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Brief Notes:
Time Change
As redundant as it may seem to some, employers with night shifts
need to once again plan for the change to daylight savings time. Employees
working overnight on April 2-3 will work one less hour due to time
being moved forward one hour for Daylight Savings Time. Although most
labor laws only require payment for actual hours worked, your labor
agreements, company policy or prior precedent may dictate full payment
for the additional hour.
Dependent Health Coverage
The definition of a dependent was standardized for most tax applications
under the Working Families Tax Relief Act of 2004. However, the IRS
has announced the new definitions will not apply for employer provided
health coverage and the current definition will apply as contained
in code section 105(b).
Signing Bonuses
In Revenue Ruling 2004-109 the IRS clarifies that an amount paid by
an employer as a bonus for signing a contract to establish an employer-employee
relationship is wages subject to FICA, FUTA and FIT withholding. This
ruling was effective for payments after January 12, 2005.
Cancellation Payments
In a companion ruling to the one above, the Revenue Ruling 2004-110
provides that an amount paid to an employee in exchange for the cancellation
of an employment agreement are to be considered wages subject to
FICA, FUTA and FIT withholding. Both rulings may be reviewed at www.irs.gov.
Per Diem Rates
If you use the federal per diem rates to reimburse your employees
for travel rather than having an accountable reimbursement plan, you
should be aware there are frequent changes to the approved rates.
You may always find the latest rates for reimbursing your employees
at www.gsa.gov/perdiem.
ERISA Rollovers
The IRS has issued final default rules for rollovers from qualified
retirement plans. The new rules are effective March 28, 2005, and
require that mandatory distributions of more than $1,000 from a qualified
plan be paid in a direct rollover to an IRA unless the plan participant
elects otherwise. Mandatory distributions are those made without
the participants consent prior to normal retirement age (such as upon
termination of employment). The full document is in question and answer
format and was issued as IRS Notice 2005-3 and 2005-5.
Free Benefit Plan Info
Once again, every employer has access to a free resource containing
detailed information on the employment tax treatment of fringe benefits.
The 2005 supplement to Circular E, Employers Guide to Fringe Benefits
(Publication 15-B) is available on the IRS web site. New items for
2005 are highlighted along with tax treatment for many other benefit
situations.
Dependent Life Insurance
In Technical Advice Memorandum 200502040, the IRS states that the
cost of group term life insurance for dependents is includable as
income to the employee subject to FIT and FICA, but not FUTA.
Personal Auto Usage
The personal use of an employer owned automobile may be valued using
the cents-per-mile method at 40.5 cents per mile in 2005. For cars
put into service in 2005, this method may be used only for cars with
a fair market value of $14,800 or less, which is the same as for 2004.
Non-exempt Bonuses
The Department of Labor has issued three opinion letters regarding
bonus payments for non-exempt employees. In each case it was determined
the bonus arrangements violated the Fair Labor Standards Act overtime
provisions. In the first instance, a bonus $3 per hour for meeting
production quotas was illegal since it was not added to the base pay
when calculating overtime. In the second case, a piece rate bonus
was offered if it exceed a guaranteed hourly amount, yet it was found
to be not in conformity since the bonus amount was not used to calculate
overtime. In the last case, a lump-sum overtime premium based on volume
of production was deemed to be illegal since it did not meet the time
and one-half required overtime calculation.
Professional Help
Most employers take pride in their company and the product or services
they provide. Yet, most employers recognize they are not experts in
many areas of business. As a professional resource available to employers,
we, likewise, take pride in the services and specialized knowledge
we provide. We would like the opportunity to review with you the services,
or additional services, we can offer to supplement your scarce resources
and allow you to focus on what you do best.
Other News:
IRS 401K regulations
Impact of the 2006 Budget plan
Child Labor Laws
Deferred Compensation Plans
Flat rate tax information
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