Vision Payroll

The US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA2009-6. 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).

In this Opinion Letter, an employer requested an opinion as to whether its pilots are exempt under the learned professional exemption. The employer has eight full-time pilots to fly its Gulf Stream and Citation-Excel jet aircraft and its medium Sikorski S76A helicopter. The pilots transport the Company’s executives, customers, and guests on an as needed basis. “The Chief Pilot and all of the Captains (pilots ## 1 – 7) hold FAA Airline Transport Pilot Certifications; all of the pilots (including the First Officer, pilot #8) hold commercial pilot licenses with instrument and multi-engine ratings and each one meets or exceeds the FAA’s requirements to qualify as a pilot-in-command.”

The DOL reaffirmed that since aviation isn’t “a field of science or learning” and that pilots do not acquire their knowledge through a “prolonged course of specialized intellectual instruction”, they are not eligible for the learned professional exemption.

For pilots and co-pilots of airplanes and rotorcraft with an FAA Airline Transport Certificate or Commercial Certificate who are paid a salary of at least $455 per week, the DOL takes a “position of non-enforcement”. This position also requires that the pilots or co-pilots be engaged as follows:

1. Flying of aircraft as business or company pilots;
2. Aerial mineral exploration;
3. Aerial mapping and photography;
4. Aerial forest fire protection;
5. Aerial meteorological research;
6. Test flights of aircraft in connection with engineering, production, or sale;
7. Aerial logging, fire suppression, forest fertilizing, forest seeding, forest spraying, and related activities involving precision flying over mountainous forest areas;
8. Flying activities in connection with transmission tower construction, transmission line construction, transportation of completed structures with precision setting of footings, concrete pouring; or
9. Aerial construction of sections of oil drilling rigs and pipe-lines, and ski-lift and fire lookout constructions.

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.

The Internal Revenue Service (IRS) recently issued Notice 2009-28 offering guidance on the Work Opportunity Tax Credit (WOTC) under §51 of the Internal Revenue Code of 1986 (IRC). Under the American Recovery and Reinvestment Act of 2009 or ARRA, unemployed veterans and disconnected youth were both added as members of a targeted group for purposes of the WOTC.

IRC §51 defines veteran, unemployed veteran, and disconnected youth. According to Notice 2009-28 a veteran is someone:

1. Having served on active duty (other than active duty for training) in the Armed Forces of the United States (Armed Forces) for a period of more than 180 days; or
2. Having been discharged or released from active duty in the Armed Forces for a service-connected disability.

Notice 2009-28 also reiterates that an unemployed veteran is someone “certified by the designated local agency” as:

1. Having been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date; and
2. Being in receipt of unemployment compensation under State or Federal law for not less than four weeks during the one-year period ending on the hiring date.

According to Notice 2009-28, a disconnected youth is defined as “any individual who is certified by the designated local agency” as:

1. As having attained age 16 but not age 25 on the hiring date;
2. As not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date;
3. As not regularly employed during such 6-month period; and
4. As not readily employable by reason of lacking a sufficient number of basic skills.

Notice 2009-28 also defines “not regularly attending any secondary, technical, or post-secondary school”, “not regularly employed”, and “not readily employable by reason of lacking a sufficient number of basic skills”.

“Not regularly attending any secondary, technical, or post-secondary school” is defined as someone who “states in writing that during the six months preceding his or her hiring date, he or she has not attended a secondary, technical or postsecondary school for more than an average of 10 hours per week, not counting periods during which the school is closed for scheduled vacations.” For this purpose, a secondary school is either “a secondary school as defined in 20 USC §7801(38); or a for-profit secondary school that otherwise meets the definition in 20 USC §7801(38).”

“Not regularly employed” is defined as someone who “during each consecutive three-month period within the six months preceding his or her hiring date, the individual earned less than an amount equal to the gross amount he or she would have been paid at the [higher of the federal or applicable state] minimum wage if he or she worked 30 hours every week during the three-month period.”

“Not readily employable by reason of lacking a sufficient number of basic skills” is defined as someone who “states in writing that he or she does not have a certificate of graduation from a secondary school or a GED Certificate” or someone who “states in writing that he or she has a certificate of graduation from a secondary school or a GED Certificate that was awarded no less than 6 months preceding his or her hiring date and has not held a job or been admitted to a technical school or post-secondary school since receiving the certificate.”

In order to receive the WOTC, an employer is generally required to obtain certification on or before the day the individual begins work or to complete Form 8850 on or before the date employment is offered and to submit Form 8850 within twenty-eight days from when the individual starts employment. Notice 2009-28 provides transitional relief for employers hiring unemployed veterans or disconnected youth after December 31, 2008 and before July 17, 2009. Employers will be eligible as long as Form 8850 is submitted to the designated local agency before August 18, 2009.

Contact Vision Payroll if you have any questions on Notice 2009-28 or the WOTC.

This week’s question comes from Burt, an office manager. An employee filled out a Form W-4 and now is not having any federal income tax (FIT) withheld from his check. He wants to have $20 withheld each week since he thinks he’ll owe about $1,000 in FIT. How does an employee increase the amount of FIT withholding? Workers who wish to adjust their withholding should file a revised Form W-4, Employee’s Withholding Allowance Certificate or its Spanish equivalent, Formulario W-4(SP), Certificado de Exención de la Retención del Empleado to adjust their withholding. Line 6 may be used to increase the amount withheld for FIT from each paycheck. If the employee files Form W-4 and claims the same exemption and enters $20 on line 6, $20 will be withheld each paycheck unless earnings increase such that FIT must be withheld. In that case, the withholding will be the calculated amount, plus $20. Contact Vision Payroll if you have any question on FIT withholding.

According to the US Department of Labor, in the week ending May 23, the advance figure for seasonally adjusted initial claims was 623,000, a decrease of 13,000 from the previous week’s revised figure of 636,000. The 4-week moving average was 626,750, a decrease of 3,000 from the previous week’s revised average of 629,750.

The advance seasonally adjusted insured unemployment rate was 5.1% for the week ending May 16, an increase of 0.1 percentage points from the prior week’s unrevised rate of 5.0%.

The advance number for seasonally adjusted insured unemployment during the week ending May 16 was 6,788,000, an increase of 110,000 from the preceding week’s revised level of 6,678,000. The 4-week moving average was 6,608,250, an increase of 123,750 from the preceding week’s revised average of 6,484,500.

The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.131 million.

The H-2B visa allows employers with peak load, seasonal, or intermittent needs to hire foreign workers to fill those slots in certain situations. According to the US Citizenship and Immigration Service (USCIS), these visas are normally used in construction, health care, landscaping, lumber, manufacturing, food service/processing, and resort/hospitality services. Under the Save Our Small and Seasonal Businesses Act of 2005 (SOS Act) a limit of 66,000 H-2B visas is set per fiscal year, with 33,000 allowed in each half of the fiscal year. The fiscal year 2010 begins on October 1, 2009. Since petitions may not be filed more than 120 days before the date of the actual need, the time to start filing petitions begins in early June. USCIS considers petitions filed on the date received, not the date postmarked. The USCIS will also regularly provide updates on the numbers of beneficiaries approved and pending. Contact Vision Payroll if you have further questions on the H-2B visa program.

The US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA2009-5. 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).

In this Opinion Letter, the DOL confirmed that lifeguards employed for less than seven months of the year are exempt from the minimum wage and overtime requirements of the FLSA. The lifeguards in question were employed by a town “to protect swimmers at the local beach.”

Since employees of an “establishment that is an amusement or recreation establishment, organized camp, or religious or non-profit conference center” that is not open more than seven months in a calendar year are exempt from the FLSA, a key factor was the definition of “establishment”. The Opinion Letter also confirmed that an amusement or recreational establishment supported by tax revenues cannot qualify under a second test involving the seasonality of the revenue collected.

The Opinion Letter clarified that “the term ‘establishment’ refers to a distinct physical place of business rather than to an entire business or enterprise, which may include several separate places of business.” Also, the fact that some employees may work more than seven months in a year does not deny the exemption as long as the beach is not open for protected swimming for more than seven months.

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.

On May 18, 2009, the Internal Revenue Service (IRS) published at 74 FR 23134, REG-115699-09, Suspension or Reduction of Safe Harbor Nonelective Contributions. The proposed regulations take effect May 18, 2009 and may be relied upon by taxpayers until final regulations are issued.

Under §401(k)(12) and §401(k)(13) of the Internal Revenue Code of 1986 (IRC), plans can avoid an IRC §401(k)(3) actual deferral percentage (ADP) failure through the use of a design based safe harbor method that requires specified qualified matching contributions (QMACs) for eligible non-highly compensated employees (NHCEs). The proposed regulations would allow employers that incur a substantial business hardship (similar to one described in IRC §412(c)) the option of reducing the safe harbor contribution during a plan year, eliminating the safe harbor contribution during a plan year, or terminating the employer’s safe harbor plan.

The factors to be taken into account in determining if there is a substantial business hardship include determining whether or not:

1. The employer is operating at an economic loss,
2. There is substantial unemployment or underemployment in the trade or business and in the industry concerned,
3. The sales and profits of the industry concerned are depressed or declining, and
4. It is reasonable to expect that the plan will be continued only if the waiver is granted.

The proposed regulations also require the following:

1. Thirty days notice to eligible employees of the suspension or reduction (the proposed regulations provide the required information to be provided to eligible employees);
2. Reasonable opportunity for employees to change their cash or deferred elections and their employee contributions elections;
3. Amendment of the plan to provide that the ADP test will be satisfied for the year of change of the safe harbor contribution; and
4. That the plan satisfies the safe harbor nonelection contribution requirement through the date of the amendment.

The IRS will hold a public hearing on the proposed regulations on September 23, 2009. Contact Vision Payroll if you have any questions on REG-115699-09.

Due to severe storms, flooding, mudslides, and landslides in West Virginia on May 3, 2009, President Barack Obama declared the following counties a federal disaster area: McDowell, Mingo, Raleigh and Wyoming. Therefore, the Internal Revenue Service (IRS) announced recently that it will waive failure to deposit penalties for employment and excise taxes due after May 2, 2009 and before May 19, 2009 as long as the deposits were made by May 18, 2009. Also, affected taxpayers will have until July 2, 2009 to file most tax returns. Contact Vision Payroll if you were affected by the storms, flooding, mudlsides, and landslides and need further information on the relief provided by the IRS.

Due to severe storms, flooding, and tornadoes in Alabama on March 25, 2009, President Barack Obama declared the following counties a federal disaster area: Covington, Geneva and Houston. Therefore, the Internal Revenue Service (IRS) announced recently that it will waive failure to deposit penalties for employment and excise taxes due after March 24, 2009 and before April 10, 2009 as long as the deposits were made by April 9, 2009. Also, affected taxpayers will have until May 26, 2009 to file most tax returns. Contact Vision Payroll if you were affected by the storms, flooding, and tornadoes and need further information on the relief provided by the IRS.

This week’s question comes from Elizabeth, a small-business owner. We just hired a part-time employee who is seventy years old. He’s already collecting social security benefits so I’m not sure if I should still withhold it from his wages. At what age does social security withholding stop? Answer: There is no age beyond which employers are no longer required to withhold social security or Medicare taxes, which are also known as FICA or OASDI. Employers must continue to withhold social security and Medicare taxes and pay the employer’s portion even if the employee is collecting social security or is eligible for Medicare. The Social Security Administration will recalculate benefits and may increase them after retirement if the additional earnings result in a benefits increase. Contact Vision Payroll if you have any questions on social security and Medicare tax withholding.