During day one of the annual American Payroll Association's (APA) Payroll Leader's Conference (PLC) in Philadelphia, the impact of the Sarbanes-Oxley Act (SOX) for internal controls was discussed.
History of SOX. Twenty years ago, the SOX Act (P.L. 107-204) was signed into law in response to several large corporate and accounting scandals in the early 2000s, most notably Enron. According to the APA, the Act requires public companies to have a framework for identifying, documenting, and evaluating their internal controls over financial reporting. Also, it provides a logical way to analyze an employer's control system. The requirements of SOX must be taken into consideration for a properly designed and implemented payroll technology system.
SEC Commission Chair speech on SOX. On July 27, 2022, U.S. Securities and Exchange Commission Chair Gary Gensler made a speech at the Center for Audit Quality titled, "Sarbanes-Oxley at 20: The Work Ahead," where he noted that the Enron crisis exposed a problem with the quality of auditing standards. "It matters who sets the standards. It matters who 'audits the auditors'," Gensler added.
APA explains SOX and payroll systems. Abbey Moran, CPP, Senior Leader of Global Payroll and Labor Accounting at Booz Allen Hamilton presented the "Strategic Payroll Practices" course at the PLC and explained that an employer's payroll system should focus on a few areas to ensure compliance with SOX is met.
These areas include: (1) time and attendance, (2) data availability, and (3) security. Employee time and attendance directly affects an employer's financial picture. Having software that will accurately track this data will ensure the reliable financial reporting and forecasting that is required by SOX.
Moran said that in the event of a SOX audit, payroll technology system data must be readily available to managers, auditors, and regulators. She added that a payroll technology system must ensure that a company complies with the necessary standards and requirements for auditable payroll technology system information. In addition, the payroll system should include authorization time stamp tracking to document system changes.
Third-party processors. For third-party payroll processors, SOX requires the documentation of internal controls and an independent review of internal controls by an independent party. The American Institute of Certified Public Accountants (AICPA) defines the requirements of the documentation and review in its Attestation Standards: Clarification and Recodification (SSAE18). The requirements define two types of reviews and attestation to the level of internal controls performed by a third-party processor.
The IRS has posted a September 14, 2022 draft version of the 2022 Form 944 (Employer's Annual Federal Tax Return) instructions on its website that include information on expired coronavirus (COVID-19) tax credits and a reminder to pay the second installment of the deferred amount of the employer share of social security tax.
Background. Form 944 is typically used by employers with an annual liability for Social Security, Medicare, and withheld federal income taxes of $1,000 or less. These employers will pay the employment taxes once a year instead of quarterly with Form 941 (Employer's Quarterly Federal Tax Return).
Changing filing. Generally, if the IRS has notified an employer to file Form 944, the employer must file this form to report employment taxes. However, an employer may request that the IRS change this filing requirement as long as it is done within a certain time period. For tax year 2022, this time period was from January 1, 2022 through April 1, 2022 via telephone call (800) 829-4933. The time period for a written request was from January 1, 2022 though March 15, 2022.
New employers. New employers are eligible to file Form 944 if they meet the eligibility requirements. New employers filing Form SS-4 (Application for Employer Identification Number) must complete line 12 of the form indicating the highest number of employees expected in the next 12 months and must check the box on line 14 to indicate whether they expect to have $1,000 or less in employment tax liability for the current calendar year.
Due date. For the 2022 tax year, Form 944 must be filed by January 31, 2023. However, if the employer made deposits on time in pull payments of the taxes due for the year, the return due date is February 10, 2023.
Electronic filing. Form 944 may be filed electronically. However, if the form is filed on paper, an employer should not also file electronically. If filed on paper, the IRS will treat a Form 944 as filed on time if the envelope contains sufficient postage and is postmarked by the U.S. Postal Service on or before the due date of the return.
COVID-19 tax credits. The September 14, 2022 draft version of the Form 944 instructions contains information on expired COVID-19 related tax credits.
Paid sick and family leave credits. The American Rescue Plan Act of 2021 adds new Code Sec. 3131, Code Sec. 3132, and Code Sec. 3133 to the Internal Revenue Code to provide credits for qualified sick and family leave wages similar to the credits that were previously enacted under the Families First Coronavirus Relief Act (FFCRA) and amended and extended by the COVID-related Tax Relief Act of 2020. These credits expired September 30, 2021.
Employee retention credit (ERC). The Coronavirus Aid, Relief, and Economic Security (CARES) Act contained a provision providing the ERC. The ERC expired for most businesses on September 30, 2021 and expired December 31, 2021 for recovery startup businesses.
COBRA premium credit. New Code Sec. 6432 allows a credit against the employer share of Medicare tax in an amount equal to the premiums not paid by assistance eligible individuals for COBRA continuation coverage.
Deferral of payroll taxes. The CARES Act allowed employers to defer the deposit and payment of the employer share of social security tax. The deferred amount of the employer share of Social Security tax was only available for deposits due on or after March 27, 2020, and before January 1, 2021, as well as deposits and payments due after January 1, 2021, that are required for wages paid on or after March 27, 2020, and before January 1, 2021. The first half of the employer share of Social Security tax was due by December 31, 2021. The instructions remind employers that the second installment is due by December 31, 2022. The deferred employer tax can be paid electronically using EFTPS.
Advance payment of COVID-19 credit ended. While qualified sick and family wages may be paid in 2022 for leave taken after March 31, 2022, and before October 1, 2021, or COBRA premium assistance payments may be made in 2022, employers may not request advance payment of these credits on Form 7200 in 2022.
Notice 2021-65 effect on deposit schedule. Employers who became semiweekly depositors for 2022 under the $100,000 Next-Day Deposit Rule solely due to relief provided in Notice 2021-65, 2021-51 IRB 880 regarding the early termination of the ERC for the fourth quarter of 2021, may be converted back to a monthly depositor by contacting the IRS. Taxpayers may continue to deposit as a monthly depositor, but may receive a system-generated failure-to-deposit (FTD) penalty notice after Form 944 is filed. Taxpayers should contact the IRS and request abatement of the FTD penalty and may ask to be converted back to a monthly depositor.
The U.S. Citizenship and Immigration Services (USCIS) has reached the Congressionally-mandated cap on H-2B visas for temporary non-agricultural workers for the first half of fiscal year 2023 [USCIS Press Release, 9/14/2022].
U.S. businesses use the H-2B program to employ foreign workers for temporary non-agricultural jobs. Congress has set the H-2B cap at 66,000 per fiscal year, with 33,000 for workers who begin employment in the first half of the fiscal year (October 1 to March 31) and 33,000 for workers who begin employment in the second half of the fiscal year (April 1 to September 30).
September 12, 2022 was the final receipt date for new cap-subject H-2B worker petitions requesting an employment start date before April 1, 2023. The USCIS will reject new cap-subject H-2B petitions received after September 12, 2022 that request an employment start date before April 1, 2023.
The USCIS continues to accept H-2B petitions that are exempt from the Congressionally-mandated cap. This includes the following types of petitions:
Tax rate schedules. The tax rate schedules for 2023 will be as follows.
For married individuals filing joint returns and surviving spouses:
If taxable income is under $22,000; the tax is 10% of taxable income
If taxable income is over $22,000 but not over $89,450; the tax is $2,200.00 plus 12% of the amount over $22,000
If taxable income is over $89,450 but not over $190,750; the tax is $10,294.00 plus 22% of the amount over $89,450
If taxable income is over $190,750 but not over $364,200; the tax is $32,580.00 plus 24% of the amount over $190,750
If taxable income is over $364,200 but not over $462,500; the tax is $74,208.00 plus 32% of the amount over $364,200
If taxable income is over $462,500 but not over $693,750; the tax is $105,664.00 plus 35% of the amount over $462,500
If taxable income is over $693,750; the tax is $186,601.50 plus 37% of the amount over $693,750
For single individuals (other than heads of households and surviving spouses):
If taxable income is not over $11,000; the tax is 10% of taxable income
If taxable income is over $11,000 but not over $44,725; the tax is $1,100.00 plus 12% of the amount over $11,000
If taxable income is over $44,725 but not over $95,375; the tax is $5,147.00
plus 22% of the amount over $44,725
If taxable income is over $95,375 but not over $182,100; the tax is $16,290.00 plus 24% of the amount over $95,375
If taxable income is over $182,100 but not over $231,250; the tax is $37,104.00 plus 32% of the amount over $182,100
If taxable income is over $231,250 but not over $578,125; the tax is $52,832.00 plus 35% of the amount over $231,250
If taxable income is over $578,125; the tax is $174,238.25 plus 37% of the amount over $578,125
For heads of household:
If taxable income is not over $15,700: the tax is 10% of taxable income
If taxable income is over $15,700 but not over $59,850; the tax is $1,570.00 plus 12% of the excess over $15,700
If taxable income is over $59,850 but not over $95,350 ; the tax is $6,868.00 plus 22% of the excess over $59,850
If taxable income is over $95,350 but not over $182,100; the tax is $14,678.00 plus 24% of the excess over $95,350
If taxable income is over $182,100 but not over $231,250; the tax is $35,498.00 plus 32% of the excess over $182,100
If taxable income is over $231,250 but not over $578,100; the tax is $51,226.00 plus 35% of the excess over $231,250
If taxable income is over $578,100; the tax is $172,623.50 plus 37% of the excess over $578,100
For marrieds filing separate returns:
If taxable income is not over $11,000; the tax is 10% of taxable income
If taxable income is over $11,000 but not over $44,725 the tax is $1,100.00 plus 12% of the excess over $11,000
If taxable income is over $44,725 but not over $95,375 ; the tax is $5,147.00 plus 22% of the excess over $44,725
If taxable income is over $95,37595,375 but not over $182,100; the tax is $16,290.00 plus 24% of the excess over $95,375
If taxable income is over $182,100 but not over $231,250; the tax is $37,104.00 plus 32% of the excess over $182,100
If taxable income is over $231,250 but not over $346,875; the tax is $52,832.00 plus 35% of the excess over $231,250
If taxable income is over $346,875; the tax is $93,300.75 plus 37% of the excess over $346,875
For estates and trusts:
If taxable income is less than $2,900; the tax is 10% of taxable income
If taxable income is over $2,900 but not over $10,550; the tax is $290.00 plus 24% of the excess over $2,900
If taxable income is over $10,550 but not over $14,450; the tax is $2,126.00 plus 35% of the excess over $10,550
If taxable income is over $14,450; the tax is $3,491.00, plus 37% of the excess over $14,450
Standard deductions. The basic standard deduction for 2023 will be:
Joint return or surviving spouse $27,700 ($25,900 for 2022)
Single (not head of household or surviving spouse) $13,850 ($12,950 for 2022)
Head of household $20,800 ($19,400 for 2022)
Married filing separate returns $13,850 ($12,950 for 2022)
Dependents. For an individual who can be claimed as a dependent on another's return, the basic standard deduction for 2023 will be $1,250 ($1,150 in 2022), or $400 ($400 in 2022) plus the individual's earned income, whichever is greater. However, the standard deduction may not exceed the regular standard deduction for that individual.
Older and blind taxpayers. For 2023, the additional standard deduction for married taxpayers 65 or over or blind will be $1,500 ($1,400 in 2022). For a single taxpayer or head of household who is 65 or over or blind, the additional standard deduction for 2023 will be $1,850 ($1,750 in 2022).
Exemption amount. While the dependency exemption deduction under Code Sec. 151 is reduced to zero from 2018 through 2025, this reduction isn't taken into account for other purposes of the Code, such as who is a qualifying relative for family credit purposes, and eligibility for head-of-household status. For 2023, this amount is $4,700 ($4,400 in 2022).
Kiddie tax. The exemption from the kiddie tax for 2023 will be $2,500 ($2,300 in 2022). A parent will be able to elect to include a child's income on the parent's return for 2023 if the child's income is more than $1,250 and less than $12,500 ($1,150 and $11,500 in 2022).
Adoption credit. For 2023, the credit allowed for an adoption of a child with special needs will be $15,950 ($14,890 in 2022). The maximum credit allowed for other adoptions will be the amount of qualified adoption expenses up to $15,950 ($14,890 in 2022).
For 2023, the credit will begin to phase out for taxpayers with MAGI in excess of $239,230 ($223,410 in 2022). The phaseout will be complete if MAGI is $279,230 ($263,410 in 2022).
Adoption exclusion. For 2023, the amount of employer adoption assistance that can be excluded from an employee's gross income for the adoption of a child will be $15,950 ($14,890 in 2022). In the case of an adoption of a child with special needs, the amount that can be excluded will be $15,950 ($14,890 in 2022). The exclusion is allowed regardless of expenses.
For 2023, the amount excludable from an employee's gross income will begin to phase out for taxpayers with MAGI in excess of $239,230 ($223,410 in 2022). The phaseout will be complete if MAGI is $279,230 ($263,410 in 2022).
MAGI limits for making contributions to Roth IRAs. Individuals may make nondeductible contributions to a Roth IRA, subject to the overall limit on IRA contributions.
The maximum annual contribution that can be made to a Roth IRA is phased out for taxpayers with MAGI over certain levels for the tax year. For taxpayers filing joint returns, the otherwise allowable contributions to a Roth IRA will be phased out ratably for 2023 for MAGI between $218,000 and $228,000 ($204,000 and $214,000 in 2022).
For single taxpayers and heads of household, it will be phased out ratably for MAGI between $138,000 and $153,000 ($129,000 and $144,000 in 2022). For married taxpayers filing separate returns, the otherwise allowable contribution will continue to be phased out ratably for MAGI between $0 and $10,000 ($0 and $10,000 in 2022).
The IRS has proposed rules that would implement changes to operations of the Independent Office of Appeals, as enacted in the Taxpayer First Act of 2019 [Preamble to Prop Reg REG-125693-19; Prop Reg §301.7803-2 and Prop Reg §301.7803-3].
Independent Office of Appeals. The Taxpayer First Act of 2019 (TFA; PL 116-25) established the IRS Independent Office of Appeals (IOA). The IOA's mission is to resolve federal tax controversies without litigation in a way that "promotes a consistent application and interpretation of, and voluntary compliance with, the Federal tax laws." (Code Sec. 7803(e)(3)(B))
To facilitate the resolution process, Appeals uses a variety of resolution methods including conferences, correspondence, and certain Appeals-provided alternative-dispute resolution services (i.e., fast-track settlement, fast-track mediation, post-Appeals mediation, Rapid Appeals Process, or early referral of issues to Appeals).
Generally, the IOA "resolution process" is available to all taxpayers. (Code Sec. 7803(e)(4)) However, the TFA did not require the IOA to consider every taxpayer dispute over federal tax controversy. The IRS is allowed to limit access to the IOA resolution process and the IRS must follow special notification procedures if a taxpayer asks the IRS to refer their federal tax controversy to IOA for review and the IRS denies that request. (Code Sec. 7803(e)(5))
Note. The most frequent type of federal tax controversy involves a taxpayer disputing a tax liability that is subject to deficiency procedures. In many of these cases the taxpayer requests an "Appeals" conference after the IRS has decided the taxpayer's liability and has sent a 30-day letter to the taxpayer. Sometimes, the taxpayer has filed a Tax Court petition after receiving a notice of deficiency. In these cases, the docketed case may be forwarded to Appeals for possible resolution.
Proposed regs. The proposed regs would, among other things, provide rules the IRS must follow when denying a taxpayer's request to have their federal tax controversy referred to the IOA.
The proposed regs would require the IOA to resolve federal tax controversies on a basis that is:
The proposed regs would also extend IOA resolution to disputes over IRS administrative determinations that are not covered by the definition of "federal tax controversy" in Prop Reg §301.7803-2(b)(2), but that are controversies that Appeals handled before the TFA. The proposed rule would also allow the IOA to add new categories of administrative determinations made by the IRS when appropriate to fulfill the IOA's function. (Prop Reg §301.7803-2(b)(3)).
Note. Basically, the proposed rule allows the IOA to consider administrative determinations made by the IRS that Appeals has historically considered and attempted to resolve without litigation.
Prop Reg §301.7803-2(c) lists the administrative determinations (i.e., exceptions from the general rule) that IOA cannot consider. Generally, these are the same IRS determinations Appeals could not consider before the TFA.
Comments requested. The IRS is requesting comments on the scope and rationale for the exceptions described in Prop Reg §301.7803-2(c). To the extent any of the proposed exceptions differ from prior Appeals practice, comments are requested on the effects of such differences and whether the objectives of such exceptions could be accomplished by alternative means while still allowing Appeals to function in accordance with Code Sec. 7803(e)(3). Comments are also requested on whether any additional exceptions to Appeals consideration are warranted.
The IRS must receive electronic comments and outlines of topics to be discussed at the public hearing (scheduled for November 29, 2022) by November 14, 2022. If no topic outlines are received by November 14, 2022, the public hearing will be canceled.
The U.S. Department of Labor's (DOL) Wage and Hour Division (WHD) conducted an investigation of the pay practices of Amrik Rai, owner and operator of two Roseburg hotels, violated federal law and found multiple violations of the Fair Labor Standards Act (FLSA).
Specifically, Rai's Crystal Services LLC, operator of Baymont by Wyndham, paid one employee a salary that did not meet minimum wage. The employer also failed to pay the worker time and one-half for hours over 40 in a workweek. At the Roseburg Value Inn, Rai's Golden Services LLC failed to pay one employee all hours worked.
The WHD had already investigated the employer in 2013, and twice in 2017. The prior investigations resulted in the recovery of $45,633 in back wages and liquidated damages for employees. In this latest investigation, the WHD recovered $37,423 in back wages for two employees, and $37,423 in liquidated damages for two employees. A civil penalty of $1,542 was also assessed.
WHD Division District Director Carrie Aguilar commented that: "The U.S. Department of Labor will hold accountable employers that take advantage of vulnerable workers. WHD is persistent, follows up after settlements, and will keep working hard to ensure employers come into compliance. Wage theft committed by repeat violators like Amrik Rai will be found and we will make their victims whole."
A number of key tax figures are adjusted each year for inflation based on the average chained Consumer Price Index (CPI) for all-urban customers (C-CPI-U) for the 12-month period ending the previous August 31.
Qualified transportation fringe benefits. For 2023, an employee will be able to exclude up to $300 ($280 in 2022) a month for qualified parking expenses, and up to $300 a month ($280 in 2022) of the combined value of transit passes and transportation in a commuter highway vehicle.
Long-term care premiums. Amounts paid for insurance that covers qualified long-term care services are treated as medical expenses up to specified dollar limits that vary with the age of the taxpayer as of the close of the tax year. For 2023, the dollar limits will be:
Payments received under qualified long-term care insurance. Amounts received under a qualified long-term care insurance contract are generally excludable as amounts received for personal injuries and sickness, subject to a per diem limitation, which will be $420 in 2023 ($390 in 2022).
Archer MSAs. For Archer medical savings account (MSA) purposes, in 2023, a "high deductible health plan" will be a health plan with an annual deductible of:
Limit on health FSA salary reductions contributions under a cafeteria plan. For purposes of determining whether a health FSA benefit will be a "qualified benefit" under Code Sec. 125 for the 2023 plan year, the cafeteria plan must provide that an employee may not elect to have salary reduction contributions exceeding $3,050 made to the health FSA ($2,850 for 2022).
Small employer health insurance credit. An eligible small employer may claim, subject to a phaseout, a credit equal to 50% of nonelective contributions for health insurance for its employees. The credit is reduced under certain circumstances, including if the average annual full-time equivalent wages per employee are more than $30,700 ($28,700 for 2022).
Qualified small employer HRA. For 2023, a qualified small employer HRA under Code Sec. 9831(d)(2) is an arrangement which, among other requirements, makes payments and reimbursements for qualifying medical care expenses of an eligible employee that do not exceed $5,850 ($5,450 for 2022), or $11,800 in the case of an arrangement that also provides for payments or reimbursements for family members of the employee ($11,050 for 2022).
Property exempt from levy. The value of property exempt from levy under Code Sec. 6334(a)(2) (fuel, provisions, furniture, and other household personal effects, as well as arms for personal use, livestock, and poultry) may not exceed $10,810 for levies in 2023 ($10,090 for 2022). The value of property exempt from levy under Code Sec. 6334(a)(3) (books and tools necessary for the trade, business, or profession of the taxpayer) may not exceed $5,400 for levies issued in 2023 ($5,050 for 2022).
Wage levy. The weekly amount of an individual's salary, wages, etc. exempt from levy for 2023 is $4,700 multiplied by the number of the taxpayer's dependents for the tax year of the levy ($4,400 for 2022), plus the taxpayer's standard deduction, divided by 52.
Deemed substantiation for reimbursement of employees' expenses. Under an optional deemed substantiation rule, eligible employers in the pipeline construction industry can provide reimbursements that will be treated as made under an accountable plan to employees who furnish welding rigs or mechanics rigs. (Rev Proc 2002-41, 2002-1 CB 1098) For calendar year 2023, an eligible employer may pay up to $20 per hour ($19 for 2022) for rig-related expenses. If the employer provides fuel or otherwise reimburses fuel expenses, an eligible employer may pay up to $13 per hour ($12 for 2022).
By Jeff Carlson
The top member from each party on the Senate Finance Committee—Chair Ron Wyden, Democrat of Oregon, and ranking Republican Mike Crapo of Idaho—have introduced the Enhancing American Retirement Now (EARN) Act (S.4808).
The new text of the bipartisan bill includes some changes to the original, including an income baseline to the revenue-raising provision concerning catch-up contributions being treated as contributions to a Roth individual retirement account. The revised provision specifies that employees with wages below $100,000 would be allowed to make catch-up contributions on a pretax or after-tax Roth basis. The changes would apply to tax years beginning after 2023.
In addition, the legislative language now includes a revenue-raising provision that would disallow a charitable deduction for a qualified conservation contribution if the deduction claimed is more than 2.5 times the sum of each partner's relevant basis in the partnership, unless the contribution meets a three-year holding test.
The EARN Act includes about 70 retirement provisions and encourages small businesses to adopt retirement plans, makes it easier for part-time workers to participate in retirement plans, expands the saver's credit for low- and middle-income workers, and allows penalty-free withdrawals during emergencies and family hardships such as natural disasters, domestic abuse, and terminal illness.
Other provisions of the $40 billion retirement package include:
"The Finance Committee has worked in a bipartisan way to improve the retirement system, building on our success in 2019," Wyden said in a statement. "The EARN Act includes policies put forward by members on both sides of the aisle, and I appreciate the collaboration of Senator Crapo every step of the way."
The Finance Committee most recently took action on retirement legislation on June 21 when it unanimously approved the EARN Act, but at that point no text for the bill had been drafted. The EARN Act is expected to be merged with legislation approved by the Senate Health, Education, Labor and Pensions Committee on June 14: the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg (RISE and SHINE) Act (S. 4353).
Those bills would then be reconciled with the SECURE 2.0 retirement bill already approved by the House of Representatives before going before the full chambers for a final vote and on to President Joe Biden to sign. Lawmakers remain optimistic Congress will act on the bill this year.
After more than two years, the owner of a Chicago restaurant has finally complied with a subpoena for certain documentation needed for an investigation by the Department of Labor's (DOL) Wage and Hour Division (WHD). The compliance came after a federal judge held Wilson Torres, owner of La Bomba Food Restaurant Inc., in contempt and confined him to one night in jail and ordered him to pay $40,500 in fines.
On May 4, 2020, the DOL's Office of the Solicitor filed a request with the U.S. District Court seeking to enforce an administrative subpoena the DOL issued as part of its wage and hour investigation of the restaurant. For two years, La Bomba and Torres failed to comply with the subpoena repeatedly. Torres paid the DOL $2,975 in attorney's fees in March 2022 after it filed a contempt motion to enforce the subpoena. As a result of Torres' continuing non-compliance, U.S. District Court Judge Martha Pacold imposed fines for contempt of court and a brief imprisonment on June 15, 2022.
In a status hearing on Aug. 23, 2022, the DOL provided an update, and reported that La Bomba and Torres had finally complied with producing most of the necessary documents. On Aug. 31, 2022, the DOL and La Bomba filed a joint stipulation of dismissal with the judge, after the WHD received the necessary documents to conduct its investigation.
Regional Solicitor Christine Heri commented in the news release that: "By enforcing the Department of Labor's subpoena and holding a non-compliant owner in contempt, the federal courts have upheld that the Department of Labor has broad investigative authority under the Fair Labor Standards Act for record audits and on-site inspections to ensure compliance with wage and hour laws. The Wage and Hour Division will now complete its investigation of La Bomba with the records received.
WHD District Director Thomas Gauza added that: "We make no assumptions that we will find violations in La Bomba's payroll records, but La Bomba and its owner Wilson Torres are required to comply with the law and allow such an investigation to be completed. The Wage and Hour Division is committed to ensuring all employees receive their rightfully earned wages."
The case is Walsh v. La Bomba Food Restaurant Inc., U.S. District Court District for the Northern District of Illinois, Eastern Division, Civil Action No. 22-cv-02678.
The IRS regularly reviews "substitute forms" for approval via its Substitute Forms Program. By IRS definition, substitute forms are those forms which are not produced or published by the IRS, but are accepted as substitutes for official IRS forms upon review. For a substitute form or statement to be acceptable to the IRS, "it must conform to the official form or the specifications outlined" in the revenue procedure. Substitute forms, privately published, may not state that "This is an IRS approved form."
Publication 1167 and others. The IRS has released Publication 1167 (General Rules and Specifications for Substitute Forms and Schedules) to provide official information regarding this process. Other publications address the filing of substitutes for specific forms, such as Publication 1141 (General Rules and Specifications for Substitute Forms W-2 and W-3)
Updated address. The IRS announced a change to the address to which questions about the program may be submitted. Questions may either be submitted to Internal Revenue Service, Attn: Substitute Forms Program, SE:W:CAR:MP:P:TP:TP, NCFB, 5000 Ellin Rd., Mail stop C-110, Lanham, MD 20706, or emailed to substituteforms@irs.gov.
With the Atlantic hurricane season at its peak, the U.S. Department of Labor (DOL) urges workers and employers who clear debris, repair homes or perform other types of disaster recovery to become familiar with federal laws governing wages, hours of work and pay practices. The failure to pay wages as due harms employees, and violations of federal labor law can be costly for employers.
DOL's Wage and Hour Division (WHD) Regional Administrator Betty Campbell stated that: "The U.S. Department of Labor works tirelessly to ensure that workers who respond in times of crisis, to help communities recover from devastating storms, are paid all of their legally earned wages and benefits. Additionally, we stand ready to equip employers with the information and guidance they need to prevent violations which are often costly."
The WHD release notes that from October 2017 to June 2022, it conducted more than 900 investigations related to recovery from natural disasters. Those cases yielded more than $62 million in wages recovered for more than 45,000 workers. During that same time, the WHD hosted more than 1,200 outreach events for disaster recovery employers, employees, and stakeholders, including more than 75,000 participants.
Common violations under the Fair Labor Standards Act (FLSA) include non-payment of wages, impermissible deductions leading to minimum wage and overtime violations and the misclassification of employees as independent contractors.
A Natural Disaster Compliance Assistance Toolkit is also available. It provides information about employee protections and employer obligations
Following an investigation by the Department of Labor's (DOL) Wage and Hour Division (WHD), a total of $67,294 in unpaid wages was recovered for 29 workers after their employer allowed them to work for months without pay.
The WHD's investigation found that the employer had failed to pay workers for two-and-one-half months in 2022. This is a violation of the Fair Labor Standards Act (FLSA) which requires that wages are due on the regular payday for the pay period covered.
WHD Division Director Matthew Utley commented that: "Workers cannot be expected to bear the burden of the employer's financial issues which, in this case, left them wondering if or when they would be paid. Workers have a right to be paid on their regularly scheduled payday so that they can meet their financial obligations and care for themselves and their families. "
The Bureau of Labor Statistics projects that about 510,000 job openings among durable goods manufacturers existed in June 2022, and about 166,000 workers quit their jobs in the sector. In the current climate, employers face significant competition to fill their positions as workers have more choices about their employment. Utley added that "Employers who fail to respect workers' rights are likely to find it more difficult to retain and recruit the people they need to operate their businesses. Employers who treat workers with dignity and who comply with federal protections for workers will have a competitive advantage"
The draft version of Form 1099-K (Payment Card and Third-Party Network Transactions) , as well as its instructions, reflects legislative changes that established a much lower minimum threshold of $600 in payments for filing starting in 2022.
Background. Previously, banks and online payment networks were required to report payments in a trade or business to the IRS and payees using Form 1099-K only if those transactions met or exceeded $20,000 or 200 transactions made to the same payee. Recent legislation lowered the threshold for filing to transactions amounting to $600, casting a much wider net to include gig-economy industries including Uber, Ebay, TaskRabbit, Etsy, and others.
Updated form and instructions. The updated draft form and instructions with a revised date of April 2022, reflect the updated minimum filing threshold. In addition, the IRS has opted to change Form 1099-K from an annual revision to "continuous use." This allows the IRS to keep the current revision of the form and instructions as current until a future revision is released.
The National Automated Clearing House Association (NACHA) issued a rule governing the use of micro-entries, ACH credits of less than $1, that goes into effect in two phases. The first phase goes into effect September 16.
The new rule. Micro-entries have been commonly used. For example, a financial institution may send two small ACH credits, followed by a debit that pulls back the total amount. The new rule improves the use of micro-entries as a means of account validation.
The rule is implemented in two phases.
Originators are not required to use micro-entries as a method of account validation.
See the one-page overview and end-user briefing for further details.
The U.S. Court of Appeals for the Third Circuit has held that the plaintiff Evan Fanor's complaint regarding his termination from University Hospital-UMDNJ revealed a triable claim that the hospital's decision violated the Family Medical Leave Act (FMLA).
The facts. Evans Fanor was a patient representative with UMDNJ in Newark, New Jersey. In the summer of 2013, he was assaulted at work by a vagrant, resulting in a serious knee injury and long-term psychiatric issues. Fanor, who was also a diabetic, submitted paperwork to UMDNJ in early November 2013 (for leave from January 2 - May 30, 2014) so that he could undergo knee surgery and get his blood sugar managed.
On Nov. 19, 2013, Fanor did not report for work as scheduled, and this was followed by a lengthy stretch of absences. UMDNJ sent Fanor a letter warning him that he needed to provide doctor's notes for his absences by Jan. 3, 2014 or return to work. Failure to do so would be considered a voluntary resignation.
Fanor did not intend to resign, and reported to work on Jan. 3, 2014 during a bad snowstorm. After his shift ended, he slipped and fell as he sought a taxi for his ride home. He was taken back to the hospital's emergency room and had back surgery the following day.
Fanor's physician called his supervisor to inform her that Fanor was likely to miss three months of work. Fanor made regular calls to his supervisor or another hospital employee to provide treatment updates. On January 28, 2014, his doctor prepared an FMLA certification to support a forthcoming request by Fanor for three months of leave. That same day, UMDNJ sent Fanor a letter conveying his termination, effective January 27, 2014. He filed a complaint alleging that the hospital's termination violated his FMLA rights.
The law. Under the FMLA, a FMLA-interference claim can be raised using a private right of action. Such a claim has five elements: (1) the plaintiff was an FMLA-defined employee; (2) the defendant was an FMLA-defined employer; (3) the plaintiff was entitled to FMLA leave; (4) the plaintiff notified the defendant of an intent to take leave; and (5) the plaintiff was entitled to FMLA benefits and was denied them (29 USC 2615(a)).
The ruling. First, the court determined that Fanor adequately met the above requirements. While the lower court rejected the possibility that Fanor was raising an FMLA interference claim related to his attempts to exercise his FMLA rights in Jan. 2014, the appellate court disagreed. It found that Fanor presented, and the trial should have considered, an FMLA-interference claim based on Fanor's attempt to invoke his right to leave after the fact of his slip-and-fall and before the fact of his termination weeks later.
The appellate court found that while the district court correctly determined that Fanor could not establish a claim that the hospital interfered with an actual exercise of FMLA rights in January 2014, insofar as Fanor failed to formally invoke those rights between his accident and termination, it should have also determined whether Fanor could establish the closely related claim of interference with an attempted exercise of FMLA rights.
In a press release, the U.S. Secret Service has announced that it has recovered approximately $286 million in fraudulently obtained Economic Injury Disaster Loans (EIDL) for the Small Business Administration (SBA). The recovered funds come from fraudulently submitted EIDL loan applications.
Secret Service Assistant Director David Smith commented in the release that: "The Secret Service is dedicated to safeguarding the integrity of the nation's financial systems against fraud and holding those responsible to account for their criminal activity. By aiding in the return of nearly $2.3 billion in stolen funds over the last 30 months, our workforce has demonstrated a clear and firm commitment to the vitality of American businesses across the country."
The investigation disclosed that the conspirators utilized the third-party payment system Green Dot Bank (GDB), the issuer of Green Dot debit cards, to conceal and move their criminal proceeds. Working with GDB, the Secret Service was able to identify over 15,000 accounts used in the conspiracy and seize the $286 million contained in these fraudulent accounts.
Kevin Chambers, the Department of Justice Director for COVID-19 Fraud Enforcement, added that: "We applaud the hard work and dedication of the Secret Service and the U.S. Attorney's Offices for the District of Colorado and Middle District of Florida. This is an important step in returning stolen funds to the American people. This forfeiture effort and those to come are a direct and necessary response to the unprecedented size and scope of pandemic relief fraud. The Department of Justice is grateful for our partnership with the Secret Service and all of our law enforcement partners working to recover stolen pandemic relief funds."
The release notes that since 2020, the Secret Service has seized over $1.4 billion in fraudulently obtained funds and assisted in returning approximately $2.3 billion to state unemployment insurance programs. The Secret Service has additionally initiated more than 3,850 pandemic-related fraud investigations and investigative inquiries [U.S. Secret Service Release, U.S. Secret Services Returns $286M in Fraudulently Obtained Funds to the Small Business Administration, 8/26/2022].
Arizona—City of Flagstaff Minimum Wage Rate Increases in 2023
The city of Flagstaff has announced that the minimum wage rate will increase, beginning January 1, 2023, from $15.50 per hour to $16.80 per hour. The cash minimum wage for tipped workers is $14.80 per hour in 2023. Workers who work or are expected to work 25 hours or more in any given calendar year with city limits are subject to the city's minimum wage ordinance.
Arizona—Federal Tax Relief for Severe Storms Victims
The IRS has announced payroll tax relief for victims of severe storms, occurring between July 17 and July 18, 2022. Individuals and households affected by severe storms that reside or have a business in the Salt River Pima-Maricopa Indian Community will now have until November 15, 2022 to file various returns. Taxpayers will have until November 15, 2022 to file quarterly payroll tax returns that are normally due on August 1 and October 31, 2022. Penalties on payroll and excise tax deposits due on or after July 17, 2022, and before August 1, 2022, will be abated as long as the tax deposits are made by August 1, 2022 [AZ-2022-08, 9/8/2022].
California—Payroll Tax Relief for Victims of the Mill Fire in Siskiyou County
The California Employment Development Department (EDD) has announced that employers in Siskiyou County directly affected by the Mill Fire, declared a State of Emergency on September 2, 2022, may request up to a 2-month extension of time from the EDD to file their state payroll reports and/or deposit payroll taxes without penalty or interest. A written request for extension must be received within two months from the original delinquent date of the payment or return [Emergency and Disaster Assistance for Employers, California EDD, 09/09/2022].
California—Payroll Tax Relief for Fairview and Mosquito Fires Victims
The California Employment Development (EDD) has announced that employers in Riverside, El Dorado, and Placer Counties directly affected by the Fairview and Mosquito Fires in a declared State of Emergency on September 8, 2022, may request up to a two month extension of time from the EDD to file their state payroll reports and/or deposit payroll taxes without penalty or interest. A written request for extension must be received within two months from the original delinquent date of the payment or return [Emergency and Disaster Assistance for Employers, California EDD, 09/12/2022].
California—Proposed Referendum Aims to Reverse Recent Fast Food Worker Law
The National Restaurant Association and International Franchise Association are proposing a referendum in response to a recent California fast food worker law by attempting to get a measure on the state's 2024 ballot to reverse the legislation. Over the Labor Day weekend, California Governor Newsom signed the Fast Food Accountability and Standards Recovery Act (FAST Recovery Act) into law that creates a Fast Food Council to set industry-wide standards for wages, working hours, and other working conditions related to the health and safety of fast food workers. On September 6, 2022, a referendum measure was submitted to California Attorney General Rob Bonta for Assembly Bill 257. The California Secretary of State's website shows the referendum measure pending at the Attorney General's Office.
Colorado—Minimum Wage Rate Increases in 2023
Colorado Governor Polis and the Department of Labor and Employment (CDLE) Division of Labor Standards and Statistics (DLSS) announced that the state minimum wage rate will increase from $12.56 per hour to $13.65 per hour, beginning January 1, 2023. A tip credit of $3.02 may be taken for workers who customarily receive more than $30 a month in tips for a cash minimum wage of $10.63 in 2023. If the employee's tips combined with the employer's cash wage do not equal the minimum hourly wage, the employer must make up the difference. Non-emancipated minors must receive at least 85% of the state minimum wage rate. In 2023, this increases to $11.60 per hour. With the minimum wage increase, the maximum withholding from a creditor garnishment will also increase. The maximum withholding for a creditor garnishment is the lesser of 25% of weekly disposable income, or the amount of disposable income in excess of 30 times the state minimum wage rate ($409.50 in 2023).
Colorado—Revenue Online Accepts Cryptocurrency for Tax Payments
The Colorado Department of Revenue's filing and payment portal, Revenue Online, accepts cryptocurrency for payment. Cryptocurrency payments are accepted through the PayPal Cryptocurrencies Hub Service. There is a service fee of an additional $1.00 plus 1.83% of the payment amount. Only PayPal personal accounts can pay using cryptocurrency. PayPal business accounts cannot pay using cryptocurrency at this time. The entire value of the payment must be paid in a single cryptocurrency transaction on the PayPal Cryptocurrencies Hub. The effective date for a transaction is the date the transaction is initiated.
Colorado—State Family and Medical Leave Insurance Program Final Regulations Issued
On August 26, 2022, the Colorado Family and Medical Leave Insurance (FAMLI) program released final rules regarding benefits and employer participation requirements. The final rules: (1) define and clarify terms; (2) clarify employer requirements such as registration with the FAMLI Division, wage report submissions, and notice of the end of business operations end or when Colorado workers are no longer employed; (3) clarify when FAMLI benefits may be used; (4) explain how benefit amounts and leave duration are calculated and when benefits are reduced for other sources of income; (5) clarify employer notification requirement; and (6) explain that an employer of a disqualified individual must still remit premiums for that individual, and remains entitled to require the individual to contribute their share of the premiums in accordance with the FAMLI Act.
Colorado—Secure Savings Program Coming in 2023
The Colorado Department of Treasury has announced that its "Secure Savings Program" will begin in 2023, although a pilot program will start this October. The plan is designed for employers with 5 or more employees, who have been in business for two or more years, and who do not provide a tax-qualified retirement savings plan. Employees must be at least 18 years old, have earned income, and have been employed for at least 180 days. Employers should: (1) register their business using the unique Access Code that will be provided; (2) upload payroll and employee info to the system and submit employees’ savings contributions levels; and (3) keep employee records up to date. Employers submit payroll details every pay period and keep employees’ payroll contributions and staff list up to date. The DOT will be contacting businesses in advance of the official launch and every employer eventually will receive an Access Code to join the program or to certify they already offer a retirement plan and are exempt from participation. Once employees have been added to the Colorado SecureSavings Program, they can choose to do nothing at all (these employees will be enrolled automatically at the default savings rate is 5% of total pay), customize their account, or opt out.
Hawaii—Legislation Establishes State-Run IRA Retirement Savings Program
New legislation (Senate Bill 3289) establishes the Hawaii Retirement Savings Program to provide a state-facilitated IRA savings plan to private sector employees who do not have access to employer-sponsored retirement savings plans. The Hawaii Retirement Savings Board is created to implement and administer the program. The Board will determine the time frame for the development and implementation of the program. Once implemented, covered employers will be required to allow covered employees to enroll and provide the employee with a written notice of the employee's right to opt in. Employers must withhold the employee's contribution amount and transmit the contribution by the 15th day of the calendar month following when the contribution was withheld. Employers are not permitted to make contributions to the program (matching or otherwise). The default contribution amount is 5% of the employee's wages. Employees may elect to contribute at a higher or lower amount or elect to opt out. The state will match up to $500 to the accounts of the first 50,000 covered employees who participate in the program for twelve consecutive months after initial enrollment. Employers that fail to enroll a covered employee will be liable for an amount equal to the contribution amount that would have been made by the employee and 6% interest per year on the contribution amount. Additionally, an employer may be subject to a penalty of $25 for each month the covered employee is not enrolled; and $50 per month the covered employee continues to be unenrolled after the date of the initial assessment of penalty. Employers that fail to timely transmit an employee's payroll deduction are subject to the same penalties as failure to remit employee wage withholding [L. 2022, S3289].
Kentucky—Unclaimed Property Report Due November 1, 2022
The Kentucky State Treasurer has issued the unclaimed property holder book for 2022. The unclaimed property report is due November 1, 2022 [Kentucky 2022 Unclaimed Property Holder Book, Ky. State Treasurer, 09/01/2022].
Kentucky—DOR Spokesperson Confirms 2023 Income Tax Reduction Conditions Met
A spokesperson for the Kentucky Department of Revenue (DOR) has confirmed that the budgetary conditions required for an income tax reduction from 5% to 4.5% for the 2023 tax year were met. L. 2022, H8, passed by overriding Gov. Andy Beshear's veto lowered the income tax rate if the DOR, with assistance from the Office of State Budget Director, determined certain budgetary conditions were met.
Kentucky—Kentucky Expands Tax Relief for Flood Victims
The Kentucky Department of Revenue (DOR) has announced it will honor the recently announced IRS tax relief, as previously announced by Kentucky Governor Andy Beshear, for taxpayers in 20 counties designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance or public assistance due to the recent flooding that caused extensive damage in parts of Eastern Kentucky. Individuals affected by severe flooding who reside or have a business in Breathitt, Casey, Clay, Cumberland, Floyd, Harlan, Johnson, Knott, Lee, Leslie, Letcher, Lincoln, Magoffin, Martin, Owsley, Perry, Pike, Powell, Whitley, and Wolfe counties qualify for tax relief. Note that DOR's release contains additional counties from the Governor's release. Affected taxpayers with a valid extension will have until November 15, 2022 to file payroll withholding filings and payments due between July 26 and November 15, 2022. Late filing and payment penalties will be waived for those affected taxpayers seeking relief. Kentucky's tax laws do not allow interest to be waived due to natural disasters. Taxpayers are advised to label the top margin of the tax forms filed under this relief provision in large, red letters with the words "Kentucky Flood Relief" [Tax Relief Announced for Taxpayers in Counties Designated by FEMA as Qualifying for Individual Assistance Due to Flooding, 09/07/2022].
Maryland—Amended Unclaimed Property Regulations Adopted
The Maryland Comptroller of the Treasury has adopted amendments to regulations (Md. Regs. Code §§ 03.05.01.01 and -.02, effective 09/19/2022) concerning abandoned property. The amendments clarify the effect of automatic deposits and withdrawals on the presumption of abandonment. A depositor or shareholder is deemed to have actively deposited or withdrawn funds from an account, thereby overcoming the presumption of abandonment, if: (1) the depositor or shareholder authorized and established an automatic deposit or withdrawal; (2) the authorization has not been canceled, revoked, rescinded, or otherwise terminated; and (3) funds are deposited or withdrawn automatically based on the depositor or shareholder’s effective authorization. However, a depositor or shareholder may not be deemed to have actively deposited or withdrawn funds from an account if: (1) the bank or financial organization automatically deposits interest or dividends earned on the account; or (2) the bank or financial organization automatically withdraws a service charge. Also, obsolete content applying only to periods before 2003 have been repealed [Maryland Register, 9/9/2022].
Michigan—Michigan Explains Personal Income Tax Treatment of Digital Currencies
The Michigan Department of Treasury has issued guidance on the state personal income tax treatment of digital currencies such as Bitcoin. Digital currencies are forms of currency that are only available in digital or electronic form. A cryptocurrency is a digital currency in which transactions are verified and records are maintained by a decentralized system using cryptography, rather than by a centralized authority, such as a government or central bank. Specifically, a cryptocurrency is an encrypted data string that denotes a unit of currency. Because cryptocurrencies are secured by various encryption algorithms and cryptographic techniques that safeguard the entries, these currencies are nearly impossible to counterfeit or to double spend. All cryptocurrencies are digital currencies, but not all digital currencies are cryptocurrencies. The guidance explains if a taxpayer is paid in digital currency by an employer or a client, that payment represents taxable income [Michigan Treasury Update, Mich. Dept. Treas., 08/01/2022].
Minnesota—Electronic Appeals Now Available for Tax Penalty Assessments
The Minnesota Department of Revenue (DOR) now offers an electronic appeals option for some letters from the DOR assessing tax and/or penalty or a denial of a penalty abatement request. Instructions for appealing electronically will be included with any eligible letter. The DOR will add this option to more letters in the near future. When completing the online appeal, a taxpayer must have an eligible POA on file. The taxpayer will need to use their name in the signature field and enter the email address where the taxpayer wants the confirmation sent [Electronic appeals option now available, Minn. Dept. Rev., 09/09/2022].
Mississippi—No Withholding Tax Relief for Victims of Water Crisis in Mississippi
The Mississippi Department of Revenue (DOR) recently announced that it will follow the federal extended due date of February 15, 2023 granted to victims of the water crisis, beginning August 30, 2022
New Jersey—Uber Pays $100M in New Jersey DOL Misclassification Case
In a news release, the New Jersey Department of Labor and Workforce Development (DLWD) has announced that Uber and a subsidiary have paid $100M to the DLWD's Unemployment Trust Fund after an audit found the ride-share companies improperly classified hundreds of thousands of drivers as independent contractors. Such misclassification deprived the drivers of statutory benefits such as unemployment, temporary disability, and family leave insurance. The payment follows DLWD audits that assessed Uber and its subsidiary, Rasier LLC, a combined $78 million in past-due contributions, plus penalties and interest of $22 million. The payments, the largest in the state to date, cover 297,866 drivers. Labor Commissioner Robert Asaro-Angelo commented that: "For over a century, our governors, legislatures and voters have made New Jersey one of the best states for workers. We will not bow to the whims of corporations' latest business models that are based on eroding long-standing protections. Our policies protect and empower workers while strengthening businesses and the Murphy Administration has given us the tools to protect our workforce and keep all employers accountable."
New York—Supreme Court Justice Sotomayor Upholds Vaccine Mandate for NYC Workers
U.S. Supreme Court Justice Sonia Sotomayor on Monday declined to block New York City from enforcing its mandate that all municipal workers be vaccinated against COVID-19, ruling against a police detective who challenged the public health policy. NYC Detective Anthony Marciano requested for a stay of the vaccination requirement while an appeal over his claims continues in a lower court. Sotomayor is the justice designated by the court to act on some matters arising from New York and certain other states. Marciano has already appealed the decision to Justice Clarence Thomas.
New York—Westchester County's Pay Transparency Law to Take Effect on November 6
Westchester County's pay transparency law, which was approved back in May, will take effect on November 6, 2022. The law will require employers with at least four employees, employment agencies, and labor organizations to include a minimum or maximum salary for a particular position, including promotions and transfers in any job posting. A "posting" includes any communication that is written or printed (electronic or hard copy) relating to a particular position. The law will not apply when an employer puts up a general "help wanted" sign at its place of work without specifying any position.
New York—2023 Contribution Amounts Announced for Paid Family Leave
New York has announced its 2023 updates for its Paid Family Leave (PFL) program. For 2023, employees will contribute 0.455% of their gross wages per pay period. The maximum annual contribution for 2023 is $399.43. This is $24.28 less than 2022. Employees taking PFL receive 67% of their average weekly wage, up to a cap of 67% of the current New York State Average Weekly Wage (NYSAWW). For 2023, the NYSAWW is $1,688.19, which means the maximum weekly benefit is $1,131.08, an increase of $62.72 from the maximum weekly benefit for 2022. Additionally, the list of family members for whom eligible workers can take PFL to care for will be expanded to include siblings with a serious health condition. This includes biological siblings, adopted siblings, step-siblings and half-siblings. These family members can live outside of New York State, and even outside of the country.
New York—Paid Family Leave Payroll Deduction Calculator Updated for 2023
The New York State Paid Family Leave webpage has released the 2023 Paid Family Leave Payroll Deduction Calculator. Employees eligible for Paid Family Leave pay for these benefits through a payroll deduction equal to 0.455% of gross wages each pay period. In 2023, these deductions are capped at an annual maximum of $399.43. The calculator can be used to see an estimate of the employee's deduction.
Ohio—No Discretion Abuse for Denial of Penalty Remission in Withholding Tax Assessment Case
The Ohio Board of Tax Appeals (BTA) upheld the tax commissioner's final determination that affirmed an employer withholding tax assessment and denied the taxpayer's request for full remission of the penalty. The assessment included tax plus interest and a late payment penalty, which was corrected to reflect no tax and interest and a $500 (reduced to $250) penalty due for failure to timely file the employer’s annual reconciliation of income tax withheld. In its petition for reassessment, the taxpayer explained that it had an employee in Ohio who had been terminated. After he was terminated, the payroll system had been deactivated before the annual reconciliation was created. Despite this, the taxpayer noted that tax payments and reporting were timely made, including the filing of the necessary quarterly forms after the employee's termination. It also noted that it had no prior late payments and no payments were due. Therefore, the taxpayer sought a full penalty remission. The commissioner concluded that the penalty was properly applied and remission was not warranted. On appeal, the taxpayer again sought full penalty remission. Remission of penalties is discretionary and upon the BTA's review of the commissioner's discretionary power, it concluded there was no evidence that the commissioner abused his discretion regarding the penalty assessed. The BTA, therefore, affirmed his final determination. (Isotec Security, Inc. v. McClain, Ohio BTA, Dkt. No. 2022-183, 09/13/2022.)
Ohio—Assessment Upheld for Failure to File Employer Withholding Return
The Ohio Board of Tax Appeals (BTA) affirmed the final determination of the Tax Commissioner against a taxpayer, a food service provider, for failure to file an employer withholding return for tax year 2019. In its petition for reassessment, the taxpayer said it believed that all applicable taxes had been paid. It requested "forgiveness of this debt" and a "detailed breakdown" of the tax due. However, it did not seem the taxpayer ever filed the return or submitted evidence it remitted the withholding. As a result, the Commissioner affirmed the assessment and the taxpayer appealed. In its petition, the taxpayer reiterated the same arguments. The taxpayer attached a printout to the notice of appeal showing money was paid to the Ohio Attorney General's office in 2019. It acknowledged that it was subject to the tax but never filed a return and it was unclear to the BTA whether the taxpayer ever remitted withholdings on its employee. The BTA held that the printout was not properly before it and even if it had considered this evidence, it would not have found it persuasive because it appeared to show that the taxpayer settled at least one collection matter unrelated to the assessment in this case. Further, the assessment was for the entire tax year, whereas the collections debt was paid in 2019; thereby, the BTA concluded that the debt was unrelated. The BTA found that the taxpayer had not carried its burden and affirmed the tax commissioner's determination [Variety Foodservices v. McClain, Ohio BTA, Dkt. No. 2021-727, 09/07/2022].
Oklahoma—Adopted and Amended Regulations for Withholding on Pension and Annuities
The Oklahoma Tax Commission (OTC) published various new and amended regulations, effective September 11, 2022, that implement tax legislation enacted in 2021. Admin. Code § 710:90-1-13 requires that, for pensions, annuities, and certain other deferred income, non-periodic payments must have tax withheld at the highest Oklahoma marginal individual income tax rate (currently 4.75%; previously specified as 5%). The regulations note that taxpayers may not use federal Form W-4P to specify withholding because since withholding allowances or marital status are not used to calculate state withholding, however, the W-4P may be used to indicate an additional withholding amount [Oklahoma Register, OAR Docket #22-517, Volume 39, Issue 24].
Puerto Rico—State of Emergency for Monkeypox Triggers Emergency Paid Leave Provisions
Puerto Rico Governor Pedro Pierluisi has issued Executive Order No. 2022-044 which declares a state of emergency for the monkeypox epidemic. Under Act 37-2020, employers are required to provide up to five days of emergency paid leave to employees who have used all available accrued leave. The Act was enacted to address the COVID-19 pandemic but generally requires emergency paid leave if the employee has "contracted or is suspected of contracting [a] disease or illness which prompted the state of emergency."
Rhode Island—DOT Reminds Large Businesses of Electronic Filing and Payment Mandate
The Rhode Island Division of Taxation (DOT) has issued a reminder that recently enacted legislation imposes a mandate that larger business registrant taxpayers use electronic means to file returns and remit taxes beginning on January 1, 2023. A “larger business registrant” is any person who operates as a business whose combined annual liability for all taxes administered by DOT for the entity is or exceeds $5,000; or operated as a business whose annual gross income is over $100,000 for the entity. The best way to file electronically and make a payment online is through the DOT's Taxpayer Portal. Taxpayers who already use the portal to file returns and remit taxes do not need to do anything differently. First-time users must create an account; request and obtain a PIN (delivered by postal mail); and validate the account before filing and paying. Same-day guest services are available for taxpayers who have not received a PIN, but require several verification steps [Rhode Island Advisory No. 2022-23, 09/14/2022].
Utah—Templates for Withholding Tax Reporting Revised
The Utah State Tax Commission (STC) has revised the template for Form TC-941E (Template for Utah Withholding Tax) and Form TC-941M (Template for Utah Mineral Withholding). The templates have a revision date of September 14, 2022. The templates are available on the STC's website as downloadable Excel spreadsheets. The instructions for Form TC-941E have been revised. The instructions note that filers should not copy or alter cells or their formatting. Users should use available dropdown menus where possible. While Excel defaults to save files as.xlsx, files must be saved as.xls to upload.
Washington—Employer Newsletter Addresses Business Size Determination for Paid Leave and EAMS Upgrade for Unemployment Reporting
The Washington Employment Security Department (ESD) has released its September 2022 edition of the Employer Newsletter. Paid leave: The newsletter notes that ESD will be determining the business size for paid leave purposes on September 30. For 2023, the business size is calculated by averaging the number of employees on reports for the third and fourth quarters of 2021 and the first and second quarters of 2022. If ESD determines that the business size has changed, a letter will be sent by late October informing the employer of the change. Employers with 50 or more employees must pay the employer share of premiums from January 1, 2023 through December 31, 2023. Employers with fewer than 50 employees are not required to pay the employer share of premiums. Unemployment: Employers must upgrade to the latest version of the Employer Account Management Services (EAMS) system prior to filing the fourth quarter unemployment tax report. ESD has been gradually making more filers eligible for upgrade. If eligible, an upgrade alert will appear after logging into EAMS. For users of the upgraded EAMS, combined unemployment tax reports for multiple employers must be filed using the new bulk filing format specifications. For filers who file for themselves or one employer at a time, that format has changed. Employers may register for a webinar on September 30 regarding these changes.
Wyoming—ACH Payments Not Accepted for 2022 Unclaimed Property
The Wyoming State Treasurer's Office is reminding submitters of unclaimed property payments that all reports must be submitted by November 1, 2022. For the 2022 reporting period, the state will not accept ACH payments. Filers should refer to the Annual Report Checklist for full instructions on submitting payments. Negative reports are not required.
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