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May Compliance Updates: Treasury To Provide Clarity on Earned Wage Access Constructive Receipt

May 25, 2023 2:10:24 PM

Treasury To Provide Clarity on Earned Wage Access Constructive Receipt

As earned wage access (EWA) becomes increasingly popular by businesses, the IRS continues to focus on creating clarity for tax treatment of EWA. For the second year in a row, the Treasury Department has issued a revenue proposal to clarify the tax treatment of EWA pay arrangements.

The Treasury says that employees with access to an on-demand pay arrangement may be in constant constructive receipt of their wages as they are earned and advises employers that offer EWA to maintain either a daily or a miscellaneous payroll period where they withhold and pay employment taxes on employees’ earned wages on a daily basis.

In order to provide clarity, the Treasury’s FY 2024 “Green Book” again includes the on-demand pay arrangement employment tax clarification. Some believe if the proposal becomes effective, it would be welcomed by employers and tax professionals. 

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Employers Encouraged to Review Compliance Laws Surrounding Paid Sick Leave 

Due to the recent pandemic, many states and localities have been enacting new paid sick leave laws over the last few years. This has led to a variation of paid sick laws across the U.S., and as a result, many employers may not be aware that they are not in compliance with all applicable laws.

“The pieces of each paid sick leave law are of a slightly different shape,” said Beth Baerman, director of communications and compliance for Attendance on Demand. “Employers need to know the key components of these laws so they can be compliant across the board.”

It is important for employers to carefully review the coverage and eligibility requirements of any paid sick leave law. Some laws may exclude businesses with a small number of employees, while others may only count employees within a specific jurisdiction. On the other hand, some laws count all employees regardless of their location. It is crucial for employers to understand the specifics of the laws in their area to ensure compliance.

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IRS Clarifies Reimbursement of Unsubstantiated Medical Expenses Through FSA Included in Gross Income

A recent inquiry asked the IRS Chief Counsel whether medical expenses reimbursed by a health Flexible Spending Account (FSA) without proper substantiation can be excluded from gross income.

The CCA clarified if unsubstantiated Code Sec. 213(d) medical expenses are reimbursed through an FSA, those amounts must be included in the gross income of the employee.

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About Proliant

Proliant puts the human in human resources. We provide a fully integrated, cloud-based HCM solution that simplifies payroll and HR processes. The company serves small to large clients in multiple industries in all 50 states and is committed to providing the highest quality customer service in the industry.

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