Vision Payroll

This week’s question comes from Hillary, a restaurant manager. I know the federal minimum wage increased to $7.25 last week. How does the increase in the minimum wage affect the tip credit? Answer: Under §45B of the Internal Revenue Code of 1986 (IRC), employers are allowed a credit for the employer portion of social security taxes (sometimes known as FICA tax or OASDI or Medicare) to the extent the tips claimed plus the cash wages paid exceeds the federal minimum wage. The credit is currently 7.65% of the excess amount and is claimed on Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips. Pursuant to IRC §45B(b)(1)(B), the minimum wage to be used in calculating the credit is the minimum wage in effect as of January 1, 2007 ($5.15). Therefore, the recent increase in the minimum wage does not affect the credit calculation. Vision Payroll can assist restaurants and other eligible employers in calculating the amount of tips eligible for the credit. Contact Vision Payroll if you need further information on the tip credit.

According to the US Department of Labor, in the week ending July 25, the advance figure for seasonally adjusted initial claims was 584,000, an increase of 25,000 from the previous week’s revised figure of 559,000. The  4-week moving average was 559,000, a decrease of 8,250 from the previous week’s revised average of 567,250.

The advance seasonally adjusted insured unemployment rate was 4.7% for the week ending July 18, unchanged from the prior week’s unrevised rate of 4.7%.

The advance number for seasonally adjusted insured unemployment during the week ending July 18 was 6,197,000, a decrease of 54,000 from the preceding week’s revised level of 6,251,000. The 4-week moving average was 6,416,250, a decrease of 131,750 from the preceding week’s revised average of 6,548,000.

The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.497 million.

The US Department of Labor (DOL) recently launched Disability.gov, the federal government’s Web site for people with disabilities, their family members, veterans, caregivers, employers and others. According to the DOL, the new site features comprehensive information about disability-related programs and services, as well as social media tools to better serve the more than fifty million Americans with disabilities.

Disability.gov’s social media tools encourage interaction and feedback from visitors, and offer new ways to organize, share and receive information. Visitors can sign up for personalized news and updates, participate in online discussions and suggest resources for the site. New features include a Twitter feed, RSS feeds, a blog and social bookmarking. Additional social media tools will be added to the site in the months ahead.

The new site includes user-friendly ways to get answers to important questions on finding employment, job accommodations and other topics. The site is organized into ten subject areas: benefits, civil rights, community life, education, emergency preparedness, employment, health, housing, technology and transportation. By selecting a category, visitors are directed to useful information on federal and state government programs and services, news and events, grants and funding opportunities and more.

Disability.gov, an effort led by the DOL’s Office of Disability Employment Policy (ODEP), contains thousands of links to reliable, trusted information from numerous federal agency partners, as well as educational institutions, non-profit organizations and state and local governments. It is an important resource not only for Americans with disabilities, but also for the parents of children with disabilities, employers, workforce and human resource professionals, veterans, military families, caregivers and many others.

In the recently released Chief Counsel Advice (CCA) 200929004, the Internal Revenue Service ruled that money distributed from a company’s tip jar should be considered tips, not wages.

The company requires that all its retail locations maintain a tip jar to collect cash to be distributed to certain employees. A non-management employee distributes the tip money according to a time sheet showing hours worked by eligible employees. Management employees are not eligible to share in the tips.

The company estimates an hourly amount that each employee earns and reports that amount times the number of hours worked as wages on Form W-2. The employer also instructs employees to report any amount received above this estimate as income.

Although under §3121(q) of the Internal Revenue Code of 1986 (IRC), tips are considered remuneration for FICA tax purposes (also known as OASDI or social security and Medicare), the remuneration is not deemed paid until the employee furnishes the employer with a written statement detailing the amount of tips received (see IRC §6053(a)). This notification is not supplied by the employees in this case. Since the procedures used by the company do not have the same level of control as described in Revenue Ruling 95-7, Q & A 2, the company is not liable for the employer share of FICA tax until the IRS makes a notice and demand for such taxes.

Contact Vision Payroll if you have any questions on taxation of distributions from tip jars.

The US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA 2009-13. 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 ruled that employees who take “web-based prerequisite classes at home in preparation for a voluntary job-related training class” must be compensated for the time spent. In this case, technicians could volunteer to take a training class during regular working hours to learn new and advanced features on Tellabs 5500 equipment. Tellabs required that the technicians, who did not work for Tellabs, complete four prerequisite classes, each lasting approximately four hours. These classes would be completed at home on the technicians own time.

There are four criteria to determine if training programs and similar activities be treated as compensable time:

1. Attendance is outside of the employee’s regular working hours;
2. Attendance is in fact voluntary;
3. The course, lecture, or meeting is not directly related to the employee’s job; and
4. The employee does not perform any productive work during such attendance.

Since criterion 3. is not met, the time spent by the technicians on the pre-requisite classes must be compensated by the employer, even though the other three criteria were met.

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 US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA 2009-12. 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 barbacks who receive tips from the bartenders they support qualify as tipped employees and therefore are eligible for tip credits. A barback is described as an assistant to the bartender who works the same hours as a bartender and whose primary duty is to support the bartender.

In this case, the barbacks did not directly receive tips from customers but from the bartenders they supported. The tips were more than $30 per month. Tip splitting or pooling is allowed under the FLSA in certain circumstances and the tips are allocated to the employee who retains them. Since the barbacks are “engaged in an occupation in which [they] customarily and regularly [receive] more than $30 a month in tips” they qualify as “tipped employees”.

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 US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA 2009-11. 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 concluded that a concessionaire at a privately-owned recreational establishment did not qualify as a recreational establishment. A recreational establishment is an “establishment that is an amusement or recreational establishment, organized camp, or religious or  non-profit educational conference center that either ‘does not operate for more than seven months in any calendar year,’ or, ‘during the preceding calendar year,’ has ‘average receipts for any six months of such year [of] not more than 33 1/3 per centum of its average receipts for the other six months of such year.’” Although a restaurant may qualify as a recreational establishment if the host establishment qualifies and the acts with the concessionaire as a single establishment, in this case the entities were separate and distinct.

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.

This week’s question comes from Amy, an HR manager. Several of our employees have wage garnishments that are limited based on their earnings. How are wage garnishments affected by the increase in the minimum wage? Answer: A wage garnishment is when an employer, generally as a result of a court order, withholds an amount from an employee’s earnings in payment of a debt. Restrictions on wage garnishments are defined in Title III of the Consumer Credit Protection Act. §303 of Title III restricts the amount of most garnishments to the lesser of 25% of the employee’s “disposable earnings” or the amount by which the employee’s disposable earnings exceed 30 times the Federal minimum wage. Disposable earnings for this purpose generally means gross wages less deductions required by law. Voluntary deductions not required by law are not included in the calculation of disposable earnings. With today’s increase in the federal minimum wage, the calculation of the maximum garnishment amount has changed. For employees with disposable earnings greater than $290.00 ($7.25 X 40), a maximum of 25% can be garnished. For employees with disposable earnings less than $290.00 but more than $217.50 ($7.25 X 30), the garnishment equals the amount by which disposable earnings exceed $217.50. For employees with disposable earnings of $217.50 or less, no garnishment is allowed. There are exceptions for child support, alimony, certain bankruptcy court orders, and debts for federal and state taxes. A state law that allows a smaller garnishment takes precedence over the federal law. There are also different calculations for some other debts owed to the federal government and its agencies. Contact Vision Payroll if you have any questions on calculating the correct amount of garnishments on employee’s wages.

According to the US Department of Labor, in the week ending July 18, the advance figure for seasonally adjusted initial claims was 554,000, an increase of 30,000 from the previous week’s revised figure of 524,000. The 4-week moving average was 566,000, a decrease of 19,000 from the previous week’s revised average of 585,000.

The advance seasonally adjusted insured unemployment rate was 4.7% for the week ending July 11, unchanged from the prior week’s unrevised rate of 4.7%.

The advance number for seasonally adjusted insured unemployment during the week ending July 11 was 6,225,000, a decrease of 88,000 from the preceding week’s revised level of 6,313,000. The 4-week moving average was 6,541,500, a decrease of 132,500 from the preceding week’s revised average of 6,674,000.

The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.474 million.

The federal minimum wage will increase to $7.25 on Friday, July 24, 2009. Therefore, all work performed after July 23, 2009 should be compensated at the higher rate. In addition, the minimum wage will also increase to $7.25 in the following areas: Delaware, Idaho, Indiana, Maryland, Missouri, Montana, Nebraska, New Jersey, New York, North Carolina, North Dakota, Oklahoma, Pennsylvania, Puerto Rico, South Dakota, Texas, Utah, Virginia, and Wisconsin. Also, the minimum wage in the District of Columbia will increase to $8.25. Contact Vision Payroll if you have any questions on the minimum wage increases.