Vision Payroll

In Notice 2010-48, the Internal Revenue Service (IRS) provided administrative “relief to sponsors of defined contribution pre-approved plans (i.e., master and prototype (‘M&P’) and volume submitter (‘VS’) plans).” Notice 2010-48 extended the following from April 30, 2010 to July 30, 2010:

• Deadline for restating affected pre-approved defined contribution plans,
• Deadline for submitting determination letters to the Service, and
• The § 401(b) remedial amendment period with respect to these plans.

The notice lists how a plan is considered in an affected area and lists the eight affected areas, all of which received previous relief from the IRS. The areas are the following:

1. Connecticut
2. Tennessee
3. Alabama
4. Mississippi
5. New Jersey
6. Massachusetts
7. Rhode Island
8. West Virginia

Contact Vision Payroll for further information on Notice 2010-48.

Twelve separate lawsuits from California, Florida, Kansas, Texas, and Washington, all of which allege that Bank of America (either Bank of America, NA or Bank of America Corp.) “routinely fails to pay its employees for off-the-clock overtime work in violation of the Fair Labor Standards Act [FLSA] and/or state law”, have been moved to the District of Kansas for coordinated or consolidated pretrial proceedings by the United States Judicial Panel on Multidistrict Litigation (the Panel). One of the cases “seeks to certify a class of all Bank of America non-exempt employees in the United States” for a class action suit against Bank of America.

The Panel considered not moving some of the cases. Some cases were moved even though the allegations were related to specific jobs, because the allegations were similar to those in other cases, “including allegations that Bank of America systematically prohibits overtime eligible employees from accurately recording their time and, as a result, does not pay its employees for all hours worked, including overtime pay.” Others considered similar “allege that that the timekeeping system used by Bank of America allows managers to modify or decrease the time recorded, and time worked is regularly deleted to avoid paying overtime.” Some cases moved included unrelated allegations, “such as discrimination (the Zhou action), retaliation, defamation and violation of the Family and Medical Leave Act (the Carrero action).” The Panel felt that any differences were not significant enough to outweigh the benefits of moving the cases for coordinated or consolidated pretrial proceedings.

The Panel recommended that, with the consent of the District of Kansas, the coordinated or consolidated pretrial proceedings be assigned to the Honorable John W. Lungstrum, who “has the experience, energy and time to handle this litigation efficiently.”

This week’s question comes from Nikki, an LLC member. I am a member in an LLC. My neighbor is a member and receives a paycheck, but I’ve been told that I can’t receive a paycheck. Can an LLC member receive a paycheck from the LLC? Answer: For federal tax purposes, an LLC can make an election to be taxed in one of the following three ways:

• Sole proprietorship (if only one member in LLC)
• Partnership (if two members or more in LLC)
• Corporation (any number of members in LLC)

This election is generally made when the entity is formed and must be done by the time the entity files its first income tax return.

If your LLC has elected to be taxed as a sole proprietorship, the LLC cannot pay wages to the member and the member cannot have income tax, social security tax, or Medicare tax withheld, and cannot receive a Form W-2 from the LLC.

If your LLC has elected to be taxed as a partnership, the LLC cannot pay wages to the members and the members cannot have income tax, social security tax, or Medicare tax withheld, and cannot receive a Form W-2 from the LLC.

If your LLC has elected to be taxed as a corporation, the LLC can pay wages to the members and the members can have income tax, social security tax, and Medicare tax withheld, and can receive a Form W-2 from the LLC. This is true even if there is only a single member in the LLC.

As for LLCs that have elected to be taxed as a sole proprietorship or a partnership, members may receive a draw from the LLC and must pay quarterly federal estimated tax payments to cover the amount of federal income tax and self-employment tax liability they will have, unless covered by withholding on other income. Vision Payroll can work with you and your CPA to determine an appropriate draw and estimated tax payment schedule. You can then receive the draw as a check or direct deposit with each payroll and schedule appropriate deductions such as retirement plan contributions. Contact Vision Payroll today to get started.

According to the US Department of Labor, in the week ending June 19, the advance figure for seasonally adjusted initial claims was 457,000, a decrease of 19,000 from the previous week’s revised figure of 476,000. The 4-week moving average was 462,750, a decrease of 1,500 from the previous week’s revised average of 464,250.

The advance seasonally adjusted insured unemployment rate was 3.5% for the week ending June 12, a decrease of 0.1 percentage points from the prior week’s unrevised rate of 3.6%.

The advance number for seasonally adjusted insured unemployment during the week ending June 12 was 4,548,000, a decrease of 45,000 from the preceding week’s revised level of 4,593,000. The 4-week moving average was 4,586,500, a decrease of 21,750 from the preceding week’s revised average of 4,608,250.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.084 million.

Many businesses consider having an intern due to budgetary concerns in hiring an employee. However, an intern is not free labor. An internship must be a learning experience for the benefit of the intern and not the employer.

• Are interns entitled to benefits under federal law such as minimum wage, overtime pay, and a workplace free from discrimination?
• How does an employer determine if a legitimate employee relationship exists?
• What resources does the Department of Labor (DOL) provide to help employers make these determinations?

Get answers to these questions by listening to Employees vs. Interns in this month’s HRCast, a recording provided by our team of HR Pros and available exclusively on MyHRSupportCenter. You’ll also learn the six key criteria the DOL uses to help determine if an intern must be paid.

Visit MyHRSupportCenter regularly, not only for our HRCasts, but also to get late-breaking compliance alerts, best practices to implement, and HR tools to use every day. If you haven’t yet signed up and would like a free trial of MyHRSupportCenter, contact Vision Payroll today.

An Assistant Professor in the Williams College (Williams) Political Science Department was denied continuing health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) after Williams terminated his three-year teaching contract “for cause because of his guilty plea [to student aid fraud, bank fraud, and social security fraud], his failure to notify [Williams] of the crimes and subsequent plea, fraudulent credentials he had supplied to Williams…in seeking employment, and his misuse of a Williams…credit card.”

In Moore v. Williams, DCMA, 09cv30208, 4/7/2010, the court granted the defendant’s motion to dismiss, thereby closing the case. Under COBRA, terminated employees may elect to continue their health care coverage, generally at their own expense. An exception disallows COBRA coverage when an employee is terminated for gross misconduct. Although the court stated that there are no regulations defining gross misconduct for this purpose, “The conduct in this case is sufficiently outrageous to constitute gross misconduct, and while it did not arise from an ‘evil design’ to harm [Williams], it indicated a reckless disregard for [Williams’s] interests.”

Due to the clear lack of standards to determine gross misconduct for COBRA purposes, Vision Payroll strongly recommends that employers consult with a competent labor law attorney for assistance in deciding if COBRA coverage should be denied because of gross misconduct.

Monday, July 5, 2010 will be the celebration of Independence Day, a federal holiday. The offices of Vision Payroll will close July 2 at 5 pm EDT and re-open Tuesday July 6. Most banks will also be closed in observance of the holiday.

Payrolls dated July 5 will be paid July 2 unless a previous change in schedule has been submitted. Payrolls submitted after these processing deadlines will be pushed back until the next available processing day. No changes are required for payrolls dated July 8.

The next federal holiday will be Monday, September 6, 2010, Labor Day. Contact Vision Payroll as soon as possible to make changes to or for questions on your processing schedule.

The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Over several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is Impact of the Small Business Health Care Tax Credit on Estimated Tax Payments.

The amount of the credit that will be allowed may be used in determining the amount of estimated tax payments that must be made in accordance with the rules for making such payments.

The next topic to be covered in this series is Impact of the Small Business Health Care Tax Credit on Deductions for Health Insurance Premiums. Contact Vision Payroll if you have further questions on Impact of the Small Business Health Care Tax Credit on Estimated Tax Payments.

The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Over the next several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is Claiming the Small Business Health Care Tax Credit Without Taxable Income for Tax-Exempt Employers.

The Small Business Health Care Tax Credit will be claimed by tax-exempt employers as a refundable credit. As such, the only limit is the previously discussed limit of federal income tax withholding and Medicare tax liability.

The next topic to be covered in this series is Impact of  the Small Business Health Care Tax Credit on Estimated Tax Payments. Contact Vision Payroll if you have further questions on Claiming the Small Business Health Care Tax Credit Without Taxable Income for Tax-Exempt Employers.

This week’s question comes from Beverly, a small-business owner. We pay health insurance costs for our employees. I heard there was a change in reporting health insurance costs under the new law. Are health insurance costs required to be reported on Form W-2? Answer: Under the Patient Protection and Affordable Care Act (PPACA), beginning in the 2011 tax year (reported to Social Security Administration (SSA) in 2012), employers will be required to start including the aggregate cost for “applicable employer-sponsored coverage” for each employee on that employee’s Form W-2, Wage and Tax Statement. There is no requirement to include this information on the 2010 Form W-2, to be reported to the SSA in 2011. Contact Vision Payroll if you have any further questions on Form W-2.