Vision Payroll

The office of Massachusetts Attorney General Martha Coakley has cited a Whitinsville, Massachusetts McDonald’s franchise for child labor law violations. After receiving complaints, auditors found that 16 and 17-year olds were working between the hours of midnight and 6 am and working more than 9 hours in a single day, both in violation of Massachusetts General Laws, c.149. There are other limitations on employing children under 18 and further restrictions on employing children under 16. We strongly recommend that you contact your labor attorney if you employ minors to ensure compliance with your state’s child labor laws.

This week’s question comes from Mel, a small-business owner. I’ve heard that the Massachusetts HIRD report must now be filed on a quarterly basis. Is the report due November 15 for the third quarter? Answer:  The Health Insurance Responsibility Disclosure (HIRD) Report due November 15 and for the year ended September 30, 2008 must still be filed on an annual basis. Under 430 CMR 15.00, starting October 1, 2008 the base periods will be quarterly. Therefore, to determine the amount of any Fair Share Employer Contribution your company must pay, a quarterly calculation and filing will be required. Periods will end December 31, March 31, June 30, and September 30 and the filing and payments will be due on or before February 15, May 15, August 15, and November 15. Contact Vision Payroll if you have questions on your Fair Share Employer Contribution or HIRD Report.

The Commonwealth of Massachusetts recently promulgated a new regulation, 201 CMR 17.00, titled Standards for The Protection of Personal Information of Residents of the Commonwealth.  The purpose of the regulation is to implement “the provisions of M.G.L. c. 93H relative to the standards to be met by persons who own, license, store or maintain personal information about a resident of the Commonwealth of Massachusetts.” Personal information is defined as:

[A] Massachusetts resident’s first name and last name or first initial and last name in combination with any one or more of the following data elements that relate to such resident: (a) Social Security number; (b) driver’s license number or state-issued identification card number; or (c) financial account number, or credit or debit card number, with or without any required security code, access code, personal identification number or password, that would permit access to a resident’s financial account; provided, however, that “Personal information” shall not include information that is lawfully obtained from publicly available information, or from federal, state or local government records lawfully made available to the general public.

Since all employers should normally store “personal information” about each employee, apparently all employers who employ a resident of the Commonwealth of Massachusetts will be required to comply with the regulations. Governor Deval Patrick has also issued a related Executive Order 504 requiring certification of compliance with the order by all state contractors. There are significant procedures that must be implemented and substantial fines for non-compliance. Vision Payroll will be communicating its compliance with the new regulations to all affected clients before 2009. We strongly suggest that you contact your attorney as soon as possible to discuss implementation of the new provisions.

This week’s question comes from Harold, a business owner. I own a business in Massachusetts. Can I switch from a weekly to a bi-weekly pay period? Answer: Under Massachusetts law it is allowable to change to a bi-weekly pay period as long as employees are provided with written notice. MGL c. 149, §148 requires written notice to each employee at least ninety days in advance of the first bi-weekly check. Contact Vision Payroll if you have questions on pay frequency changes.

This week’s question comes from Mark, owner of an import company. I receive the same salary every week. All year, my Massachusetts income tax withholding has been the same. Now it’s gone up two weeks in a row. Why did this happen? Answer: In Massachusetts, a deduction of up to $2,000 is allowed on the state income tax return for social security and Medicare tax (also known as FICA). Therefore, in calculating the amount of income tax to be withheld, a deduction is allowed for these taxes. Once the combined social security and Medicare tax equals $2,000, the deduction is no longer allowed. Vision Payroll will automatically make this change for you once the limit is reached. The reason the amount changed twice is that on the first check the deduction may be partially allowed. For example, if the combined social security and Medicare was $1,980 and the current withholding was $50, $20 ($2,000 – $1,980) would be allowed as a deduction and $30 ($50 – $20) would be over the limit and not allowed as a deduction for state purposes. In the next week, the entire $50 would be considered excess and none allowed as a deduction. Since the deduction decreased two weeks in a row, the tax withheld must increase each week. Contact Vision Payroll if you have any questions.

This week’s question comes from Louisa, an HR manager: We have individuals who perform services for us. Does Massachusetts have any laws to determine if these individuals are our employees or independent contractors? Answer: In Massachusetts General Laws (MGL), c. 149, §148B three tests are enumerated and unless the individual meets all three tests, an employer-employee relationship will result. The tests are (1) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and (2) the service is performed outside the usual course of the business of the employer; and, (3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed. The law also states that not withholding federal or state income taxes or not paying unemployment insurance or workers compensation insurance premiums for this individual has no impact on the determination. Furthermore, even if the individual has a workers’ compensation insurance policy, it is not relevant for making the determination. To further complicate matters, the Massachusetts Department of Revenue (DOR) issued TIR 05-11, that states the DOR will follow the rules of MGL c. 62B for withholding purposes. Significant penalties exist for misclassifying workers, so be sure to consult your attorney if you have further questions.

In TIR 08-8: Sales/Use Tax, Withholding and Administrative Changes Contained in Chapter 182 of the Acts of 2008, the Massachusetts Department of Revenue (DOR) commented on the changes required by the new law. For withholding purposes, the law allows the DOR to require withholding by S corporations and entities treated as partnerships for tax purposes on distributions to shareholders or partners. In Proposed 830 CMR 62B.2.2: Pass-Through Entity Withholding, the DOR listed which entities would be required to withhold and which shareholders and partners would be exempt from withholding. It also addressed several administrative issues related to registration, payment, and reporting. TIR 08-8 confirmed that a final form of the proposed regulation will soon be promulgated effective for tax years beginning on or after January 1, 2009. Vision Payroll is ready to help its clients deal with the changes required by this new law. Please call us for our recommendations for a smooth transition to the new withholding requirements.