payroll compliance group august 5, 2014. payroll compliance group (pcg) debra cormier – state...
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Payroll ForumPayroll Compliance Group
August 5, 2014
PAYROLL COMPLIANCE GROUP (PCG) Debra Cormier – State Payroll Compliance Administrator
[email protected] 302-672-5543
Statewide Payroll Regulatory Compliance Payroll Policies
Debbie (Hurd) Ide – Payroll Compliance Office [email protected] 302-672-5506
Payroll Planner Internal Control Plans Payroll Administration Training Delivery
Micheale Lessard– Payroll Compliance Analyst [email protected] 302-672-5517
Payroll Authorizations Wage Overpayments / Repayments Wilmington City Wage Tax Direct Deposit Participation Funding Reconciliations
AgendaRecords Retention presented by Kit
Carson, Delaware Public ArchivesSurvey QuestionsCompliance Examination:
Resident/Nonresident AliensOpen Discussions:
Worker ClassificationWilmington City Wage Tax
On the Horizon
Delaware Public Archives
Presented by Kit CarsonFor more information and a copy of the presentation:Contact Kit Carson
http://archives.delaware.gov/govsvcs/govsvcs.shtml
Compliance Examination
Resident vs. Nonresident Aliens
Resident and Nonresident AliensCompliance Examination
Resident and Nonresident Alien Employees Spreadsheet – Distributed 06/26/2014
Responses Were Due On 07/21/201442% received To Date
(Have you Submitted Yours Yet?)
The Clock is Ticking!
If you have not already done so…Please complete your spreadsheets as soon
as possible. PCG is reviewing tax setups for all alien employees and contacting
Organizations to make necessary corrections in the PHRST system to ensure Calendar Year 2014 is reported accurately.
Payroll - The Buck Stops Here!
You don’t have to “know” all the rules…You just have to know where to find them!
PCG Bulletin 2014-002 – Tax Treatment of Income Paid to Aliens
PCG Tax Residency Decision TreePCG Teamwww.IRS.gov
Gets Colle
cted
Common ErrorsJ-1 Visa OASDI/Medicare Exemption
First Two Calendar Years – Incorrect Exempt Status
Continue Exempt Status after Two-Year PresenceCounting Years Incorrectly
Nonresident Alien – Invalid W-4sMay Only Claim Single or Married Filing
SeparatelyMay Only Claim Zero or One Allowance
Substantial Presence TestDays of Presence in the U.S. vs. Working Days
Common ErrorsIncome Tax Treaties:
No Federal Income Tax (FIT) Exemption Unless a Tax Treaty Exists.
FIT Tax Treaty Terms Vary From Country to Country.
Years of FIT Exemption Differ from OASDI/Medicare Exemption.
Failure to Enforce Earnings Limitation (F-1 Visa).Failure to Maintain Records That Substantiate
Tax Setup.
OPEN DISCUSSIONWorker Classification
Worker ClassificationOrganizations Periodically Hire
Workers as Independent Contractors.Circumstances of the Engagement
Dictate the Appropriate Worker Classification.
Regulatory AgenciesCongress and the IRS believe that the use of
independent contractors has led to an ever-widening “tax-gap” in lost payroll tax revenues from misclassified workers.
The U.S. Department of Labor is considering a survey to explore the extent and nature of independent contractor misclassification as part of its ongoing misclassification initiative.
IRS receives employment tax referrals from agencies administering workman’s compensation & unemployment.
Employees
Individuals perform services for your Organization; and,
someone at your Organization controls what
is done AND how it is done.(Treas. Reg 31.3121(d)-1(c)(1))
ControlIt does not matter if an
employer exercises the right to control how and when the
work is done; it only matters that the employer has the right to control it.
Independent Contractor
Employers/Payers have the right to control or direct
only the result of the work done, not the means and
methods of accomplishing the result.
Where’s The Harm?IRS loses millions of dollars in uncollected income,
Social Security, and Medicare taxes because of misclassification of independent contractors.
Employers are generally subject to imposition of fines and penalties, and are liable for back-taxes.
Misclassified Workers lose work credits used to calculate social security and pension benefits.
Misclassified Workers are not eligible for health benefits (Affordable Care Act implications).
Misclassified Workers are not eligible for unemployment benefits.
Correct ClassificationLook at the entire picture. There is no magic number of factors that
make the determination.No one factor can stand alone. Some factors may be relevant in one scenario
but not relevant in another.Document each of the factors you used to
come up with the determination.
Payroll - The Buck Stops Here!
You don’t have to “know” all the rules…You just have to know where to find them!
PCG Bulletin 2014-003 – Worker ClassificationWorker Classification Decision ToolPCG TeamForm SS-8 – Determination of Worker Status for
Purposes of Federal Employment Taxes and Income Tax Withholding (IRS Form)
Gets
Collected
OPEN DISCUSSION
Wilmington City Wage Tax
State Employees pay $3,400,000 WCWT annually.
DOA receives an Annual Tax Bill for Uncollected WCWT (Average $14,000).
PCG Reconciles the bill with the City.
Wilmington City Wage Tax
Employers who operate within the State of Delaware have a statutory responsibility to collect and remit earned income tax to the City of Wilmington (City).
Failure to collect and remit the tax to the City subjects the employer to joint liability for the tax, as well as all accrued penalties, interest and other charges.
Wilmington City Wage Tax
Who is subject to the earned income tax? All residents of the City (as per Address
Coding Guide). Tax is payable on all earned income, regardless of where it was earned.
Any person who works in the City, and earns wages, regardless of where they live.
Earned income tax is calculated as 1.25% taxable gross wages (reduced by pre-tax deductions, and increased by imputed income).
Wilmington City Wage Tax
Important: Tax set up in PHRST must be correct. Address and Work Location changes must
be entered timely. Employee Self Service – Monitor address
changes that affect the tax setup in PHRST.
PCG monitors employee records with mismatched data.
Wilmington City Wage Tax
Untimely updates result in under/over taxation. Correcting the employee tax record involves:
Determining the affected pay period(s) Submitting PHRST Correction Form
One-Time General Deduction Refund/Adjustment. PCG reviews Correction Form and forwards to
PHRST. PHRST corrects WCWT taxable gross and
adjusts tax as appropriate on Payline.
Wilmington City Wage Tax
Payroll - The Buck Stops Here!These rules are pretty simple…Toughest part is determining if an address is
taxable:City of Wilmington Taxpayer AdvisoryCity of Wilmington Address Coding Guide
http://www.ci.wilmington.de.us/docs/37/EIT_flyer.pdfPHRST Proc. PRU-TAX-01 – Update Employee
Tax DataPCG Team
Gets
Collected
Questions
Reminders Coming Soon!Internal Control Plan SubmissionResident/Nonresident Alien Worksheet
SubmissionPayroll Repayment WorkshopNext Forum: Late Fall 2014
On the Horizon….