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September 23rd Compliance Updates

Oct 5, 2022 10:47:46 AM
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American Payroll Association Issues Report on Paying Wages With Cryptocurrency

On September 15, 2022, the American Payroll Association (APA) announced that its  Government Relations Task Force (GRTF) Electronic Payments Subcommittee released the following report: “Roadblocks to the Blockchain: An Analysis of Regulatory Hurdles for the Payment of Wages With Cryptocurrency."

Cryptocurrency history. According to the report, the concept of cryptocurrency first appeared in 1983 in a conference paper ("Blind Signatures for Untraceable Payments") by American cryptographer David Chaum, in which he described an anonymous cryptographic electronic money that could be sent untraceably and without the need for an intermediary. In 1995, Chaum created the first prototype called Digicash.

The APA explains that the pioneer of cryptocurrency (and the founder of Bitcoin in 2008) is Satoshi Nakamoto, a pseudonym for whoever wrote the original Bitcoin white paper, “Bitcoin: A Peer-to-Peer Electronic Cash System."

Use in employment. There are a number of examples of cryptocurrency in employment. Green Bay Packers professional football player, Aaron Rodgers, wanted to receive pay in Bitcoin, but when his employer refused his request, in 2021, he partnered with cryptocurrency broker CashApp to convert an undisclosed portion of his salary into Bitcoin.

Also, New York City Mayor Eric Adams wanted his first three paychecks in cryptocurrency. In 2022, the city distributed his pay in U.S. dollars to an account held by the mayor at exchange Coinbase that converted it to Ethereum and Bitcoin.

Federal laws and cryptocurrency. The Fair Labor Standards Act (FLSA) “require[s] payments of the prescribed wages, including [minimum wage and] overtime compensation, in cash or negotiable instrument payable at par." There are limited exceptions to the "cash or negotiable instrument" rule. For example, the FLSA allows employers to count the value of food, housing, or other facilities provided to nonexempt employees (overtime eligible) toward wages under certain circumstances.

According to APA's report, the U.S. Department of Labor (DOL) has historically allowed employees to be paid in foreign currencies as long as the value, when converted to U.S. currency, meets the FLSA thresholds. The report notes something that is unclear: Whether the DOL or the courts will allow cryptocurrency to be managed like foreign currency?

The APA says another open question is whether cryptocurrencies could be provided by employers for wage amounts above the minimum requirements (exempt and nonexempt)? Warnings have been issued by the DOL to retirement plan fiduciaries regarding adding options for participants to invest their money in cryptocurrency. This would include employer-offered retirement plans. However, the APA says that no rules prevent employees from investing their pay in cryptocurrencies.

Value fluctuation could mean trouble for employers. The APA report explains how cryptocurrency values can fluctuate dramatically, which could result in employers running afoul of federal and state labor laws by paying below federal, state, and local minimum and overtime wages, assuming that cryptocurrency is allowed at all. 

The report imagines a situation in which between the time the employer purchases cryptocurrency and distributes it to employees, the value goes down below minimum wage. This could subject an employer to compliance challenges for unpaid wages. Conversely, if employer-purchased cryptocurrencies go up in value before distribution to employees, an employer could run afoul of fair wage payments between employees in similar jobs receiving and not receiving pay in cryptocurrencies, even if employees have selected their payment method.

Employment taxes. The IRS refers to cryptocurrency as a type of virtual currency and “[f]for federal tax purposes, virtual currency is treated as property.” In the employment context, the IRS generally ignores the medium by which employers pay for services. Instead, federal income taxes are based on the fair market value of the virtual cryptocurrency paid as wages, measured in U.S. dollars on the date of receipt.

This includes tax withholding under the Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax Act (FUTA). Employers must report these taxes quarterly using Form 941 (Employer’s Quarterly Federal Tax Return) and annually on Form W-2 (Wage and Tax Statement).

Securities or commodities. The Securities and Exchange Commission (SEC) defines some cryptocurrencies as a security and not currency. The APA report says that, for employers, the SEC’s interpretation suggests caution when engaging in cryptocurrency markets to pay wages. Purchasing cryptocurrencies that are later identified as fraudulent or become the subject of SEC or Commodity Futures Trading Commission (CFTC) enforcement action could raise questions about whether wages were paid to employees.

Executive order. In March 2022, President Joseph Biden signed an “Executive Order on Ensuring Responsible Development of Digital Assets.” The executive order called for the U.S. Department of the Treasury and other partner agencies to develop a series of policy recommendations for cryptocurrency to seek an understanding of the implications of digital assets and their effect on the economy.

The executive order does not seek agency action to develop clear and decisive guidelines for the implementation and use of cryptocurrency for the payment of wages in the U.S. However, the APA points out that agency interpretation of the executive order could present some findings toward wage payments.

Q&A Corner: Federal Tax Levy and Severance Pay

Question: For the past six months, we have been withholding on a federal tax levy on an employee's wages. Due to downsizing, a number of workers have been laid off including this worker. This employee will be receiving severance pay. Do I have to garnish the severance payment for the federal tax levy?

Answer: Yes. In general, severance pay is subject to a federal tax levy, but how to determine the exempt amount from levy will depend on whether the payment is attributable to pay for a period of time or not.

If severance pay is attributable to pay for a period of time then the exempt amount is based on that time period.

  • Example: An employer pays one week's pay for each year of service as severance pay. The employee worked ten years and will receive 10 weeks of severance that is paid out bi-weekly. The exempt amount would be determined on a bi-weekly pay period, the frequency of the payment. However, if the employee receives a single payment for the ten weeks, this would be considered an advance payment rather than writing out a series of checks, therefore, the exempt amount is based on ten times the weekly exempt amount.  However, if severance pay is not attributable to pay for a period of time then the amount exempt for one pay period is used. 
  • Example: An employer pays an incentive to an employee to retire early. This severance payment would not be attributable to pay for a period of time. In this scenario, the exempt amount is based on the taxpayer's regular pay period. If there is no regular pay period, the employer should use one week's exempt amount. 

If the employee receives regular wages and a severance payment in the same pay period, the exempt amount is only used once for the total payment received in that pay period. The worker does not get the exempt amount twice.

The exempt amount is calculated using IRS Publication 1497 using the filing status, number of dependents, and pay frequency.

Diner Ordered to Pay $1.35M in Back Wages and Penalties After DOL Investigation Uncovers Illegal Tip Pool

Following an investigation by the U.S. Department of Labor's (DOL) Wage and Hour Division (WHD), a federal court has ordered a diner, its owner, and a manager to pay more than $1.35 million in back wages and liquidated damages to 107 servers and kitchen workers after a five-day trial confirmed the business operators used an illegal tip pool. The court found that the defendants were liable for $675,626.67 in back wages and an equal amount in damages owed to the affected current and former employees.

The WHD investigation had determined the employer failed to comply with the tip credit requirements, specifically wrongfully using servers' tips to pay bussers' wages. The WHD also found the employer violated minimum wage, overtime and recordkeeping provisions of the Fair Labor Standards Act.

The DOL filed a lawsuit to recover the back wages and liquidated damages owed. In its ruling, the court found the employer willfully violated the FLSA when it failed to comply with the tip credit requirements and misused the servers' tips to pay wages. Before that ruling, the court had granted, in part, the Office of the Solicitor's 2021 motion for summary judgment, and found the employer had violated federal wage and recordkeeping provisions. Specifically, the court agreed the defendants were not entitled to claim employee tips as a credit towards their minimum wage obligation.

Deputy WHD Administration Jessica Looman noted that: "Tipped workers in the food services industry rely on their hard-earned tips to make ends meet. By diverting a portion of these tips, restaurant employers violate federal labor laws and harm workers and their families. This significant and successful litigation demonstrates the Department of Labor's commitment to protect the nation's essential workers."

The latest ruling comes after months of litigation and a bench trial, during which the DOL's attorneys established that the employer violated federal law when they did the following:

  • Required servers to turn over 10 to 15 percent of their total tips received on any given shift to pay the bussers' wages.
  • Interfered with the investigation by telling employees to lie about the business' unlawful pay practices.
  • Paid straight time to certain kitchen employees for all hours worked, including hours over 40 in a work week.
  • Used an improper practice of paying servers time and one-half of their cash wage of $2.83 per hour for hours over 40 in a work week.

In addition to the back wages and liquidated damages, the employer was assessed a $47,620 civil money penalty due to the willful nature of the violations.

The Bureau of Labor Statistics (BLS) projects that 918,000 food and accommodation services workers left their positions in June 2022. BLS also projects about 41,400 openings for food service managers each year, on average, from 2020 to 2030.

"Retaining and recruiting workers becomes much more difficult in today's changing job market where workers have choices about where and for whom they work," Looman further explained. "Employers who take advantage of workers by violating their legal rights will find it increasingly difficult to recruit and retain the people they need to fill jobs and stay in business."

Federal Employment Tax Deadlines for October

We have listed the October payroll tax deposit deadlines for semi-weekly and monthly depositors below.

Semi-weekly depositors. Semi-weekly depositors must deposit the income tax they withheld from employee wages, and both the employee and employer share of Social Security and Medicare taxes (FICA taxes), by the end of Wednesday if the payday was on the previous Wednesday, Thursday, or Friday; or by the end of Friday if the payday was on the previous Saturday, Sunday, Monday, or Tuesday.

A due date which falls on Saturday, Sunday, or a legal holiday is postponed until the next business day. Semi-weekly depositors must have at least three business days after the end of a semiweekly period to deposit their taxes.

The October deposit deadlines for semi-weekly depositors are as follows: 

  • October 5 - deposit the taxes for payments made September 28-30
  • October 7 - deposit the taxes for payments made October 1-4
  • October 13- deposit the taxes for payments made October 5-7
  • October 14 - deposit the taxes for payments made October 8-11
  • October 19 - deposit the taxes for payments made October 12-14
  • October 21 - deposit the taxes for payments made October 15 - 18
  • October 26 - deposit the taxes for payments made October 19-21
  • October 28 - deposit the taxes for payments made October 22-25

Monthly depositors: Filers who have a monthly deposit frequency must deposit the tax for September by October 17.

Tips. Employees must report tips of $20 or more earned during September to employers by October 11.

Holiday. Monday, October 10th is Columbus Day. 

Federal unemployment tax. By October 31, deposit the tax owed through September if more than $500.

Form 941 - Social Security, Medicare, and withheld income tax. File Form 941 for the third quarter of 2022 by October 31. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. Taxpayers who deposited the tax for the quarter timely and in full have until November 10 to file the return.

Department of Labor Recovers $230K for Restaurant Workers Denied Full Tips

The U.S. Department of Labor's (DOL) Wage and Hour Division (WHD) has recovered $230,353 in back wages for 274 workers employed by a barbecue restaurant operator after an investigation found the employer gave a portion of employee tips to restaurant managers.

The WHD's investigation determined that Black's Barbecue Inc., Kent Black's Lockhart Barbecue Inc. and New Braunfels Barbecue LLC (operating as Black's Barbecue restaurant) kept a portion of the employees' tips and shared them with managers in violation of the Fair Labor Standards Act (FLSA). The FLSA prohibits employers, managers and supervisors from keeping or sharing in tips received for any purposes, regardless if the employer takes or does not take a tip credit. 

WHD District Director Nicole Sellers commented that: "Food service industry employers must know that tips are the property of tipped employees who earn them, plain and simple. Workers and their families depend on their rightfully earned wages and benefits. If you take from them, you take from their families. The Wage and Hour Division is committed to safeguarding the rights of all essential food service workers."

Restaurants are a common target of WHD investigations. In fiscal year 2021, the WHD identified nearly $35 million in back wages owed to more than 29,000 food service industry workers. In its food service investigations, the WHD frequently finds violations related to employers retaining tips, failing to pay overtime when required and not paying for pre- and post-shift work. 

Hot on the Hill: Proposed Legislation as of September 21, 2022

Several pieces of proposed legislation introduced in the 117th Congress' first session could significantly alter the American payroll landscape. Bills in committees in the House of Representatives and Senate aim to streamline the H-2A visa process, mandate overtime pay for truck drivers, provide climate disaster pay for displaced employees, and increase the amount of hours minors are allowed to work.

Senate Bills in Committee:

S4813.The "Paperwork Reduction for Farmers and H-2A Modernization Act," introduced on September 8, 2022, and currently under review in the Senate Committee on the Judiciary, would update the H2A Visa Program to allow multiple employers to file applications for the same temporary workers, and to require a simplified application for employers hiring the same temporary workers on a repeated basis. The bill would also allow electronic reporting, filing, and response to requests from USCIS. 

S4823. The "Guaranteeing Overtime for Truckers Act," introduced on September 13, 2022, and currently under review in the Senate Committee on Health, Education, Labor, and Pensions, would amend the Fair Labor Standards Act to repeal the overtime exemption of motor carriers under the jurisdiction of the Secretary of Transportation.

House Bills in Committee: 

HR8819. The "Worker Safety in Climate Disaster Act," introduced on September 14, 2022 and currently under review in the House Committee on Education and Labor would establish employment protections and paid emergency leave to workers impacted by certain climate disasters. Paid leave time for full-time employees would amount to 80 hours, and the number of hours equal to a typical two-week period for part-time workers. The total amount of pay is limited to $511 for 2022 and would be adjusted annually with a cost of living increase. The bill would also ensure that no employee loses his or her employment when the use of paid leave has ended. Employers are required to notify employees of any applicable climate disasters.

HR8826. The "Teenagers Earning Everyday Necessary Skills Act," introduced on September 14, 2022 and currently under review in the House Committee on Education and Labor, would increase the number of hours that minors between the ages of 14 and 16 would be allowed to work during the school year to 24 hours per week. Minors would be allowed to work no earlier than 7:00 am and no later than 9:00 pm on school days.

E-Verify Features New Design

The E-Verify program has announced it has redesigned its website. 

E -Verify. E -Verify is a free, Internet-based system that determines the employment eligibility of new hires by comparing information from the new hire's Form I-9 (Employment Eligibility Verification), to Department of Homeland Security (DHS) and Social Security Administration (SSA) records. 

Employers are required to record the E -Verify case verification number on the corresponding Form I-9 or attach a copy of the case details page to the Form I-9. Employers should retain the Historic Records Report with the Forms I-9.

Redesigned website. The redesigned website features improved navigation, and news and social media feeds on its main page. E-Verify has also enhanced its search engine for better case access. E-Verify notes that more improvements are to come in the near future.

OCSE Issues Guidance on Reporting Employee Terminations

The Office of Child Support Enforcement (OCSE) has updated guidance regarding the reporting of employee terminations [OCSE website, Reporting Employee Terminations for Private Employers and Federal Agencies, 9/19/2022].

Background. Employers that have been remitting child support payments to comply with an income withholding order (IWO) are required to notify the state agency, court, or attorney of the issuing IWO when the employee separates from employment.

  • Create-A-Chart. Under the Garnishment folder, there is a chart that provides information state-by-state as to which state agency must be contacted when an employee terminates.

Reporting options. Electronic termination (Eterm) is available on the OCSE Child Support Portal to report terminations online. Registration is required prior to use. Alternatively, terminations may be faxed or mailed to the appropriate state contact. To report a termination, the IWO section labeled "A Notification of Employment Termination or Income Status" must be completed with the following information: (1) employee's name; (2) employee's case identifier; (3) last known home address; (4) new employer's address (if known); and (5) date of separation.

Reporting requirements. Termination reporting is required even if the employee left during the first pay period and if: (1) an employer-employee relationship existed; (2) the employee filled out a W-4 form; (3) a new hire report was submitted for that employee; and (4) an IWO was received for that employee.

Rehired employees. Employers should retain an IWO when an employee is temporarily laid off. The retention period varies from state to state. At a minimum, when an employee is rehired, a new hire report must be submitted if the employee has been separated for at least 60 consecutive days. However, states may have shorter timeframes. 

Work Opportunity Tax Credit Information Updated

The IRS issued a news release announcing updates to its Work Opportunity Tax Credit (WOTC) webpage, specifically focusing on the prescreening requirements [IR 2022-159, 09/19/2022]. 

Background. The Work Opportunity Tax Credit (WOTC) is a credit allowable against employer income tax liability for businesses who hire new employees from one or more of ten disadvantaged worker groups. The credit is computed as up to 40% of wage expenses for wages paid to covered newly hired employees on or before December 31, 2025.

Eligibility requirements. To qualify for the credit, employers and applicants must complete Form 8850 (Pre Screening Notice and Certification Request for the Work Opportunity Credit) on or before the day the offer is made. Form 8850 must then be submitted to their states' workforce agencies within 28 days of hiring a new worker who is (1) a recipient of Temporary Assistance for Needy Families (TANF), (2) an unemployed veteran, (3) a formerly incarcerated individual, (4) a designated community resident of an Empowerment Zone or Rural Renewal County, (5) a referral from a vocational rehabilitation program, (6) a summer youth employee residing in an Empowerment Zone, (7) a recipient of Supplemental Nutrition Assistance Program (SNAP) benefits, (8) a recipient of Supplemental Security Income (SSI), (9) a recipient of long-term family assistance, or (10) a recipient of long-term unemployment benefits. The IRS has provided  Publication 5642 as a quick reference guide for employer WOTC eligibility, and the LB&I and SB/SE Joint Directive on the Work Opportunity Tax Credit to help certain employers facing extended delays in WOTC certification.

The updated webpage also notes that page two of Form 8850 requires four dates prior to submission to the state workforce agency. These dates are: (1) when the job applicant gave information, (2) was offered job, (3) was hired, and (4) started the job.

Claiming the WOTC. Once the employer obtains a certification that the individual is a qualified member of a targeted group, the employer may claim the credit by completing Form 5884 (Work Opportunity Credit) and Form 3800 (General Business Credit) when filing the business income tax return.

IRS Issues 2023 Draft Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions

The IRS has issued a September 16, 2022 draft version of Form W-4R (Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions) for 2023.

Form split in 2022. Prior to 2022, Form W-4P (Withholding Certificate for Periodic Pension or Annuity Payments) was also used to make withholding elections for nonperiodic payments and eligible rollover distributions. Starting in 2022, withholding elections for nonperiodic payments and eligible rollover distributions may be made on new Form W-4R. 

Optional in 2022. The IRS has postponed the requirement to begin using the redesigned Form W-4P and the new Form W-4R until January 1, 2023. The IRS recommends that payers update their system programming for the new 2022 Forms W-4P and W-4R. The Service has also begun encouraging payers to use these forms in 2022 as soon as programming is in place. The withholding tables for both the 2021 Form W-4P and the 2022 Form W-4P are provided in the 2022 IRS Publication 15-T. The 2021 Form W-4P will no longer be available for use after December 31, 2022. The IRS advises payees to use the form that is provided to them by their payers.

2022 Form W-4R. In early January 2022, the IRS issued the 2022 final version for Form W-4R, in addition to the final 2022 version of Form W-4P. The 2022 Form W-4R said that the payer must withhold at a default 10% rate from the taxable amount of nonperiodic payments unless the payee enters a different rate on line 2. Also, if a payee does not give Form W-4R to its payer, does not provide a Social Security Number (SSN), or the IRS notifies the payer that the payee has given an incorrect SSN, then the payer must withhold 10% of the payment for federal income tax and can’t honor requests to have a lower (or no) amount withheld. In addition, the 2022 form's instructions said that for payments that began before 2022, the payee's current withholding election (or the default rate) remains in effect unless the payee submits a Form W-4R. 

Draft 2023 Form W-4R. There are no major changes to the 2023 draft Form W-4R compared with the final 2022 version. The 2023 draft does not include the marginal rate table numbers yet. The column for married filing jointly or qualifying widow(er) has been changed to read "surviving spouse." The form's instructions suggest using the marginal rate tables to help select the appropriate withholding rate for the payment or distribution. The instructions say that the tables are the most accurate if the appropriate amount of tax on all other sources of income, deductions, and credits has been paid through other withholding or estimated tax payments. 

AccuWage Online Help Guide and FAQs for 2022 Released

The Social Security Administration (SSA) has released the 2022 AccuWage Online Help Guide and has updated related FAQs.

Background. AccuWage Online is a free Internet application from the SSA that allows employers to check electronically-filed Forms W-2 and W-2c for correctness before uploading the forms to Business Services Online (BSO). AccuWage may be used to test files for any tax year. Employers who wish to use AccuWage Online must have a valid BSO username and password. They will then log in with their BSO account and go to the Electronic Wage Reporting Web Service (EWRWS) application webpage

BSO registration changes. The BSO webpage is alerting filers that effective September 19, 2022, the BSO registration process has changed. After registering to use BSO, or for any new BSO service, the SSA will mail an activation code to complete the process. This includes those submitting W-2 and W-2C reports. The new process is for security purposes. The activation code is mailed to the employer whose Employer Identification Number is being used, at the employer’s business address registered with the IRS. The activation code is generally received within two weeks. Wages may not be reported until the activation code is entered to complete the registration process. It is recommended that filers register for BSO before W-2 reporting season in January to ensure compliance prior to submitting W-2s.

Recommendations. The SSA strongly recommends that users zip files before submitting to AccuWage Online. The maximum file size that can be tested is 350MB prior to being zipped. All wage files must be in the EFW2/EFW2C format. The FAQs contain instructions on how to zip files.

Reminders. The SSA is reminding users to upload and submit their formatted wage file after testing it through AccuWage Online. AccuWage Online is used solely for testing. To submit a wage file to the SSA, users must access the "Report Wages to Social Security" option on BSO.

While AccuWage Online identifies many wage report issues, not all will be identified. For example, AccuWage Online does not verify names and Social Security Numbers (SSNs). The likelihood of submission rejection, though not eliminated, is greatly reduced when using this application. 

With IRS Funding Secured, Treasury Chief Outlines 6-Month Plan

By Tim Shaw

The IRS is poised to course-correct from COVID-19 setbacks impacting customer service and uncollected taxes from top earners, according to the top Treasury Department official, who announced targets for next filing season using additional appropriations from the Inflation Reduction Act.

Speaking at the IRS' New Carrollton, Maryland facility September 15, Treasury Secretary Janet Yellen gave a first look at how the IRS immediately plans to deploy the roughly $80 billion authorized in the recently enacted reconciliation package. Driving home a sense of urgency to make 2023 different from recent years plagued by a chronic lack of resources and pandemic-related roadblocks, Yellen affirmed that the agency is ready to modernize its operations and systems from top to bottom.

"The Inflation Reduction Act finally provides the funding to transform the IRS into a 21st century agency," said Yellen to an audience of IRS employees. "While all the improvements won't be done overnight, taxpayers can expect to feel real differences during the next filing season."

First among a series of benchmarks announced Thursday was the plan to, by next year, fully staff every IRS Tax Assistance Center and drastically raise the number of taxpayers served in-person, from 900,000 in 2019 to 2.7 million in the coming tax season. According to Yellen, these centers have been "massively understaffed and under-resourced," and it is "critical" for low- and middle-income taxpayers to be able to get assistance on-site as needed.

Taxpayers have also been unable to, for the most part, resolve issues over the phone due to a high call volume. "During the most recent filing season, the IRS averaged a 10-15% level of service, meaning that it answered less than two of every 10 calls," Yellen said. The amount set aside in the inflation bill for improving the customer experience will be used to bring on 5,000 additional phone representatives, who will aim to reduce wait times from the 2022 filing season average 30 minutes to less than 15 minutes.

To address the slow processing turnaround times for paper returns, Yellen announced that the IRS will begin automating "the scanning of millions of individual paper returns into a native digital copy." This is intended to deliver returns to taxpayer in a timely fashion while preventing a bigger backlog of outstanding paper return inventory. Further, communication lapses stemming from paper mail notices will be possibly rectified by allowing "millions of taxpayers'' to receive and respond to IRS correspondence online.

Moving forward, Yellen will consult with private sector customer service providers to get outside opinions on how the IRS can continue to evolve with advancing technology. "Consulting these experts—and employees at the IRS—will help us sketch out our vision of what the IRS of the next decade looks like," she said.

Over a half of the total Inflation Reduction Act's IRS appropriation is dedicated towards compliance enforcement, prompting some of the Biden administration's political opponents to raise concerns that this will lead to more audit scrutiny against working- and middle-class families. Yellen repeated Democrats' messaging that audit rates will not go beyond "historical levels" for households making under $400,000 in annual income.

"In fact, we expect audit rates for honest taxpayers to decline, once the IRS has the right technological infrastructure in place," Yellen said before her closing remarks. "This means a simpler tax filing season for taxpayers who are doing everything right."

Rather, she insisted the enforcement funds will be directed towards wealthy individuals and large corporations. According to Yellen, the so-called tax gap will balloon to $7 trillion over the next 10 years, and top earners are "responsible for a disproportionate share of unpaid taxes." Citing a May 2021 Treasury report, she said the top 1% accounted for over a fifth of unpaid taxes in 2019.

"This inequity is unacceptable. As leaders and employees at the IRS have warned for years now, enforcement of the law is not only a means to raise revenue," said Yellen. "It is also a matter of fundamental fairness. It is important for honest taxpayers to know that, when they file their taxes accurately with the IRS, other people are doing the same."

Hot on the Hill: Proposed Legislation as of September 19, 2022

Several pieces of proposed legislation introduced in the 117th Congress' first session could significantly alter the American payroll landscape. Bills in committees in the House of Representatives and Senate aim to restructure the retirement system, reform the healthcare industry, target unemployment fraud, address employment age discrimination, limit anti-competitive employment practices, establish work-hour requirements for agricultural employees, analyze workforce changes, and increase union participation.

Senate Bills in Committee: 

 S4808. The "Enhancing American Retirement Now Act," or "EARN Act," is a bipartisan endeavor aimed at increasing retirement savings through changes to various deferred compensation plans. It has been officially introduced and is on the Senate calendar as of September 9, 2022. Some further revisions have been made to the bill, including the ability for employees at lower wage levels to make catch-up contributions as either pre-tax or after-tax Roth contributions. A section-by-section summary is available here.

House Bills in Committee:

HR8588. The "Fair Care Act of 2022," introduced on July 28, 2022 and currently under review in the House Committees on Energy and Commerce, Ways and Means, Education and Labor, the Judiciary, Oversight and Reform, Rules, the Budget, Armed Services, and House Administration, would make several major reforms to the healthcare industry in the United States. Notably for employers, the bill would consolidate HSAs, FSAs, MSAs and HRAs into one pre-tax spending account. It would also eliminate the employer health insurance mandate, instead allowing employees whose employers provide employer-sponsored Insurance to receive premium assistance. Finally, the bill would allow the use of pre-tax dollars to cover insurance premiums and direct primary care arrangements.

HR8661. The "Guaranteeing Unemployment Assistance and Reducing Deception Act," or "GUARD Act," introduced on August 5, 2022 and currently under review in the House Committees on Ways and Means and the Budget, would target fraud in unemployment insurance programs by increasing recovery efforts for fraudulent payments, requiring state unemployment programs to participate in information sharing systems, and improving communication with unemployment claimants. 

HR8690. The "Age Discrimination in Employment Parity Act," introduced on August 9, 2022 and currently under review in the House Committee on Education and Labor, would lower the number of employees that an employer must have in order to be subject to age discrimination prohibitions from 20 to 15. 

HR8755. The "Restoring Workers' Rights Act of 2022," introduced on August 30, 2022 and currently under review in the House Committee on Education and Labor, would eliminate the validity of "non-compete" agreements entered into before the enactment of the bill. It would also bar the creation of new non-compete agreements going forward. Employees may still be required to sign agreements designed to restrict the sharing of "trade secrets" with competitors.

HR8756. The "Protect Local Farms Act," introduced on August 30, 2022 and currently under review in the House Committee on Education and Labor, would preempt the ability of states to mandate a maximum work week for agricultural employees of 60 hours or less.

HR8784. The "Commission on the American Workforce Act," introduced on September 9, 2022 and currently under review in the House Committee on Education and Labor, would create a commission designed to analyze workforce changes over the last 10 years, including the coronavirus (COVID-19) pandemic, the 2008-2009 recession, changes in education attainment, remote work, gig economy, globalization of manufacturing, general out-sourcing, and social dynamics. The Commission will present a report to the President and Congress within one year of the initial meeting.

HR8793. The "Nationwide Right to Unionize Act," introduced on September 9, 2022 and currently under review in the House Committee on Education and Labor, would repeal the section of the National Labor Relations Act that allows states to pass so-called "Right-to-Work" laws. This bill is mirrored by S4803 in the Senate Committee on Health, Education, and Labor.

APA Leadership Conference Discusses Some Common Errors Leading to Tax Deposit Penalties

During day one of the annual American Payroll Association's (APA) Payroll Leader's Conference (PLC) in Philadelphia, some of the common errors that lead to employment tax deposit penalties were discussed.

Federal tax deposits. Generally speaking, employers must deposit the federal income tax withheld as well as both the employer and employee portions of Social Security and Medicare taxes. There are two deposit schedules: (1) monthly and (2) semi-weekly. Before the beginning of each calendar year, an employer must determine which of the two deposit schedules it is required to use. 

Deposits for Federal Unemployment Tax Act (FUTA) taxes are required for the quarter within which the tax due exceeds $500. The tax must be deposited by the end of the month following the end of the quarter. Employers must use electronic funds transfer (EFT) to make all federal tax deposits. This is done through the Electronic Federal Tax Payment System (EFTPS).

If an employer fails to make a timely deposit, then it may be subject to a failure-to-deposit penalty of up to 15%.

Breakdown of IRS failure to deposit penalties. The IRS may charge penalties if an employer does not make the required deposits on time, makes deposits for less than the required amount, or if it does not use EFTPS when required. However, the IRS will not charge penalties if the employer did not willfully neglect to make a proper and timely deposit and it has a reasonable cause.

Deposit penalties. For amounts not properly or timely deposited, the penalty rates are as follows:

  • 2% for deposits made one to five days late.
  • 5% for deposits made six to 15 days after the date of the first notice.
  • 10% for deposits made 16 days or more late, but on or before the 10th day after the date of the first notice. Also, for amounts subject to electronic deposit requirements but not deposited using EFTPS.
  • 15% for amounts still unpaid more than 10 days after the date of the first notice the IRS sent asking for the tax due or the day on which the employer received notice and demand for immediate payment, whichever is earlier [Code Sec. 6656].

Filing/paying late. The penalty for filing late is 5% of the total tax assessed that was not paid when due. It is charged each month or part of a month the return is late, for up to five months. The penalty for paying late is initially 0.5% of the unpaid tax shown on the return.

It is charged each month or part of a month following the payment due date until the tax is paid. The penalty increases to 1% of the unpaid tax for any tax that is not paid within 10 days after the IRS issues a notice of intent to levy. However, the total penalty cannot exceed 25% [Code Sec. 6651].

Reasonable cause. The law permits the IRS to remove or reduce the penalties in the notice sent to an employer if it has an acceptable reason. If an employer believes it has reasonable cause it may contact the IRS to explain the reason(s) by establishing that the employer used ordinary business care and prudence to comply with its federal tax obligations but were nonetheless unable to do so. The IRS said it will consider the facts and circumstances presented and will let the employer know if it accepts the employer's explanation as reasonable cause. Interest is not applicable for reasonable cause.

Federal investigations can result in prison. The U.S. Department of Justice (DOJ) issues regular press releases that detail the results of employer investigations. Many times, these investigations discover that the employer failed to make federal tax deposits in the time and manner required by law. For example, the DOJ issued a September 13, 2022 press release explaining that the CEO of a group homes company failed to pay employment taxes to the IRS in an amount totaling more than $752,000 from 2014 to 2017. The CEO is next scheduled for a sentencing hearing on January 31, 2023.  The DOJ explains that the willful failure to pay over employment taxes in violation of Code Sec. 7202 carries a maximum statutory sentence of five years in prison and a $250,000 fine.

Avoiding common tax deposit errors. Abbey Moran, CPP, Senior Leader of Global Payroll and Labor Accounting at Booz Allen Hamilton presented the "Strategic Payroll Practices" course at the PLC where she discussed some common errors leading to a tax deposit penalty.

Schedule B. First up is the omission of Schedule B (Form 941) (Report of Tax Liability for Semiweekly Schedule Depositors) entirely. As discussed earlier, semiweekly depositors must remember to attach a properly completed Schedule B to Form 941 (Employer's Quarterly Federal Tax Return). Moran noted that employers should remember that the monthly liability portion of Line 16 on Form 941 is for monthly depositors and only semiweekly depositors must not complete Line 16 in place of Schedule B.

Averaged failure to deposit. Moran said that one of the most common penalties charged on Form 941 is the averaged failure to deposit penalty, which results from a simple error committed by the Form 941 preparer. On Schedule B (Form 941), the total liability for the quarter box at the bottom right side of the form must equal the amount reported on Line 12 of Form 941. Moran cautioned not to make the mistake of entering deposits on Schedule B (Form 941) as the form clearly states it is used to show the tax liability for the quarter and not the deposits.

If the deposits are incorrectly shown on Schedule B (Form 941), the total liability for the quarter amount will not equal the amount on Line 12 of Form 941 unless the deposits are the same as the liabilities, which Moran noted is often not the case with larger employers. What happens is that the IRS's computer responds to this error by allocating the liabilities equally among the 12 periods and then compares the redistributed liabilities to the deposits.

As a result, this comparison leads to the averaged penalty. To avoid such a penalty, the APA recommends to always double check the math and be certain that the total liability for the quarter on Schedule B (Form 941) equals the amount on Line 12 of Form 941.

Tax deposit errors. According to the APA, taxpayers often indicate the incorrect tax type or period on their EFTPS transaction. This results in payments being erroneously posted to the wrong accounts, which can trigger assessments of tax, penalties, and interest. Moran said that while the payments can be traced and moved to the proper account, and interest and penalty amounts can be reversed, there are a lot of hours spent on these corrective tasks. It is best to always review EFTPS transactions before initiating the deposit and keep a copy for further reference in case a payment is lost or mis-posted. 

General math errors. There are some lines on Forms 940 and 941 that require simple multiplication and addition, so in a situation where an employer may be manually preparing these returns, it is important to double-check all mathematical calculations before filing a return. Moran noted that it can be easy to make simple math mistakes that can lead to error notices being sent by the IRS's computer.

Next Phase of Premium Processing for EB-1 and EB-2 Visas Begins

The US Citizenship and Immigration Services (USCIS) has issued an alert announcing that USCIS is implementing the second phase of premium processing for certain pending Form I-140 (Immigrant Petition for Alien Workers), for the EB-1 and E-2 classifications [USCIS Alert, 09/15/2022].

Background. Form I-140 is used by employers to petition for an immigrant visa based on employment. An employer may file this petition for certain experienced professors, researchers, managers and executives; educated or skilled workers; and unskilled workers if qualified workers are not available in the United States. EB-1 class or EB-2 class visa applications are open only to highly skilled workers such as multinational executives and professionals with advanced degrees, respectively.

Premium processing. The expansion of premium processing applies only to previously filed Form I-140 petitions under an E13 multinational executive and manager classification or E21 classification as a member of professions with advanced degrees or exceptional ability seeking a national interest waiver (NIW). Form I-907 (Request for Premium Processing Service) must be submitted to request the upgrade to premium processing. 

Under the second phase, which began on September 15, 2022, Form I-907 requests will be accepted for:

  • E13 multinational executive and manager petitions received on or before January 1, 2022.
  • E21 NIW petitions received on or before February 1, 2022.

Premium processing requests filed after the January 1 or February 1 start date will be rejected.

Form I-907. The USCIS notes that a new Form I-907 was released May 24, 2022. Beginning July 1, versions of the form older than the 9/30/2020 edition will not be accepted. 

DOL Secures $1.8M for Construction Workers through Contempt Litigation in Federal Court

Following civil contempt litigation by the U.S. Department of Labor's (DOL) Wage and Hour Division (WHD) against two Massachusetts construction companies and their officers, a federal district court has approved the distribution of $1.8 million from court-ordered real estate sales and additional funds to 478 workers who were employed by Force Corp., AB Construction Group Inc., Juliano Fernandes, and Anderson dos Santos.

The WHD determined that the companies, Fernandes, and dos Santos, had misclassified the workers as independent contractors, and obtained a 2016 consent judgment and order, which restrained the defendants from withholding $1,179,842.55 in back wages and ordered them to pay an equal amount in liquidated damages, plus interest.

The DOL secured a 2020 contempt order appointing a special master to examine the finances of all four defendants, Fernandes's wife, and five related non-defendant entities, including Turn Key Lumber Inc. A special master was appointed to act as receiver to take possession of and sell three real properties owned, controlled, or used by Fernandes, his wife, or Turn Key. Following the sales, the special master/receiver had over $1.7 million in real estate proceeds available for distribution.

Western Surety Co., a bond company with liens on the properties, contended it had priority over the real estate sale proceeds, as well as over additional funds from Fernandes. After extensive negotiations, the parties agreed to distribute a total of $1.8 million from the sale proceeds and additional funds to the department for the affected workers. The defendants previously remitted $547,900 to the department for the workers.

Solicitor of Labor Seema Nanda commented that: "This case shows that the U.S. Department of Labor will aggressively pursue wages and liquidated damages that are often owed to low-wage workers, including through judgment enforcement actions such as contempt proceedings. The employer community should be aware that we will not only actively pursue judgments against those who violate wage and hour laws, but we will also use the legal tools at our disposal to collect on judgments."

WHD Division District Director Carlos Matos added that: "In the years since this case began, some workers have moved, are unaware of the back wages, or may otherwise be uncertain about claiming the monies due to them. Partnering with the Wage and Hour Division, Boston-area community and worker advocacy groups - including the Brazilian Women's Group, Brazilian Worker Center, Brockton Workers Alliance, Centro Comunitario de los Trabajadores, La Colaborativa (formerly known as Chelsea Collaborative), Fuerza Laboral, Metrowest Worker Center-Casa and the Massachusetts Coalition for Occupational Safety and Health - have been instrumental in connecting unallocated workers to the Wage and Hour Division."

State Payroll Tax News

Alaska—Legislation Removes Minimum Wage Exemption for Worker with a Disability

Legislation (Senate Bill 185), effective December 12, 2022, eliminates the use of the subminimum wage rate for workers with disabilities. Specifically, Alaska Stat. § 23.10.070 has been amended by removing the commissioner's authority to provide a subminimum wage rate for "an individual whose earning capacity is impaired by physical or mental deficiency, age, or injury." Further, the legislation adds a minimum wage exemption to individuals employed by a nonprofit residential summer camp for not more than 12 weeks in a calendar year at a residential summer camp who receive room and board and a weekly wage equal or greater than: "80 percent of the minimum hourly wage established under Alaska Stat. § 23.10.065(a), multiplied by 40 hours; or 50 percent of the minimum wage established under Alaska Stat. § 23.10.065(a) multiplied by the total hours worked in the week by the individual" [L. 2022, S185].

Arizona—2023 Unemployment Taxable Wage Base Announced

The Arizona Department of Economic Security announced that the 2023 unemployment taxable wage base will increase from $7,000 to $8,000. A recent budget bill (Senate Bill 1828) called for an increase in the wage base in 2023. Also, the legislation reduces the number of weeks claimants are eligible for benefits. Beginning January 1, 2023, employers are required to pay unemployment taxes on the first $8,000 in gross wages paid to each employee. The increase will be in effect beginning with the first Quarter Unemployment Tax and Wage Report for the quarter ending March 31, 2023, for wages paid during January, February, and March of 2023. 

Arizona—Minimum Wage Rate Increasing to $13.85 Per Hour in 2023

The Industrial Commission of Arizona has announced that the minimum wage rate will increase from $12.80 to $13.85 per hour on January 1, 2023. The $1.05 increase is based on the increase in inflation between August 2021 and August 2022, as published in the U.S. Bureau of Labor and Statistics Consumer Price Index. Exemptions from the state's minimum wage rate law are described in the state's Fair Wages and Healthy Families Act, which does not apply to any person who is employed by a parent or a sibling; any person who is employed performing babysitting services in the employer’s home on a casual basis; any person employed by the Arizona or United States government; or any person employed in a small business that grosses less than $500,000 in annual revenue, if that small business is exempt from having to pay a minimum wage under section 29 USC § 206(a). For any employee who customarily and regularly receives tips or gratuities, an employer may pay tipped employees a maximum of $3.00 per hour less than the minimum wage if the employer can establish by its records that for each week, when adding tips received to wages paid, the employee received not less than the minimum wage for all hours worked. The cash minimum wage for tipped workers is $10.85 per hour in 2023. Employers must post the 2023 minimum wage rate poster in a place accessible to employees.

California—Guidance for Employers on Monkeypox

The California Department of Industrial Relations' Division of Occupational Safety and Health has provided guidance to employers on Monkeypox for the purpose of providing protection to employees in the state. The guidance applies to all workplaces covered by the Aerosol Transmissible Diseases (ATD) standard, which includes health care facilities, public health services, police, medical transport, and more. The regulations require covered California employers to: (1) implement a written program to prevent or reduce the transmission of aerosol transmissible diseases specific to the workplace and operations. Provide and ensure the use of respiratory protection; (2) ensure that personal protective equipment (PPE) is provided and used by employees exposed to persons with or suspected to have MPX, or to linens or surfaces that may contain the virus; (3) implement written procedures for exposure incidents; (4) report the exposure to the local health officer; (5) remove the employee from the workplace if the PHLCP or local health officer recommends precautionary removal; (6) employers must maintain the employee’s pay, rights, benefits, etc. during precautionary removal. Employers should keep in mind that there are different requirements for referring employers, laboratories, and all other employers.

California—Sunset Date for ABC Test Exemption for Fishers Extended

New legislation (Assembly Bill 2955) extends the sunset date for the exemption from the application of the ABC test for worker classification purposes for commercial fishers working on an American vessel until January 1, 2026. Since 2020, California employs the ABC test, with specified exceptions, where a worker is presumed to be an employee rather than an independent contractor unless the hiring entity meets the following conditions: (A) the person is independent of the hiring organization in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) the person performs work that is outside the hiring entity's business; and (C) the person is routinely doing work in an independently established trade, occupation, or business that is the same as the work being requested and performed. As a result, the ABC test exemption for commercial fishers will be based on the Borello test, a test that relies upon multiple factors.  

California—Legislation Enacts Unclaimed Property Voluntary Compliance Program

On September 13, 2022, Assembly Bill 2280, which authorizes the California Controller to establish an unclaimed property voluntary compliance program (VCP), was signed into law. The new program will enable voluntary compliance by businesses holding past-due unclaimed property that has not been reported to the Controller. The bill prescribes the requirements for a holder to participate in the program and for the Controller to waive interest assessments. Also, the legislation allows the Controller to reinstate interest that had been waived under the program if the property is not timely paid or delivered. The Controller is permitted to adopt guidelines and forms for the administration of the program..

California—Daly City Minimum Wage Increases to $16.07 in 2023

Daly City has announced that the local minimum wage rate will increase from $15.53 per hour to $16.07 per hour, beginning January 1, 2023. The minimum wage applies to all businesses within the geographic boundaries of Daly City and any employee working at least two or more hours per week. Employers are not permitted to use tips, or fringe benefits such as health insurance, vacation, sick leave or other benefits to offset or use as a credit towards the employer's obligation to pay the City's minimum wage.

California—Court Rules Employee Left Work for Good Cause, Qualifies for Unemployment Benefits

The California Court of Appeal for the First Appellate District Division Four has ruled that a home improvement salesperson, who left work to care for a terminally ill relative, did so for good cause and qualifies for unemployment benefits. The Court examined the issue of whether a claimant is eligible for unemployment benefits when an employee who leaves work to care for a sick family member under Cal. Lab. Cd. § 1256. The Court concluded that the claimant left her job due to emergency circumstances with the employer’s approval, and thus for good cause. On remand, the trial court must calculate the amount of benefits that the claimant would have been entitled to had the California Employment Development Department (EDD) not erroneously ruled that she was disqualified from receiving benefits. The initial ruling from the EDD went against the claimant, which cleared her former employer from any unemployment benefit charges against its account. Benefit charges can increase an employer's unemployment tax rate. Since the Court has ruled for the claimant and order the EDD to pay her the amount of unemployment benefits she was denied, it can be assumed that the EDD will charge her former employer for the benefits, which may affect the employer's unemployment tax rate [Johar v. California Unemployment Insurance Appeals Board, A162563, 09/13/22].

Kentucky—W-2 Submission Instructions Released for 2022

The Kentucky Department of Revenue has issued its tax year 2022 specifications for electronic submission of annual wage and tax information on Form W-2. The DOR uses the Social Security Administration's (SSA's) EFW2 specifications found in Pub. No. 42-007. The DOR accepts Form W-2 information via web-based filing or CD only. The filing deadline for tax year 2022 files is January 31, 2023. No filing extensions will be granted. Transmitter Report 42A806 must accompany each CD submitted. Transmitter Report 42A806 is not required for web-based filing.

Maine—State Law Without H-2A Exclusion for Forestry Workers Challenged in Federal Court

A Maine law (Public Law 280, "An Act Regarding the Transportation of Forest Products in the Forest Products Industry") that prohibits a landowner from hiring or contracting with a person to hire, a worker to transport forest products from a location in the U.S. to another location in the U.S. unless the motor carrier is operated by a resident of U.S., is being challenged by a Canadian citizen with an H-2A visa, his employer, and an industry association that includes landowners and paper mills. They have asked a federal district court to preliminarily enjoin defendants (the Director of the Maine Bureau of Forestry and the Maine Attorney General) from enforcing Public Law Chapter 280. Specifically, they claim that the law violates (1) the Supremacy Clause of the United States Constitution, (2) the Equal Protection Clause of the United States Constitution, and (3) the Equal Protection Clause of the Maine Constitution. The law, as it is currently worded, does not provide for an exclusion for H-2A visa workers authorized to work in the U.S. The district court granted Plaintiffs' motion and the defendants appealed. The First Circuit Court of Appeals recently heard oral argument on the case [Maine Forestry Council v. Cormier, CA1, Dkt. No. 22-01198, oral argument held 9/7/2022].

Massachusetts—Guide to Withholding Taxes on Wages Updated

The Massachusetts Department of Revenue (DOR) has released an updated guide on withholding taxes on wages as of September 15, 2022. The guide includes withholding requirements for various types of employers as well as Massachusetts Form M-4, effective January 1, 2020. There are no changes to the withholding tables.

Michigan—Interrogatories Limited to 20 in Tax Tribunal Proceedings

Effective January 1, 2020, Michigan Court Rules (MCR) 2.309(A)(2) was amended to set a presumptive limit of 20 interrogatories for each separately represented party. Because the Court Rule addresses a matter not covered by the applicable Entire Tribunal rule, the Michigan Tax Tribunal has determined that it governs practice and procedure in all contested cases pending in the Entire Tribunal. Therefore, effective December 1, 2022, interrogatories will be limited to 20 in Entire Tribunal proceedings and Small Claims proceedings in which leave to conduct discovery is granted. The rule specifically states that "a discrete subpart of an interrogatory counts as a separate interrogatory." Because the Tax Tribunal’s discovery process is bifurcated into pre-valuation and post-valuation disclosure discovery, parties may serve and compel responses to a maximum of 20 interrogatories in each phase of the discovery process. Parties may change these limits by written stipulation or court order pursuant to MCR 2.302(F). As such, a party wishing to compel responses to more than 20 interrogatories must include a copy of the written stipulation between the affected parties, or in the alternative, file a motion requesting leave and showing good cause for the excess interrogatories. If a party fails to include a written stipulation or show good cause, the Tribunal will not compel responses beyond the first 20 interrogatories included in the discovery request(s) [Mich. Tax Tribunal Newsletter, MTT 2022-10, 09/19/2022].

Minnesota—Withholding Tax Fact Sheets to be Updated as Web Pages

On September 26, 2022, the Minnesota Department of Revenue will republish the Income Tax and Withholding Tax Fact Sheets as web pages instead of PDFs. The content of these fact sheets is the same, but in a new format. This change will offer many benefits to practitioners and taxpayers, including: improved searchability on the Department's website; faster and more frequent updates from the Department as needed; and easier sharing through webpage links instead of PDF attachments. If a taxpayer or practitioner would like these fact sheets as PDFs, they can use the Print Page button on the webpages to save them in this format. If a taxpayer or practitioner has them treated as favorites in their browser or shared on any websites, they will need to update the links [Coming soon: Income Tax and Withholding Tax Fact Sheet webpages, Minn. Dept. Rev., 09/16/2022].

Minnesota—e-Services Unavailable October 7, 2022

Due to scheduled maintenance, the Minnesota Department of Revenue's e-Services system and other online services will be unavailable Friday, October 7, 2022 from 4:30 p.m. to midnight. Regular deadlines for filing and paying taxes still apply. Taxpayers should plan accordingly [e-Services and other online services unavailable Friday, October 7, Minn. Dept. Rev., 09/16/2022].

Montana—Recent Newsletter Provides Information on Independent Contractors

The third quarter newsletter from the Montana Department of Labor and Industry (DLI) provides some Questions and Answers (Q&A) to help provide information on the classification of independent contractors. The questions the DLI answers include: (1) What defines an independent contractor; (2) What is my responsibility as an employer; (3) How can I verify someone has an active Independent Contractors Exemption Certificate (ICEC); and (4) How can I verify if someone has an active workers' compensation policy. The DLI directs contractors to its Employment Relations Division website for additional information. 

New Jersey—2023 Minimum Wage Increases Announced

The New Jersey Department of Labor and Workforce Development (DLWD) has announced the 2023 minimum wage increases. Beginning Jan. 1, 2023, the minimum wage rate will increase from $13.00 per hour to $14.13 per hour. The cash minimum wage for tipped workers will increase to $5.26 per hour. The minimum wage rates in 2023 will also increase to: (1) $12.93 per hour for seasonal and small employers (fewer than six employees); (2) $12.01 per hour for agricultural workers; and (3) $17.13 per hour for long-term care workers.

New Jersey—Updated Withholding Guide Available

The New Jersey Division of Taxation (DOT) has updated Publication NJ-WT, New Jersey Income Tax Withholding Instructions. The updated guide explains that compensation to election workers is not subject to state withholding and is excluded from Box 16 of Form W-2. Additionally, it clarifies that combat zone compensation for the 2021 tax year and after is only excludable from income tax for members of the U.S. Armed Forces. Such amounts should be excluded from Box 16 of the W-2.

New York—Deadline for Applying for World Trade Center Disability Claims Extended

New law, effective September 9, 2022, extends the deadline for applying for World Trade Center disability benefits from September 11, 2022 to September 11, 2026. Any claim by someone who participated in the World Trade Center rescue, recovery cleanup operations whose disablement occurred between September 11, 2017 and September 11, 2021 will not be disallowed if the claim is filed before September 11, 2022.. 

New York—New Law Clarifies Presumptive Evidence for Workers Comp Claims for 9/11 Responders and Clean-Up Operators

  1. 2022, A9922, effective immediately, provides that the board overseeing funds to individuals who became ill or died after working at the World Trade Center site must accept the certifications of the Centers for Disease Control and Prevention World Trade Center Health Program as presumptive evidence of causation of the illness or death pursuant to 42 USC 30mm for claims filed, including workers' compensation claims. Additionally, any claimant who filed a claim(s) that were denied prior to this legislation now has two years to refile the claim(s).

Puerto Rico—IRS Offers Tax Relief to Hurricane Fiona Victims

The IRS has announced payroll tax relief for victims of Hurricane Fiona, beginning September 17, 2022. Individuals that reside or have a business in all 78 municipalities in Puerto Rico will now have until February 15, 2023, to file various returns. Taxpayers will have until February 15, 2023, to file quarterly payroll tax returns that are normally due on October 31, 2022, and January 31, 2023. Penalties on payroll and excise tax deposits due on or after September 17, 2022, and before October 3, 2022, will be abated as long as the tax deposits are made by October 3, 2022 [PR-2022-10, 9/19/2022].

South Carolina—Several Withholding Forms Updated

The South Carolina Department of Revenue has updated several withholding forms that were last revised in 2019. The revised forms do not contain substantive changes. Form WH-1601 (Withholding Tax Coupon) is used to accompany withholding tax payments. Taxpayers with $15,000 or more in withholding or who make more than 24 or more payments in a year are required to file and pay electronically. Taxpayers that file by paper may only use black ink when completing the form and on the check. Form WH-1605 (SC Withholding Quarterly Tax Return) must be filed even if no tax is withheld during the quarter. The form may also be used to indicate a change of address. The WH-1601 coupon should not be included with Form WH-1605. The form may be filed online at Form WH-1605 should not be used to file for the fourth quarter. Form WH-1606 (SC Withholding Fourth Quarter and Annual Reconciliation Return) must be filed even if no taxes were withheld during the fourth quarter. The form is also used as the final return for a business who closes its withholding account. Form WH-1606 must be filed if a withholding account was open for any portion of the calendar year. Forms form should not be mailed when filed online. 

Washington—Power of Attorney for Unemployment Insurance Revised

The Washington Employment Security Department (ESD) posted on September 21, 2022, a revised Power of Attorney for Unemployment Insurance (POA) with a revision date of 5/3/2022. The form is used to authorize the ESD to send or share unemployment information with a designated representative. Employers must have an actual ESD account number issued prior to submitting a POA form. The revised form notes that the authorization will remain in effect as of the authorization date until the employer revokes the authorization in writing. Also, the updated form asks if the designated representative participates in State Information Data Exchange System (SIDES) and if so, the representative must provide the Broker Number. SIDES is a federal web-based system that allows electronic transmission of unemployment benefit information requests from state workforce agencies to multi-state employers and/or third party administrators (TPAs), as well as transmission of replies containing the requested information back to the state agencies. 



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