Tech Flex: August, 2017 Volume VIII

Transcription

1 Tech Flex: August, 2017 Volume VIII 1

2 Tech Flex: August, 2018 Volume VIII Topics Covered In This Issue The topics covered in this issue are: Payroll: Filing Extensions for Forms W-2 and 1099-MISC Are Not Automatic Social Security Administration to Notify Employers of Name/SSN Errors Supreme Court of California Rejects Application of De Minimis Rule Delaware Minimum Wage Increase Delayed Measure to Increase Missouri Minimum Wage Will Appear on November Ballot Time and Labor: VETS Reporting Portal Open for 2018 Reporting Year California Court of Appeals Approves Neutral Time Rounding Policy New York City Department of Consumer Affairs Releases Poster and FAQs on Temporary Schedule Change Law Seattle Enacts Protections for Domestic Workers 2

3 Tech Flex: August 2018 Volume VIII 3 FILING EXTENSIONS FOR FORMS W-2 AND 1099-MISC ARE NOT AUTOMATIC On August 1, 2018, the Internal Revenue Service (IRS) released Treasury Decision (TD) 9838, Extension of Time to File Certain Information Returns, which clarified that filing due date extension requests for Forms W-2 and 1099-MISC reporting would not be automatically approved. Filing extension requests must meet specified criteria and be requested on the appropriate IRS form by the filing deadline (i.e., January 31). Requests for extensions of the filing deadline have no effect on the deadline to furnish forms to recipients. Background The IRS maintains procedures by which employers filing Forms W-2 (and/or other Information Returns) can request extensions of time to file. Prior to 2016, such extension requests were generally automatically approved. However, on August 13, 2015, the IRS published temporary regulations (TD 9730 (80 FR 48433)) removing the automatic 30-day extension of time to file Forms W-2 series, and providing a single nonautomatic 30-day extension of time to file these forms. Statutory Changes to Due Dates and Penalties The Protecting Americans from Tax Hikes Act of 2015 (PATH Act), P.L , enacted December 18, 2015, changed the due date for filing Forms W-2 and Forms 1099-MISC reporting nonemployee compensation to January 31. Prior to the PATH Act, Forms W-2 were due by the last day of February, or March 31 if filed electronically. Forms 1099-MISC were due by February 28, or March 31 if filed electronically. Both must now be filed by January 31, regardless of whether they are filed on paper or electronically. IRS information-reporting penalties may apply under Internal Revenue Code (IRC) Sections 6721 and/or 6722 for failure to file and/or furnish, respectively, correct Information Returns by the required due date. Penalties may apply if an employer: Fails to file timely Fails to include all information required to be shown on Form W-2 Includes incorrect information on Form W-2 Files on paper when required to file electronically Penalties under Section 6721 can be up to $270 per Form W-2, up to an annual maximum of $3,282,500 for For businesses with gross receipts of not more than $5,000,000 annually, the annual maximum is $1,094,000 annually. Penalty amounts are indexed and may change annually. Separate penalties under IRC Section 6722 (for failure to furnish timely and accurate Information Returns to recipients) may apply to the same error. Both penalties may apply. For example, if an employer furnished an incorrect form to an employee and also failed to file a correct Form W-2 by the applicable deadline and filing method, a penalty of $540 per Form W-2 may apply. 3

4 Tech Flex: August 2018 Volume VIII 4 Filing Extensions for Forms W-2 and 1099-MISC Are NOT Automatic In TD 9838, the Treasury explains that Identity theft and refund fraud are persistent and evolving threats to the nation s tax system. They place an enormous burden on the tax system and taxpayers. Identity thieves and unscrupulous preparers often claim refunds by electronically filing fraudulent tax returns early in the tax filing season. Because of the importance of Forms W-2 and Forms 1099-MISC reporting nonemployee compensation, extensions of the deadline to file these forms will not be automatic. Nonemployee compensation is reported in box 7 of the Form 1099-MISC. Previously, Form 8809 required a narrative explanation of the need for an extension, which was difficult to administer and led to uncertainties. Consequently, Form 8809 will be revised, in time for the 2019 filing season, to provide checkboxes to indicate the reason for the extension request. Extensions will be granted only if: (1) The business suffered a catastrophic event in a Federally Declared Disaster Area that made the business unable to resume operations or made necessary records unavailable; (2) Fire, casualty or natural disaster affected the operation of the business; (3) Death, serious illness, or unavoidable absence of the individual responsible for filing the Information Returns affected the operation of the business; (4) The Information Return is being filed for the first year the business was established; or (5) The filer did not receive timely data on a third-party payee statement (such as statement of sick pay). To make such a request, the filer must submit the Form 8809 on or before the due date of the Information Return, and sign the form under penalty of perjury. Only one 30-day extension of time may be requested. No Effect on Deadline to Furnish Statements to Recipients Extensions of time to file do not extend the time for furnishing statements to recipients. Most IRS Information Returns, such as Forms W-2, 1099-MISC and 1095-C, must be furnished to recipients (e.g., employees) by January 31. If an employer is unable to meet this deadline, a 30-day extension of time to furnish IRS statements can be requested by submitting a letter to the IRS with the following information: Employer name, address and Federal Employer Identification Number (FEIN) Type of return (e.g., Form W-2 ) Specify that the extension request is to provide statements to recipients Reason for the delay (The IRS requires a substantive explanation; e.g., steps taken to prepare and why it was not possible to complete the task on time.) Signature of duly authorized person Requests for extensions of time to furnish IRS forms to employees are not automatically approved. 4

5 Tech Flex: August 2018 Volume VIII 5 Information Returns That Are Eligible for Automatic Filing Extensions TD 9838 specified the types of Information returns that will be eligible for automatic extensions of time, if requested. These include: Form W-2G Certain Gambling Winnings Form 1042-S Foreign Person's U.S. Source Income Subject to Withholding Form 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns Form 1095-B Health Coverage Form 1095-C Employer-Provided Health Insurance Offer and Coverage Form 3921 Exercise of an Incentive Stock Option Under Section 422(b) Form 3922 Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c) Form 8027 Employer's Annual Information Return of Tip Income and Allocated Tips Form 1097 series Form 1098 series Form 1099 series (except forms reporting nonemployee compensation) Form 5498 series Not Entirely Automatic Extensions Must Still Be Requested Filers can request an automatic 30-day extension of time to file the Information Returns that are eligible for automatic extensions by filing a Form 8809, Application for Extension of Time to File Information Returns on or before the due date of the Information Return. The filer is not required to sign the Form 8809 or provide an explanation to request the automatic 30-day extension. An additional nonautomatic 30-day extension can be requested, although this must be signed under penalties of perjury and include an explanation of why an additional extension of time to file was needed. Effective Date The final regulation is effective on August 3, 2018, and applies to requests for extensions of time to file Information Returns due after December 31, 2018 (i.e., 2018 Forms W-2 filed and furnished in early 2019). For details, see TD 9838, Extension of Time to File Certain Information Returns, 83 FR at 5

6 Tech Flex: August 2018 Volume VIII 6 SOCIAL SECURITY ADMINISTRATION TO NOTIFY EMPLOYERS OF NAME/SSN ERRORS Starting in August 2018, the Social Security Administration (SSA) will begin mailing Educational Correspondence to employers that submit Forms W-2 containing employee names and Social Security numbers (SSNs) that do not match SSA s records. An initial letter in 2018 will provide general background information and offer resources to help employers ensure accurate information in Forms W-2. It will also inform the employer they may receive similar letters beginning in 2019 if there are errors in names and SSNs in 2018 and future Forms W-2. These letters will ask the employer to review any errors and take action to correct their records. There are many reasons why names and SSNs on Forms W-2 may not match SSA records; for example, data input errors and unreported name changes due to marriage or divorce. IRS Accuracy Penalties May Apply to Forms W-2 Employers file Forms W-2 to the SSA annually. Because Form W-2 is an IRS tax form, IRS information reporting penalties may apply under Internal Revenue Code (IRC) Sections 6721 and/or 6722 for failure to file and furnish, respectively, correct Information Returns by the required due date. Penalties may apply if an employer: Fails to file timely Fails to include all information required to be shown on Form W-2 Includes incorrect information on Form W-2 (including employee name and/or SSN that don t match government databases) Filing on paper when required to file electronically Penalties under IRC Section 6721 (failure to file correct Information Returns) can be up to $260 per Form W-2 in 2018 ($270 for 2019), up to an annual maximum of $3,282,500. For businesses with annual gross receipts of less than $5 million, the maximum is $1,094,000. Penalty amounts are indexed and may change annually. A separate penalty under IRC Section 6722 (failure to furnish correct Information Returns) may also apply to the same error. Both penalties may apply e.g., if an employer furnished an incorrect form to an employee and also failed to file a correct Form W-2 by the applicable deadline and filing method. If both penalties are assessed, the penalty exposure for employers could be as much as $540 per Form W-2, up to more than $6.5 million annually. Accuracy Penalties May Also Apply to Affordable Care Act Forms 1095-C Additionally, under the Affordable Care Act, Applicable Large Employers (generally those that employed at least 50 full-time employees, including full-time equivalent employees during the preceding calendar year) must file and furnish Forms 1095-C to employees to report whether they offer their full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan. Forms 1095-C are also subject to accuracy penalties under IRC Sections 6721 and IRS Enforcement of Accuracy Penalties May Be Evolving In recent years, the IRS has rarely assessed accuracy penalties for incorrect names and SSNs on Forms W-2. Similarly, no accuracy penalties have been assessed to date with respect to Forms 1095-C; however, the IRS electronic filing system for Forms 1095-C does notify employers of errors in names and SSNs (including any reported dependents with errors). In contrast, IRS accuracy penalties are enforced with respect to other IRS information returns, such as Forms

7 Tech Flex: August 2018 Volume VIII 7 SSA s 2018 Letter In a recent teleconference, SSA officials said that the SSA would send letters to employers that had at least one name/ssn error on 2017 Forms W-2. These letters will begin in August 2018, with batches of roughly 200,000 letters every two weeks. The letters are general in nature, asking employers to help ensure the accuracy of W-2 reporting by registering for SSA s Business Services Online (BSO) system to access a variety of services, such as: Social Security Number Verification Service (SSNVS) View W-2 submission processing status and any errors AccuWage Software to test wage files for proper formatting The letter includes general tips to help ensure accuracy, such as asking employees to check their last Form W-2 against their Social Security card to identify any differences, and reminding employees to report any name changes due to marriage, divorce, etc and Future SSA Letters The 2018 letter explains that the SSA will begin mailing informational notices to employers who submit Forms W-2 that contain name and SSN combinations that do not match SSA s records, beginning in February 2019 (i.e., based on 2018 Forms W-2). For a sample employer letter, see New SSA Landing Page for Educational Correspondence The SSA has established a helpful web page at to assist employers: How to register for BSO and how to activate a BSO account How to use the Social Security Number Verification Service How to find errors in BSO A sample letter to give to employees How to fix errors using Form W-2c Frequently Asked Questions For further information, including samples of letters, see 7

8 Tech Flex: August 2018 Volume VIII 8 SUPREME COURT OF CALIFORNIA REJECTS APPLICATION OF DE MINIMIS RULE The Supreme Court of California recently issued a decision rejecting the application of the so-called de minimis rule to California wage and hour law. Under the federal Fair Labor Standards Act (FLSA), there has long been a principal known as the de minimis defense. In short, this theory holds that amounts of time worked that are so small or trivial as to be inconsequential, and that are also difficult to record, do not need to be considered or counted in determining the total amount of time worked by an employee. In Troester v. Starbucks Corp. (No. S234969), the plaintiff employee was a shift manager at a Starbucks store. As part of his duties, he regularly had to complete a few small tasks after he had clocked out for the day. These tasks included setting the store alarm, locking the building and occasionally, walking employees to their cars. The employee estimated that these tasks generally took him between 4 and 10 minutes per day. Over a period of 17 months, he claimed that they added up to 12 hours and 50 minutes of unpaid time worked, or a total amount of unpaid wages in the amount of $ Starbucks argued that, under the de minimis defense, it was not liable for failure to pay for the employee s unrecorded time spent on activities after he clocked out. The court rejected this argument. It found that the de minimis defense had never been adopted either under the California Labor Code, or the California Wage Orders. Further, it found that where it is clear that employees are regularly working small amounts of time for several minutes a day, that time must be recorded and employees must be paid for them. While decision leaves unclear whether the de minimis defense might apply in situations where an employee only irregularly or rarely works small amounts of unrecorded time, it is clear that relying on this defense in California may be a risky proposition. This case highlights the need for employers to make sure that employees record all time worked to the greatest extent possible. Other best practices include making sure that policies require employees to record all time worked, and training supervisors and managers to be aware of the need to for employees to record all time worked, even if that work is conducted right before or after an employee s scheduled shift. To read the Troester decision, click here: 8

9 Tech Flex: August 2018 Volume VIII 9 DELAWARE MINIMUM WAGE INCREASE DELAYED It was reported in the July Tech Flex that on July 1, 2018 Delaware Governor John Carney signed legislation (SB 170) that increases the state minimum wage rate from the current level of $8.25 per hour as follows: October 1, 2018 $8.75 per hour October 1, 2019 $9.25 per hour It is important to note that SB 170 did not adjust the minimum cash wage for tipped employees, which remains at $2.23 per hour. Additional legislation was also enacted (HB 483) in Delaware that stipulates that effective January 1, 2019, an employer may pay a training wage to an employee who is 18 years of age or older, during the first 90 consecutive calendar days of employment, at a rate up to 50 less than the state minimum wage rate. Employees under the age of 18 may be paid a youth wage at a rate up to 50 less than the state minimum wage rate. The increase in the state minimum wage to $8.75 is effective January 1, 2019 for these employees. HB 483 also contains a provision that delays the increase in the minimum wage. Consequently, although SB 170 says the first minimum wage increase will occur on October 1, 2018, HB 483 contains a provision that delays the increase until January 1, Accordingly, both of SB 170 s minimum wage increases will occur in 2019 as follows: January 1, 2019 $8.75 per hour October 1, 2019 $9.25 per hour Section Title (a)(3) as amended by SB 170 states: (a) Except as may otherwise be provided under this chapter, every employer shall pay to every employee in any occupation wages of a rate: (3) Not less than $8.75 per hour effective October 1, 2018; Section Title (a)(3) as amended by HB 483 states: Section 3. The provisions of 902 (a)(3) of Title 19 take effect January 1, For a copy of SB 170 please click on the link provided below. For a copy of HB 483 please click on the link provided below. 9

10 Tech Flex: August 2018 Volume VIII 10 MEASURE TO INCREASE MISSOURI MINIMUM WAGE WILL APPEAR ON NOVEMBER BALLOT Petition Statutory Amendment to Chapter 290, Relating to Minimum Wage has gathered enough signatures to qualify to appear on Missouri s November 2018 election ballot. If the ballot measure passes, the minimum wage in Missouri will increase from $7.85 per hour to $8.60 in 2019; $9.45 in 2020; $10.30 in 2021; $11.15 in 2022; and $12.00 in Thereafter, the minimum wage would increase or decrease each year based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The initiative would also penalize an employer who pays employees below the minimum wage and require the employer to provide the underpaid employee with the full amount of the wage rate plus an additional amount equal to twice the unpaid wages. It is important to note that the ballot measure would also exempt government employers from the minimum wage increase. VETS REPORTING PORTAL OPEN FOR 2018 REPORTING YEAR The portal for government contractors to file their annual VETS-4212 report is now open. Affected government contractors now have until September 30, 2018 to file their annual VETS-4212 report with the federal Veterans Employment and Training Service (VETS). To file the VETS-4212 report, employers must look at data for the 12-month period preceding the snapshot date selected by the employer. In past years, contractors were required to pull a workforce snapshot from between July 1 and August 31, and to file the report between August 1 and September 30. Beginning this year and going forward into the future, however, contractors will have the option using December 31 as their snapshot date. This is intended to allow contractors to benefit from the efficiency of using a single snapshot date for both the VETS-4212 report and the EEO- 1 report, now that the snapshot period for the EEO-1 report has changed. To file the VETS-4212 report, employers must look at data for the 12-month period preceding the snapshot date selected. For more information about the VETS-4212 report, please visit this link: The portal for filing the VETS-4212 report can be found at this link: 10

11 Tech Flex: August 2018 Volume VIII 11 CALIFORNIA COURT OF APPEALS APPROVES NEUTRAL TIME ROUNDING POLICY A recent decision by a California appellate court upheld an employer s use of a policy that automatically rounded employees time entries up or down to the nearest quarter of an hour. In AHMC Healthcare, Inc. v. Superior Court of Los Angeles County, No. B (June 25, 2018), the plaintiff employees claimed that the employer s practice of rounding time entries to the nearest 15 minutes, going both up and down depending upon the time of the punch, violated California wage and hour law. The policy at issue in this case was facially neutral, i.e., it rounded up or down based upon how close the employee s punch was to the next quarter of an hour. For example, if an employee clocked in between 6:53 and 7:07, he or she was paid as if he or she had clocked in at 7:00; if an employee clocked in from 7:23 to 7:37, he or she was paid as if he or she had clocked in at 7:30. The two named plaintiffs in the case argued that the policy was unfair because they both had lost small amounts of money as a result of the application of the rounding policy Expert statistical analysis of the application of the policy revealed that, as applied, the policy did not consistently benefit the employer. In fact, overall, the employer ended up paying employees more as a result of the rounding policy than if no rounding has been applied. Because the policy was fair and neutral both on its face and in its application, the court found that the policy did not violate California law. The court did caution that an apparently neutral rounding policy could violate the law if it were to unfairly applied, such as if it were used to single out certain employees, for example "a system that in practice overcompensates lower paid employees at the expense of higher paid employees could unfairly benefit the employer." Another example where such a policy could violate the law could be where employees were also told to clock in at a time that would result in a reduction in their recorded time, and were not allowed to clock in at times that would result in an increase. In the AHMC case, no such unfair application had occurred. In fact, the court found that "employees benefited overall from the rounding policy. Therefore, the fact that a bare majority lost a minimal amount of time was not sufficient" for the plaintiffs to prove that the policy violated California law. You can read the entire decision of the Court here: 11

12 Tech Flex: August 2018 Volume VIII 12 NEW YORK CITY DEPARTMENT OF CONSUMER AFFAIRS RELEASES POSTER AND FAQS ON TEMPORARY SCHEDULE CHANGE LAW As reported earlier this year, on January 19, 2018, New York City s City Council adopted the NYC Temporary Schedule Change Law ( TSCL ), a provision that allows employees to request up to two schedule changes per year for certain qualifying, personal events. Unlike other scheduling laws passed in New York City, this provision applies to employees regardless of the industry in which they work (with narrow exceptions), not just those in the retail or fast food sectors. The new law took effect on July 18, In keeping with the requirements of that law, New York City s Department of Consumer Affairs ( DCA ) recently published a model Notice of Employee Rights. The posting, with the heading You Have a Right to Temporary Changes to Your Work Schedule, must be conspicuously posted in most New York City workplaces. The Notice must be posted in English and any language that is the primary language of at least five percent of employees at that workplace, assuming the DCA has made the Notice available in that language. At the time the writing of this article, only the English version of the Notice has been released. It can be found at this link: Notice-English.pdf The DCA also recently published FAQs regarding the TSCL. Among other points, the FAQs note that: Employees cannot agree to waive their rights under the TSCL; The following employees are not covered by the law: o Employees who work 80 hours or less a calendar year in New York City o Employees who have not been employed by their employer for 120 or more days o Employees of federal, state, or local government o Certain employees subject to a collective bargaining agreement that waives the law s provisions and addresses temporary schedule changes o Certain employees in motion picture, television, and live entertainment industries The following are considered to be family members for purposes of the TSCL: o Any individual whose close association with the employee is the equivalent of family o Child (biological, adopted, or foster child; legal ward; child of an employee standing in loco parentis) o Grandchild o Spouse (current or former regardless of whether they reside together) o Domestic Partner (current or former regardless of whether they reside together) o Parent o Grandparent o Child or Parent of an employee s spouse or domestic partner o Sibling (including a half, adopted, or step sibling) o Any other individual related by blood to the employee 12

13 Tech Flex: August 2018 Volume VIII 13 Employers must post the Notice where employees can easily see it at each NYC workplace and the Notice should be printed on and scaled to fill an 11 x 17 paper. The FAQ document can be found here: TemporaryScheduleChangeLaw.pdf For more information on the TSCL, please see the February 2018 Tech Flex article titled New York City Passes New Law Allowing Requests for Temporary Schedule Changes. Paste the following into your browser: pdf SEATTLE ENACTS PROTECTIONS FOR DOMESTIC WORKERS On July 27, 2018 Seattle Mayor Jenny Durkan signed into law Domestic Workers Ordinance C.B (the Ordinance ) that establishes labor standards for domestic workers. Under the Ordinance, domestic worker is narrowly construed to mean any worker: 1) who 1) is paid by one or more hiring entities; and 2) who provides domestic services to an individual or household in or about a private home; and 3) whose primary occupation is work in the job classifications of as a nanny, house cleaner, home care worker, gardener, cook, or household manager. The Ordinance requires that beginning in July 2019, all domestic workers, whether classified as an independent contractor or an employee, are covered by the new standards, which require that domestic workers: be paid the Seattle minimum wage; (paste following into your browser) FactSheets-MW_updated_04_19_18(0).pdf have uninterrupted meal and rest periods, including financial compensation if responsibilities require working without breaks; and are given one day (24 hours) off in a seven-day period for workers that reside where they are employed. For more information on the ordinance please click on the link provided below. 13

14 Tech Flex: August 2018 Volume VIII 14 ADP does not make any representation or warranty that the information contained in this newsletter, when used in a specific and actual situation, meets applicable legal requirements. This newsletter is provided solely as a courtesy and should not be construed as legal advice. The information in this newsletter represents informational highlights and should not be considered a comprehensive review of legal and compliance activity. Your legal counsel should be consulted for updates on law and guidance that may have an impact on your organization and the specific facts related to your business. **Please note that the information provided in this document is current as of the date it is originally published.** 14