Paying the Employee Payroll Source Review Course Fall 2011 Presented by: Mary Kazmierczak, CPP.
CPP/FPC Fall Study Group
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Transcript of CPP/FPC Fall Study Group
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CPP/FPC Fall Study Group
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Any Questions ?
Concerns ?
Review
Quiz/Break
Group Questions
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Section 9: Other Deductions From Pay
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Involuntary Deductions
• Employer and employee have no control over the deduction
• Employer is required by law to deduct amounts from the employee’s check and remit those funds to satisfy the employee’s debt.
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Priority of Multiple Orders
• Bankruptcy Order (except Child Support Order)• Child Support Order prior to Federal Levy • Federal Tax Levy• Child Support• Administrative Wage Assignment (AWG) including
government ordered student loans of 15%• State Tax Levy• Student Loan (state ordered 10%)• Creditor Garnishment• Voluntary Deduction
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Tax Levy
• Used to collect unpaid taxes after all other means have been exhausted by a state or federal agency.
• Take precedence over all other garnishments except for child support orders already in effect and bankruptcy.
• If more than one tax levy, then first come first served.
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Form 668-W Notice of Levy on Wages, Salary, and
Other Income
Has 6 parts
• Part 1 is the employer’s copy• Parts 2-5 send to the employee (Parts 3-4
should be returned to Employer in 3 days)• Part 6 is for the IRS• If forms are not returned then the employee
should be treated as married filing separately with one exemption.
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Figuring the amount to deduct and remit for levy
Wages exempt from levy
• Unemployment compensation benefits*• Worker’s compensation benefits*• Annuity and pension payments under the Railroad
Retirement Tax Act *• Certain armed service-connected disability payments• Certain public assistance payments *• Amounts ordered withheld under a previously issued
court order for child support
Note: * can now be attached for 15%
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Levy Take Home Pay
Gross Earnings less:1. Taxes2. Deductions (voluntary or involuntary) in
place before levy is received3. Increases in deductions beyond the
employees control (medical premiums)4. Deductions added after a levy is received
that are a condition of employment (union dues)
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When to make payments/Stop Withholding
• 668-W says pay same day• Penalties – full amount to be withheld
plus interest, and penalty of 50% of the amount recoverable by the IRS
• Form 668-D – Release of Levy / Release of property from Levy
• Notify IRS when EE terms
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Child Support
• Wage withholdings become automatic if non-custodial parent is late one month in paying support
• Joint Federal/State responsibility for enforcement
• Withholding laws are based on the Consumer Credit Protection Act (CCPA)
• Take precedence over all other garnishments except for levies that are already in effect and bankruptcy court orders that include child support obligations. (p. 9-11)
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Order/Notice to Withhold Income for Child Support
• Standard form (see 9-16 & 9-17)
• Some information varies by state
• One centralized disbursement unit per state
• Employer allowed to withhold an administrative fee in most work states
• Must withhold for employee and independent contractors
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CCPA Limits
• 50% if employee is not in arrears and is supporting another family
• 55% if employee is in arrears by 12 weeks and is supporting another family
• 60% if the employee is not in arrears and is not supporting another family
• 65% if the employee is in arrears by 12 weeks and is not supporting another family
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Uniform Interstate Family Support Act (UIFSA) (p. 9-15)
• Must honor orders from other states that are “regular on its face”
• Duration and amount of periodic payments• Person or agency who will receive payments• Medical support (40 business days to state if
employee has a plan)• Amount of payment fees and costs for the
enforcement agency• Amount of arrears payments and interest
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Multiple Orders
• Follow the laws in the state where the employee works
• Most states require child support to be fulfilled before medical insurance premiums are paid.
1. Pro-rate2. Equal funds3. 1st come 1st served (Montana only)
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Child Support Continued…
• Employee attempt to avoid withholding
• Handling child support for employees serving in the military
• Employers must withhold from independent contractors.
• Medical child support orders (9-28 – 9-29)
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Creditor Garnishments CCPA limits
Garnishments cannot exceed the lesser of:
– 25% of disposable earnings; or
– Amount that the employees disposable earnings for the week exceed 30 times the federal minimum wage.
• Prohibited from terminating an employee because the employee’s “earnings have been subject to garnishment for any one indebtedness”
• One creditor garnishment at a time
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Bankruptcy Orders
• Employer must stop withholding on any other garnishments against the employee (if included in the bankruptcy)
• Chapter XIII bankruptcy orders take priority over levies
• 2005 Act and child support
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Student Loans• To repay a loan granted under the Federal Family
Education Loan Program• Max amounts
– The lesser of 15% disposable earnings– Or the excess of the employee’s disposable earnings
over 30 times the federal hourly minimum wage – – Multiple student loans the max increased to CCPA
limit of 25% of disposable earnings.• If terminated and rehired within 12 months, student loan
withholding can start 12 months after rehire date.
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Federal Agency Debt Collection aka Administrative Wage Garnishments (AWG)
• For payment of government, non-tax debts (FHA, VHA, HUD)
• If employee involuntarily terminates and is re-employed, deduction can start after 12 months of re-employment
• Max amounts– The lesser of 15% disposable earnings– Or the excess of the employee’s disposable earnings
over 30 times the federal hourly minimum wage –
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Voluntary Deductions
• Wage Assignments– Voluntary agreement to a deduction – Not covered under the CCPA– Employer can decide to honor or not
• Union Dues – In addition to mandatory dues– Need a written signed authorization– Can not be revoked for 1 year
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More About Deductions
Charitable Contributions• $250 threshold for substantiation (single check)• Substantiate contributions by providing the
following: – Pay stub, W2, a pledge card from the charity
FLSACan my net pay fall below minimum wage?
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Resources
•Payroll Source
•Family Support Registry
•National Web Site
•Actual Support Orders
•State Tax Levy
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Record keeping and Record Retention
Section 10
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Recordkeeping
and Retention FLSA
IRC
Title VII
IRCA
FMLA
State
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FLSA…….Required by DOL
2 years from last date of entry•Basic employment and earnings records
2 years from last effective date•wage rate tables and piece rate schedules, work time schedules establishing hours and days of employment
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FLSA…….Required by DOL
3 years from last date of entry– SS Card Name – home address – date of birth < 19 –
gender and occupation – workweek begin – regular rate of pay for each week – hours worked – earnings (regular & OT) – additions to and deductions from pay – total wages paid – date of payment & pay period covered.
3 years from last effective date– collective bargaining agreements –
certificates – records showing total sales volume and goods purchased
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FLSA…….Required by DOL
White Collar/Exempt Employees
Hospital Employees
Tipped Employees
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IRC – TAX4 years after the due date of the tax, or 4 years after the date the tax is actually paid if later
Maintenance of Records
Penalties for non-compliance
Penalties for Faulty Recordkeeping
IRS Goal: make it easy for IRS to calculate the correct tax liability
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Title VII of the Civil Rights Act
ADEA – Age Discrimination in Employment 3 years for employee records 1 year for applicant records
IRCA – Immigration Reform and Control Act
I9 – Know this one!
72 hours: time available to produce records for inspection by DOL or EEOC
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FMLA Records in addition to Master Control
Items
Exception for Exempt Employees
Medical Records – CONFIDENTIAL
Record format is flexible
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State Taxes, Orders and EscheatWage & Hour: MI 3 yrs, Federal 4 yrs
Child Support/Wage Attachments: Preserve for 3 yrs after last withholding
from employees wages
IRS Levies: 4 yrs from last withholding or until any related legal action is concluded
Escheat: MI 10 yrs
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Retention and StorageObtainable
ReadableEasy to calculate liability
No law dictating form of retention and storage
Retrieval and DestructionHave a clear, written policy and
implement it
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MISC Important InformationDirect Deposits: no retention
requirements after Direct Deposit is discontinued
Master File – Table 10.4 (pg 10-17)
Records needed from new employees:
I9 and W4
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Cheat Sheet Data
ADA = 1 year (1st letter in the alphabet)
Time Sheets = 2 years (2 letters)
HR = 3 years (2 letters + 1)
TAX = 4 years (3 letters +1)
OSHA = 5 years (4 letters + 1)
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QUIZ/Break
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Questions ?
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Discussion Time
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