Insights & Innovations
CompuPay’s monthly publication, Insights & Innovations, highlights topics that impact the business community. Issues include payroll-related subjects, information relevant to general business practices and topics that serve as resources for employers. Articles cover a wide range of subject matter, including tax updates, workers’ compensation insurance, ways to avoid payroll fraud and basic payroll management.
Expanding Operations Across State Lines
Keys to entity compliance
Posted on April 27, 2012
Business opportunities don’t stop at your state’s border, and pursuing them may require extra layers of government compliance to ensure your entity’s limited liability protections remain intact.
Successful corporations and limited liability companies often share a common characteristic—they provide value by economically solving customers’ problems. Over time, such a reputation may open possibilities for new markets of potential customers. When those markets are located outside of a company’s state of formation, a series of compliance tasks must be completed in order to legally interact with those customers.
“Foreign qualification” is at the top of that list. This is the process by which businesses register with government authorities in other states. States mandate foreign qualification for a number
Listed in Business Resources.
Wage Garnishments
An employer's responsibility
Posted on March 30, 2012
Wage garnishments, sometimes referred to as levies, wage assignments or earnings withholding orders, are legal orders or equitable procedures requiring an employer to withhold a specific portion of an employee’s wages for payment of debt. Most garnishments are made by court order; however, the IRS and state tax collection agencies can garnish wages by issuing a levy for unpaid taxes. As an employer, it is important to understand wage garnishments as garnishment orders are issued to the employer to withhold from payroll; it is the employer’s responsibility to ensure that the payment is made in full and on time to the appropriate court or agency requiring the garnishment.
Restrictions on Garnishments
Title III of the Consumer Credit Protection Act (CCPA) limits the amount of earnings that can be collected in one work week or pay period and protects the employee from being terminated if pay is garnished for any one debt regardless of the number of levies for that one debt. Although state laws on the matter vary, the CCPA does not prohibit discharge for separate garnishments for two or more debts. Title III does not have authority over any other issues regarding garnishment.
Questions regarding a specific garnishment order that do not pertain to Title III coverage should be directed to the court or agency issuing the withholding order.
Pay subject to garnishment is based on an employee’s disposable earnings (the amount remaining after required deductions, such as federal, state and
Listed in Employer Resources.
Employees Vs. Independent Contractors
An employer's guide to properly classifying workers
Posted on February 29, 2012
When hiring workers to perform services for their business, it is crucial that an employer correctly determine the appropriate classification of each worker. A worker can be classified as an employee, independent contractor, statutory employee or statutory nonemployee, based on the business relationship with that worker.
Employee
Generally, an employee is a worker with whom the employer maintains a continuous relationship, who the employer has the right to terminate from employment and for whom the employer provides a workplace, training and tools with which to perform his or her job. Additionally, the employer determines the work to be performed as well as how it will be done. Payments to workers classified as employees require employers to withhold taxes and report wages subject to taxation; employers are also responsible for employment taxes such as unemployment, Social Security and Medicare.
Independent Contractor
Independent contractors usually provide services to individuals or other businesses and have the autonomy to choose how, where and when the work will be performed. Payments to workers classified as independent contractors generally do not
Listed in Employer Resources.
2012 Tax Changes
and what they mean to employers
Posted on January 26, 2012
During 2011, hundreds of new laws or extensions of existing laws were enacted that affect all Americans; many of the significant legislative changes were to tax laws that will have a direct effect on employers across the country in 2012.
Social Security Wage Base
The Social Security wage base is the maximum amount of earnings against which the Social Security tax can be applied. It has been increased from $106,800 in 2011 to $110,100 for 2012. This means that any wages earned in excess of $110,100 in 2012 are not subject to Social Security taxes.
Temporary Payroll Tax Cut Continuation Act of 2011
In December of 2011, Congress, by unanimous consent, passed the Temporary Payroll Tax Cut Continuation Act of 2011. The act, which is funded by an increase in mortgage guaranty fees, extends not only a payroll tax cut, but also unemployment benefits through the end of February 2012.
In 2011, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 reduced the employee portion of the Social Security tax from 6.2% to 4.2% on the first $106,800 of wages earned. The Temporary Payroll Tax Cut Continuation Act of 2011 extended the reduction of the employee portion of the Social Security tax through February 29, 2012. Because the extension only covers two-twelfths of the year, the tax reduction applies only to the first $18,350 (two-twelfths of $110,100) in wages earned in 2012. A Congressional conference committee is tasked with determining whether the act should be extended through the end of 2012. If it is not extended, a recapture of
Listed in Employer Resources.
FUTA Credit Reductions in 2011
Resulting rate changes and their effect on employers
Posted on December 22, 2011
While the country begins to see positive changes in the economy, many aspects of the troubled economic times we have recently experienced will be with us for years to come. One will certainly be the effects of high numbers of unemployed workers, extended unemployment benefits and the correlating insolvency of many state unemployment funding programs.
Unemployment insurance (UI) is a program established by the Federal Unemployment Tax Act (FUTA) that is jointly financed through federal and state employer payroll taxes. It is designed to provide individuals with emergency income in times of involuntary unemployment and to encourage employers to effectively manage their workforce. In general, most employers must pay both state and federal unemployment taxes if they pay wages to employees of $1,500 or more in any quarter of a calendar year or if they had at least one employee during any day of a week during any 20 weeks, consecutive or not, in a calendar year. In New Jersey, Alaska and Pennsylvania, both employees and employers are required to pay unemployment taxes.
Calculating FUTA Taxes
The FUTA UI tax rate was originally set at 6.0%. For over 30 years, a temporary surcharge of 0.2% made the effective FUTA UI tax rate 6.2%. The surcharge expired on June 30, 2011, and the rate reverted to 6.0% as of July 1, 2011. However, it is important to understand that most employers do not pay the full tax; employers that pay the full tax;
Listed in Employer Resources.