Certified Payroll Professional

FICA Student Exemption

FICA taxes do not apply to service performed by students employed by a school, attending the school.

Acceptable Work Time Rounding Practices

FLSA allows employers to round employees working time to the nearest quarter hour or fifteen minutes if defined under the FLSA

Included in /Excluded from FUTA wages

FUTA not payable 1)a household employer who pays cash wages totaling less than $1000 for all household employees in a calendar quarter for household employees. 2)An agricultural employer who pays cash wages of less than $20,000 to farm workers in a calendar quarter or employs less than 10 farm workers during at least some part of a day during any 20 or more weeks during the year.

Non discrimination Testing

In order to qualify for tax favored status in a benefit plan must not discriminate in favor of highly compensated employees.

Other Reasonable Bases

Not meeting other Safe Haven rules, but still having a reasonable basis to consider a worker a contractor.

Pre notification Process

Not required. Prenote is a zero value transaction to test the validity. If an ACH prenote is used it must be processed six days before the transmission of the actual direct deposit.

Form 688-W

Notice of Levy on Wages, Salary, and Other Income. Assists the tax payer in determining the amount of income that is exempt from the Levy.

Compensatory Time off in lieu of overtime pay

OT must be irregular or occasional. Both exempt and Non exempt can qualify for compensatory time off. Prevailing rate employees also qualify, but it's not required. Must be used by the end of the 26th pay period after its earned.

FUTA Wage Base

Paid only by employers on the first $7000 earned for each employee

Tip Pay Requirements

Pay can never be less than the applicable minimum wage rate. Tips and wage have to beat or above $7.25

Obligations for Temporary Agency /Leased Employee

Payroll. Bookkeeping,Tax Deductions, Workers Comp and Fringe Benefits

Federal Income Tax Withholding Methods

Percentage Method and Wage Bracket

FICA Public Sector Exemption

Public employees fall into three different categories with respect to social security. 1)Subject to SS tax withholding through mandatory coverage. 2)Subject to SS through a Section 218 Agreement.3)Exempt from SS since they are covered by a public retirement plan. A section 218 agreement between the SS Administration and states SS Administration provides coverage for a group of state or local government employees.

Public Sector workweek and Compensatory time off

Public sector agencies are required under FLSA to compensate each hour of overtime with an hour and a half of compensatory time. Law enforcement, seasonal activity, emergency and firefighters are allowed to accrue up to 240 hours before they must be taken.

Qualified Plans

Qualified plans must be for the exclusive benefit of employees or their beneficiaries and they are subject to Internal Revenue Code requirements. Either defined benefit plans or defined contribution plans. A defined benefit plan is employer sponsored and benefits are formula based. The employer controls portfolio risk and management. Cafeteria Plan/Sec 125-the premium only plan lets employees take employer required healt insurance deductibles from pretax income.

Railroad Retirement Tax Act Requirments

Rail Road Tax Act taxes fund railroad worker retirement benefits. Collection of these taxes is the responsibility of the IRS. These taxes are imposed by chapter 22 of the Internal Revenue Code (IRC)

Industry Practice Safe Haven

Recognized industry practices. (Employee classification)

Necessity to maintain confidentiality of employer/employee data

Records relating to medical conditions or histories of employees and families are mandated to be confidential by the Family and Medical Leave Act FMLA. HIPAA Health Insurance and Portability Act prohibits disclosure of individually identifiable medical information in all cases other than those conditions authorized by the act.

Requirements for Changing Workweek

Regularly recurring 168 hour period or seven twenty-four hour periods that occur consecutively once established, must remain constant. If the employer changes the "workweek" , the change initiated is to be intended to be permanent. The change may not be a regular occurrance. Change may not be made to intentionally avoid overtime.

Past Audit Safe Haven

Taxpayer relying on an audit by IRS for employment taxes due. (Employee classification)

Judicial Precedent Safe Haven

Taxpayers using previous legal rulings (within reason for employee classification)

Ability to apply legislative and regulatory standards

Social Security Act Family and Medical Leave Act Americans With Disabilities Act Civil Rights Act Immigration and Control Act Age Discrimination in Employment Act

Fluctuating Workweek

Straight time compensation compensates the non-exempt employee with a fixed salary regardless of the hours worked whether over or under forty hours.

Social Security Wage Base

The withholding applies to the first $117,000.

Stopping payment of checks

Uncashed checks can have a stop payment placed, followed by a reissued to the employee upon request.

Escheatment Procedures

Unclaimed property is transferred to the state, so claiming the funds becomes an issue between the employee and the state.

Child Labor Restrictions

Under FLSA youth under 16 have restricted hours as well as prohibitions on working in hazardous occupations. Children under 14 years of age may not be employed in non-agricultural occupations including grocery store. They can deliver newspapers and act, minor chores around private homes or casual baby sitting.

Form W-2

Wage and Tax Statement is for an employer to report to each employee who earned income in the tax year, information regarding the amount of earnings and amount of income, Social Security and Medicare taxes withheld for that year.

FICA Withholding Requirements

Federal Insurance Contributions Act. The FICA tax consists of both SS and medicare taxes. FICA adds up to 15.3%. Social Security 12.4% Medicare 2.9%.

Medicare Tax Withholding Rate

1.45% of each employee's pay for medicare. The employer is required to match this amount so that total amount sent to the government is 2.9%.

FUTA Tax Rate

6.0%

Social Security Tax Withholding Rate

6.2% withheld from employees and 6.2% paid by employers.

Impact of Federal Banking Holidays

Federal Reserve System is closed preventing the processing of all banking transactions. Rescheduled to a day before or a day after.

Form 1042-S

Foreign person's U.S. source income subject to withholding. To report income subject to withholding for foreign persons such as non resident aliens, foreign partnerships, foreign corporations, foreign estates and foreign trusts. Interests, rents, and royalties. Certain natural resource gains and certain gains on certain intellectual property.

Relocation Benefits

Generally not taxable, moving household goods, the first 30 days of storage and final move travel. Temporary housing is taxable.

Escheat Laws

If a substantial period of time has elapsed since the original issue, the escheatment laws of the applicable state may impact the ability to reissue. Penalties for failure to file unclaimed property reports vary between states, but typically involve civil penalties and criminal fines and imprisonment.

Form 1099-MISC

Miscellaneous Income is to report to each recipient and the IRS. -Royalties no less than $10 -Payments $600 or more for Rents, Services, Prizes and Awards, Other income payments and Attorneys.

Wage Bracket (Federal Income Tax Withholding Methods)

1)Determine gross earnings($4750-$800 deferred deductions)2)Taxable income:$39503)Allowances on W-4 are 3. 4)Determine pay cycle:Monthly 5)maritial status on W-4: single 6)Tax table single monthly payroll 7)Find appropriate range for single, monthly payroll. According to the table, the tax on $3950 is $363.

Percentage Method (Federal Income Tax Withholding Methods)

1)Determine the employees gross wage for payroll period. 2)Find the allowance amount from the appropriate IRS table according to the employees frequency of payment and multiply that amount by the number of withholding allowances claimed on the W-4. 3)Subtract the allowance amount of federal tax using the appropriate percentage withholding table.

Key control factors for classifying employees under the Department of Labor standards

1)The extent to which the work performed is an integral part of the employers business. If the work performed by a worker is integral to the employers business, it is more likely that the worker is economically dependent on the employer and less likely that the worker is in business for himself or herself. 2)Does the worker exercises managerial skills and if so, whether those skills affect that workers opportunity for both profit and loss.3)The relative investments by the worker and employer. 4)The workers skill and initiative. Business judgment. 5)The permanency of the workers relationship with the employer.6)The nature and degree of control by the employer.

I-9 List B Documents

1. Drivers license or ID card issued by a state 2. ID Card issued by federal, state, or local 3. School ID card with photograph 4. Voter registration card

I-9 List A Documents

1. Passport 2. Permanent resident card or alien registration card 3. Foreign passport that contains I-551 stamp 4. Employment authorization document (Form I-766)

I-9 List C Documents

1. Social Security Card 2. Certification of Birth Abroad (Form FS-545) 3. Certification of Report of birth 4. Original of Certified Copy of birth certificate issued by a state

Form 688-D

A 688-D is issued to release the levy by the IRS when the employee satisfies the IRS judgement.

Minimum Wage Requirements

A minimum wage for nonexempt employees is among the provisions required by the Federal Fair Labor Standards Act.All qualifying non-exempt employees must be paid the minimum wage for each hour worked during a 40 hour work week.

Direct Deposit Reversal Timing

A single entry reversal is allowed within five days of the original direct deposit.

Transit Routing Numbers

Nine digit number assigned to a financial institution by a registrar acting on behalf of the American Bankers Association (ABA).

Non Qualified Plans

Non Qualified plans are an agreement or promise by an employer to certain employees to provide benefits at a future date for services currently performed.

Supplemental payment taxation methods (Flat rate aggregate)

Annualized wages:Compute the employees annual pay rate and the figure the annual withholding amount on the IRS Annual Payroll Period tax table. Divide the amount by the number of pay periods in the year to determine the deduction for an individual paycheck.

Employee(Common Law Employee)

Anyone who performs services for you is your employee if you can control what will be done and how it can be done

8/80 Rule

Anything over 8 hours in a day or 80 hours in a 14 day pay period is paid as overtime.

Form SS-5

Application for a Social Security Card. Apply for a new card or a replacement card or to make an existing card.

Form SS-4

Application for employer identification number.

Social Security Tax Withholding Requiremenys

Applies to the first $117,000 and withheld at 6.2%

Adoption Assistance

Non taxable under fringe benefits IRS exclusion rules.

Form 941-X

Adjusted Employers Quarterly Federal Tax Return or Claim of Refund

Employee Classification (Exempt/nonexempt)

An employee is not entitled to the benefits and protections of the FLSA when an employee is exempt from the FLSA. Non exempt are hourly wage employees.

Form 945

Annual Return of withheld federal income tax is for payers to report to the IRS the amount of federal income tax withheld on the following types of payments. Pensions, Military Retirement, Indian Gaming Profits, Voluntary withholding of certain governments payments and Back up withholding

Form 1096

Annual summary and transmittal of U.S. information returns. It is used to summarize each type of information return. A separate 1096 is to be filed with each group of returns. Forms 1097,1098,1099.

Form 1042-T

Annual summary and transmittal of forms 1042-S. Summarize the income and taxes withheld amounts from all corresponding forms.

Form 1042

Annual withholding tax return for U.S. source income of foreign persons.To report the amount of income tax withholding on certain income paid to non resident aliens, foreign partnerships, foreign corporations, foreign estates and foreign trusts.Form 1042 must be filed in any of the following criteria are met: Form 1042 is required to be filed or Gross investment income is paid to taxable foreign private foundations or Specified federal procurement payments are paid to any foreign person.

Form W-4

Employees withholding allowance certificate. Documents the amount of federal tax withholding.

ACH Components

Employer, Originating Financial Institution, ACH Network(Settle the transactions between the financial institutions) Receiving Financial Institution, Employee.

Regular Rate of Pay Components

Before any kind of payroll deduction is made the regular rate of pay is computed. 40 hour workweek. Hours worked times rate of pay. Rate/Hours

Common Law Rules

Behavioral-Does the company control what the worker does and how the worker does their job? Financial-Are the business aspects of the workers job controlled by the payer?(How the worker is paid? Expenses reimbursed? Who provides tools and supplies?) Type of Relationship-written contracts or employee type benefits? Will the relationship continue? Work performed a key aspect of business.

ACH Process

Employer>Originating Financial Institution,>ACH Network(Settle the transactions between the financial institutions) >Receiving Financial Institution>Employee. The employee needs to pre authorize the electronic payment

Form 943

Employers Annual Federal Tax Return for Agricultural Employees.

Form 940

Employers Annual Federal Unemployment (FUTA) Tax Return. Reports the annual federal unemployment tax liability for employers.

Form 944

Employers Annual Federal tax return is to report to the IRS by so called small employers, the wages paid, federal income taxes withheld and employer and employee share of social security and medicare taxes due.

Allowed Pay Vehicles

Cash, Check, Direct Deposit, Pay Cards

Pay frequency/method goverance

Check that can be turned into cash at a bank without service charge. Pay check at a financial institution that is at least located in the same state as the employee. Direct deposit can be required as long as the employee has the choice of financial institutions.

Direct Deposit reversal procedures

Common errors such as incorrect employee, incorrect amount of payment of duplicated payment. The employee must be notified of the correction no later than the same day that the entry was posted to the employee's account.

Form 941

Employers Quarterly Federal Tax Return is to report by employers to the Internal Revenue Service the total amount of wages paid, income taxes withheld and social security and medicare taxes due. (Both employee and employer portions)

Form W-2C

Correct errors on W-2's. Only update incorrect fields.

Compensable Time Periods under Fair Labor Standards Act

Employers are not required to provide employees with paid meal and rest breaks. Unauthorized overtime is required to be paid.

Federal Employment Tax Requirements

Employers are required to make federal payroll tax payments to the governments as well as filing the proper reporting and information returns. Must provide employees with W-2 and 1099's. Federal tax deposits need to be done on a periodic basis. Federal tax returns must be filed on a quarterly or annual basis. The deposits must be electronic as of 2011. Small business with federal tax liability of $2500 or less per quarter can pay by check.

Federal Income Tax Withhold Requirements

Employers generally must withhold federal income tax from employees wages.

FUTA Tax Credit

Employers get credits that are based on the money they pay into state unemployment programs. The credit claimed cannot exceed 5.4%. Whenever the maximum credit is applied against the federal rate, the effective rate will fall to 0.6%.

Overtime Requirements

Employers pay non exempt employers one and one-half times their regular rate for any hours worked in excess of 40 hours

I-9

Employment Eligibility Verification used to verify that the prospective employee is authorized to work in the U.S. (If hired after Nov 6, 1986)

Form W-3

Essentially the "Cover Sheet" for the transmittal of Forms W-2.*250 or more forms, you must file electronic (Form W-3 is not required for electronic filing)

Allowable Tip Credit

Example $4.00 cash wage, Tip credit $3.25 total $7.25 Minimum wage

White Collar exemption classifications and Job Duties

Executive admin and professional, a minimum salary is $455/week except for outside sales and certain professions such as doctors and teachers and certain computer professionals who are paid $27.63/hour or more in straight time pay for each hour worked. Primary duty directly related to management or general business operations. Not selling a product.Functional areas such as QC, ACCT, HR etc...

Form 8233

Exemption from withholding on compensation for independent personal services of a nonresident alien individual. The purpose is to claim an exemption from the withholding requirements.

Imputing Fringe Benefits

De Minims Fringe benefits- Holiday gifts, occasional meals, flowers, fruit. Amount is so small as to make accounting for it unreasonable or impractical.

Impact of Taxable Benefits

Deductions are taken after tax

Impact of Non-Taxable Benefits

Deductions are taken before tax

Form SS-8

Determination of worker status for purpose of federal employment taxes and income tax withholding. Can be filled out by the business or worker.

Form 1099-R

Distributions From Pensions, Annuities Retirement or Profit-Sharing Plans, IRA's Insurance Contracts ($10 or more)

Federal Minimum Wage Rate

Effective 2009 the minimum wage is $7.25 per hour. If the state minimum wage is different the employee is paid whichever is more.

Temporary Agency/Leased Employee

Employees are hired by temporary help services and send the workers to companies who need employees. A leased employee is an employee whose service is leased from a company that specializes in recruitment. All temp agency employees are leased employees but the converse is not necessarily true.

FLSA

Fair Labor Standards Act

Breach of Confidentiality

Include but not limited to: Disclosure of rate of pay and deduction information of an employee. Disclosure of the presence of a medical condition of an employee to a person not authorized by the employee or as per the HIPAA permitted disclosure list. Medical information retained as per FMLA of an employee other than The supervisor, First aid or safety personnel or FMLA government investigative personnel.

Constructive Receipt

Income is constructively received when an amount is credited to your account or made available to you without restriction. You need not have possession of it. If you authorize someone to be your agent and receive income for you, you are considered to have received it when your agent receives it. Income is not constructively received if your control of its receipt is subject to substantial restrictions or limitations.

Worker Status

Independent Contractor, Employee (Common Law Employee), Statutory Employee, Statutory Non-Employee

Statutory Employee

Independent Contractors that fall into any of four categories. Driver , FT life insurance agent, individual who works at home on materials or goods that you supply and must be returned.FT traveling or city salesperson. ...and meet all three conditions under SS and medicare taxes: service contracts states all services performed by them. They do not have a substantially investment in the equipment and property used to perform the service. The services are performed on a continuing basis for the same payer.

Salary for Exempt Employees

Minimum salary of $455 per week

Components governed under FLSA

Minimum wage, overtime, child labor

Form W-4S

Request for Federal Income Tax withholding from sick pay

Form W-9

Request for Taxpayer Identification Number and Certification. The purpose is for the payer to obtain the correct identification number.

Form W-3C

Required whenever a Form W-2C (Copy A) is filed in paper form.

Reasonable Basis Test

Safe Harbor Rules Sec 530 Revenue Act of 1978. Employees vs. Independent Contractors for tax purposes.

I-9 Section 1-3

Section 1, employee-Attestation of Citizenship status Section 2, employer-Attestation of documents verified Section 3, employer-Re verification of documents

Resources available to stay abreast of legislative and regulatory changes

The Congressional Record-printed daily containing all activities of the State and House of Representatives. The Federal Register- contains proposed, temporary and final regulations that are issued by an agency of the federal government. Internal Revenue Bulletin-contains recently issued regulations, rulings, procedures, etc. from the Internal Revenue Services (IRS) Cumulative Bulletins-hardcover editions containing all bulletin information issued for a year. SSA/IRS Reporter-contains wage and hour and employment tax information as published by the Social Security Administration (SSA) and the Internal Revenue Service. The IRS also provides the following sources. Revenue Procedures, Revenue Rulings, Private Letter Rulings, Publications, Internal Legal Opinions and Announcements

ERISA Requirements

The Employee Retirement Income Security Act of 1974.established to help protect the rights and financial security of retirees who are and were dependent on pensions for their retirement funding. Requires that the employer give the participant information regarding the plan, define minimum contributions for participation in the plan, establish a reasonable vesting schedule, define the method of benefit accrual and how the plan will be funded, sets up the need for fiduciary to be responsible for plan, and allows participants to sue the fiduciary for failing to act in a manner consistent with a fiduciary.

FMLA Basic Requirements

The FMLA, effective Aug 5 1993, requires an employer to maintain coverage under any group health plan for an employee on FMLA leave.

NACHA Role

The National Automated Clearinghouse Association is a nonprofit organization that acts as the self regulatory body for the automated clearinghouse (ACH) process of electronic payments. Responsible for the development, administration and governance of the ACH network.

Work Week

The basis on which determination of employee coverage, the application of most exemptions and compliance with the wage payment requirements of the FLSA are made.

Application Multi-State Taxation Rules to Employees working in Multiple States (e.g. SIT and SUI)

The employee lives in state "A" and works in state "B". The worked in state provides the unemployment compensation insurance coverage. Therefore the employers quarterly wage reports and contributions go to state "B". SUI=State Unemployment SIT=Withholding

Independent Contractor

The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it is done.

Common Law Test

The keys are to look at the entire relationship. Consider the degree or extent of the right to direct and control.Document each of the factors used in coming up with determination.

Direct Deposit Authorization

The operating rules of the Automated Clearinghouse require that direct deposit transactions be pre-authorized by the recipient employee.

Back up withholding requirments

The rate is 28% if the payee does not provide his or her SS number or other identifying number in a timely manner.

Medicare Wage Base

There is no upper limit on the amount of withholding which applies to all earnings.

Public Service Acts (Davis-Bacon, Walsh-Healey, Service Contract)

These apply to contractors and subcontractors. Performing on federally funded or assisted contracts in excess of $2000 for the construction (including painting) of public buildings or public works. "Davis-Bacon and related acts". The contractors and subcontractors have to pay the labors the locally prevailing wages for the area. The acts also cover work paid under which federal agencies assist construction projects through grants, loans, loan guarantees and insurance. Contracts 100,000 or more, under the Contract Work Hours and Safety Standards Act, pay overtime of one and one half times over 40 hours. WD=Wage Determination Number.

Statutory Non-Employee

Three categories: Direct Sellers, Licensed real estate agents,Certain companion sitters.

Medicare Tax Withholding requirements

Total of 2.9% half by employee and half by employer on all earnings, bonus, commissions etc.

Public sector Social security requirements

When the SS system was enacted in 1935, it specifically excluded public sector employees. The employees contribute to the Civil Service Retirement System. In 1951 Section 218 allowed states to provide optional coverage under Social Security. If the employees do not pay in they do not receive benefits.

Form W-4P

Withholding Certificate for Pension or Annuity payments