Vision Payroll

The US Department of Labor recently issued Administrator signed Opinion Letter FLSA2008-10. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA). This Opinion Letter discusses whether employers must pay for replacement uniforms for employees who repeatedly damage uniforms in non-work-related activities.

A tipped employee who worked in a dining facility received $2.13 in cash wages and the employer claimed a tip credit so that the employee received at least the federal minimum wage. The employer requires the employee to wear a uniform that is provided by the employer at no cost to the employee. The employer provides an adequate number of uniforms to employees “relative to the nature of their work assignments and job duties.” The uniform does not require any special laundering.

One employee damaged several uniforms while riding a skateboard on days that he wasn’t working. The employer wanted to know if it must continuously replace such uniforms at no cost to the employee or if the employee could be charged for the uniforms. Employers may not charge directly or indirectly for uniforms required as a condition of employment if the charge would reduce the employee’s wages below the required minimum wage or overtime pay. The employer must also replace uniforms damaged at work using the same guidelines. Employers may charge, however, both for additional uniforms voluntarily purchased by any employee beyond the normal allotment and for uniforms damaged by the employee during personal use without violating the FLSA.

State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.

Nonfarm payroll employment fell sharply in January (-598,000) and the unemployment rate rose from 7.2% to 7.6%, the Bureau of Labor Statistics of the US Department of Labor reported recently. Payroll employment has declined by 3.6 million since the start of the recession in December 2007; about one-half of this decline occurred in the past 3 months. In January, job losses were large and widespread across nearly all major industry sectors.

Both the number of unemployed persons (11.6 million) and the unemployment rate (7.6%) rose in January. Over the past 12 months, the number of unemployed persons has increased by 4.1 million and the unemployment rate has risen by 2.7 percentage points.

The unemployment rate continued to trend upward in January for adult men (7.6%), adult women (6.2%), whites (6.9%), blacks (12.6%), and Hispanics (9.7%). The jobless rate for teenagers was unchanged at 20.8%. The unemployment rate for Asians was 6.2% in January, not seasonally adjusted.

Among the unemployed, the number of job losers and persons who completed temporary jobs increased to 7.0 million in January. This measure has grown by 3.2 million during the last 12 months.

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 2.6 million in January. Over the past 12 months, the number of long-term unemployed was up by 1.3 million. The number of persons unemployed less than 5 weeks rose to 3.7 million in January.

This week’s question comes from Carolyn, a business owner. I read recently about statutory employees and would like to find out if some of our new hires would qualify as statutory employees. Can you tell me more about statutory employees? Answer: Common law considers some workers employees and some independent contractors. By statute, some independent contractors are treated as employees for employment tax purposes.

There are four categories of independent contractors that might be statutory employees:

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.

If the independent contractor must perform the services personally as an explicit or implicit clause of the service contract, if the independent contractor does not have a substantial investment in the non-transportation facilities property and equipment, and the services are performed for the same payer on a continuing basis, then the payer must withhold social security and Medicare tax from payments to contractors.

For workers in categories 1 and 4 above who have payments subject to social security and Medicare tax under these rules, the payments are also considered wages for federal unemployment (FUTA) purposes. Payments to workers in categories 2 and 3 above are never considered wages for FUTA purposes.

Payments to statutory employees are never subject to federal income tax withholding.

Report payments to statutory employees on Form W-2, box 1, box 3 (to the wage limit), and box 5. Be sure to check the box 13 “Statutory employee” checkbox on the Form W-2. Statutory employees report the amount from Form W-2, box 1 on Form 1040, Schedule C, line 1 and complete the checkbox on that line. They may also deduct related business expenses on Schedule C, to the extent allowable by law.

Contact Vision Payroll if you have any questions on statutory employees.

According to the US Department of Labor, in the week ending January 31, the advance figure for seasonally adjusted initial claims was 626,000, an increase of 35,000 from the previous week’s revised figure of 591,000. The 4-week moving average was 582,250, an increase of 39,000 from the previous week’s revised average of 543,250.

The United States Citizenship and Immigration Services (USCIS), a component of the United States Department of Homeland Security (DHS) has announced a delay in the implementation of the revised Form I-9, Employment Eligibility Verification, but you shouldn’t delay in learning what you need to know about the rule changes that the new form will bring.

This month’s featured article on MyHRSupportCenter covers the basics of the form, revisions to the form including newly acceptable documents and documents that are no longer acceptable, and how the delay impacts use of the current and revised forms.

To learn more, sign into MyHRSupportCenter and read this month’s featured article. If you’re not yet signed up or would like a free trial of MyHRSupportCenter, contact Vision Payroll today.

The United States Citizenship and Immigration Services (USCIS), a component of the United States Department of Homeland Security (DHS), announced recently that it would delay “the implementation of an interim final rule entitled ‘Documents Acceptable for Employment Eligibility Verification’ published in the Federal Register on Dec. 17, 2008.”

The delay allows the DHS time to reconsider the rule and also accept additional public comments since the public comment period has been reopened until March 4, 2009.

The revised version of the Form I-9, Employment Eligibility Verification, that was to become effective February 2, 2009 has been delayed 60 days until April 3, 2009 pending implementation of the interim final rule.

Contact Vision Payroll if you have any questions on the interim final rule and the revised Form I-9.

This is the last in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Boxes 15 through 20, state and local income tax information.

Employers report state and local tax information in boxes 15 through 20. There is room for two states on each individual form with one state reported above the broken line and one state reported below the broken line. You should report local information in the same manner. If you must report information for more than two states or localities, use a second form. Do not complete federal information on any additional form for the same employee unless it is information that couldn’t fit on the first form or is being reported separately. For the state name, use the two-character abbreviation assigned by the United States Postal Service. The state taxing authority should have assigned the employer’s state ID number to use.

State wages reported in box 16 and local wages in box 18 must be reported according to the reporting requirements of the state or locality and may or may not equal wages reported in box 1, box 3, or box 7.

Although this ends this series on the 2008 Form W-2, Vision Payroll will continue to provide information throughout the year to assist you in the process of gathering data to help ensure an accurate and efficient 2009 year-end reporting season. Contact Vision Payroll with any questions on the 2008 Form W-2.

This is one in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 14, other.

Box 14 is used to provide additional information that employees may want or need for their tax records. Employers must report the lease value of a vehicle reported in box 1 either here or in a separate statement provided to the employee. The following are examples of items that employers may want to disclose in box 14:

• State disability insurance taxes withheld
• Union dues
• Uniform payments
• Health insurance premiums deducted
• Nontaxable income
• Educational assistance payments
• Clergy’s parsonage allowance and utilities
• Nonelective employer contributions to a pension plan on behalf of an employee
• Voluntary after-tax contributions to a pension plan that are deducted from an employee’s pay (not including Roth contributions)
• Required employee contributions to a pension plan
• Employer matching contributions to a pension plan

Employers may also report prior-year makeup amounts for nonelective employer contributions, voluntary after-tax contributions, required employee contributions, and employer matching contributions made under the Uniformed Services Employment and Reemployment Rights Act of 1994, also known as USERRA. Such amounts should be reported separately for each year.

Amounts included in box 14 should include a separate label for each item.

The next topic in this continuing series will be Boxes 15 through 20, state and local income tax information. Contact Vision Payroll with any questions on the 2008 Form W-2.