excess funds Reasonable period of time What happens if we do not meet the rules Non-accountable Plan Reportable and Taxable event Tests Both the Time and Distance tests must be met Tests Time Test 12 Month period 39 weeks Exceptions to test Tests Distance Test 50 Miles further Shortest most common route must be used Non-taxable vs. Taxable Non-taxable Transportation of household goods Storage (up to 30 days) Traveling from former to new home Mileage reimbursement (.19 per mile) Non-taxable vs. Taxable Meals Excess mileage Pre-move house hunting Breaking leases Taxable Real estate taxes Security deposits Buying and selling a home Personal effects Anything that is not included in Non-taxable Is it Business Travel or Relocation? Business Travel It is temporary in nature Moving Expense It is a permanent Change Reporting Employer pays to Third Party Qualified moving expense Does not have to be recorded or reported Non-qualified Report on Form W-2, Boxes 1,3,5 Boxes 16,18 (if applicable) Reporting Employer pays to employee Qualified moving expense Form W-2, Box 12, Code P Non-qualified Report on Form W-2, Boxes 1,3,5 Boxes 16,18 (if applicable) Reporting Form 3903 Suggested Form for Employee Employee will complete, if necessary One form for each move Questions Educational/Tuition Assistance Educational /Tuition Assistance Job Related Educational Assistance No limit Non-taxable as long as certain conditions are met Non-Job Related Educational Assistance Limited to $5250 per year. Adoption Assistance Adoption Assistance Adoption Assistance limit for 2016 is $13,460 Eligible Child Phase out for the Adjusted Gross income $201,920 to $241,920 Qualified expenses W-2 Box 12- Code T Adoption Assistance Example: The employer paid $15,000 in 2016for a qualified adoption expense on behalf of one if it s employees. The employee and her spouse do not reach the income limitations for In 2016 this employee can have $13,460 excluded from income, but must include the remaining $1,540 as income in 2016 Flexible Spending Accounts Flexible Spending Arrangements Funded through salary deductions Designation at the beginning of the plan year Contribution limit for 2016 $2550 Use it or Lose it Dependent Care Dependent Care $5,000 Limit Must be necessary Eligible and Ineligible Expenses When the expense is incurred On Site Facility (Day Care Center) Dependent Care On Site Facility Example: The employer has an on-site child care facility for its employees. Its direct operating cost for 2016 is $90,000 and the number of children it could care for at any one time is 30. The Daycare center was open for 250 days during The employee brought her child to this facility on 225 days during Here is how you determine the value you of the benefit for the employee: Dependent Care On Site Facility Direct Cost x 125%= $90,000 x 1.25 = $112,500 $112,500 / total child capacity= $112,500 / 30 = $ $ / number of days facility was open= $ / 225 = $15.00 $15.00 x number of days employee used the center: $15.00 x 225 =$3,375.00 GIFTS Gifts De minimis Holiday gifts Gift Certificates or Gift Cards? What about those gifts and prizes given out at Holiday Parties? What do we do with those? Awards Outstanding Achievement Awards Length of Service Awards Safety Awards Civic and Charitable Award Sick Pay Is it taxable? Sick Pay Generally employers provide their employees with sick time off for brief illnesses. That compensation is taxable. When would sick leave not be taxable? For Long term illness Sick Pay Third Party Payers Payments made by an Employers Agent They administer the disability plan The employer retains responsibility for taxes unless it enters into an agreement with the agent that they will take responsibility Sick Pay Third Party Payers Payments made by a third party non agent Assumes a greater role as far as tax responsibility They do not withhold Federal Income tax unless they receive a W-4S from the employee directing them to do so They are responsible for the employer portion of SS and Medicare Life Insurance Group Term Life Insurance Over $50,000 is included in income unless: The beneficiary is the employer The beneficiary is a charitable organization Terminates during the year because of permanent disability Dependent Group Term Life Up to $2000 in coverage Group Term Life Insurance Group Term Life - Example Scenario #1 An Employee is 36 years old has a salary of $70,000 per year he is paid monthly and he receives 2 times his salary as a company paid benefit, what is his taxable imputed income for this benefit? Group Term Life -Example Scenario #1 Calculation 70,000 x 2 = 140, ,000 50,000 = 90,000 90,000 / 1,000 = x.09 = 8.10 (per month) Group Term Life -Example Scenario #2 An employee is 45 years old, has a salary of $82,000 per year, and receives a benefit of two times his salary. This employee is paid biweekly and has a deduction of $3.00 per pay period in after tax dollars and the remainder is paid by the employer. What is the imputed income for this employee each pay period? Group Term Life -Example Scenario #2 Calculation 82,000 x 2 = 164, ,000 50,000 = 114, ,000 / 1000 = x.15 = (per month) x 12 months = / 26 pay periods = (after tax deduction) = 4.90 per pay period imputed income Life Insurance Whole Life Insurance Policies for Whole or Straight Life Taxability is determined by who the beneficiary of the policy is. Questions Contact Information LINDA DAILEY, CPP
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