Everything You Always Wanted to Know About Payroll

and more…

Prepared for:Glen Ellyn Business Leaders Forum

01/24/14

#@%*?!! I owe the IRS WHAT?

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The American Dream of self-determination, rooted in opportunity, is at the foundation of small businessSmall business heroes• Invest their time, passion, energy, money and

other resources to create and build business• Offer personalized service and a sense of

community and connection

The American Dream

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Small business growth • Big idea (product and/or service)• Survival• Success• Take-off and growth• Employees are hired and…

The American Dream

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More Responsibilities for You!

You’re now responsible for:• Tax collection• IRS, IDES, IL Dept. of Revenue

• Employee financial commitments• Garnishments, child support, etc.

• Federal and state reporting• Homeland Security (illegal immigrants)• Dept. of Labor (pay rates – regular/overtime, etc.)

• Equal Employment & Opportunity Commission(discrimination)

If you fail on these among other obligations… expect fines, claims and interest payments!

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Payroll 101

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Having employees requires paying employees accurately and timely• Establish a pay period• Collect and document hours from non-exempt

employees• Calculate gross wages, overtime, paid-time off, etc...• Create checks for all employees• Calculate and pay tax liabilities• Pay all 3rd party obligations (child support, etc.)• Update GL and then…back to running the business!

The Payroll Process

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State

IL Unemployment Tax

2014 Wage Base = $12,960.

Tax Rates .55% to 8.55%

New Company Rate 3.95%

Small Company Rate

5.4% ($50,000. or less per QTR)

Key Tax Notes

Federal

Employee

Social Security

6.2% 2014 cap = $117,000.

MHI MedicareEE ADD MHI-> $200K

1.45%.9%

No cap

Employer MatchSelf Employment taxSelf Employ-ADDMHI > $200K

6.2% + 1.45%12.4% + 2.9%

.9%

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Federal & State posters www.state.il.us/agency/idol/Posters/poster.htm

• Federal & state posters may be ordered through Precision Payroll

• Or piece together your own

State poster www.state.il.us/agency/idol/Posters/poster.htm

Required: Post both federal and state posters

Mandated Labor Law Posters

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National Labor Relations Board (NLRB)• Union election rule fro 2012 makes it easier for

employees to bring in unions - How?• Rule shortens window to vote union or non-union• Union advocates’ position - previous voting window was

too long (up to 2 months)• Companies’ position: the new 2 week window is too short

(emotions too high and rational thinking is limited)

FYI: A non-vote initiative almost passed. (2012) The initiative would have eliminated voting. An authorization card would have replaced a “vote”. Initiative attempt failed.

Union Avoidance?

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Credit checks for applicants• In Illinois as of 2011, it is NOT legal to check

an applicant’s credit• Exceptions include:• Positions handling large amounts of cash• Insurance positions• Banking positions• Management positions

Credit Checks

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Compliance 101

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Letter of notification to employer stating that an employee’s name does not match their social security number, and/or that the number does not exist• Requires immediate action from the employer • New procedure does not allow the employer to fire employee• Employee could sue for National Origin Discrimination

• Employee must fix problem at the social security office. If employee does not take action, the employer should makes notes only

• When can an ER Fire? Never, unless they go AWOL. Becomes an immigration issue.

Social Security No-Match Letters

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In 2013• Companies with 250 employees or more…• Employer portion of healthcare costs must be given to

whoever does payroll for the company, so that each employee’s W-2 shows both the employee paid healthcare cost, and the employer paid healthcare cost for the employee

In 2014• Companies of ALL SIZE are required to comply—

Indefinitely on hold—not currently on the front burner

New W-2 Requirement for Benefit Costs

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IN 2014:

If a company has 45 full time employees and 15 part time employees(EE), the employer (ER) must verify the full time equivalents by adding up the number of part time EE’s and their hours and do a calculation to see if they fit into the over 50 EE category for healthcare. An affordable health care report can be created to help with this. IF it is shown that the number of EE’s including the full time equivalents is 50 or greater, then the ER must provide healthcare for the FULL TIME Employees (30) Or possibly be penalized. DELAYED UNTIL 2015—HOWEVER—hours worked in 2014 will be used in the calculation for 2015. Remember: Law does not apply to under 50 EE’s, but the 30 hours do apply for full time on insurance policies.

AFFORDABLE CARE ACT?

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Fair Labor Standards Act (FLSA)• Illinois minimum wage (home state rule): $8.25• Overtime pay for over 40 hours worked in a week

(unless otherwise dictated by a union contract)• Maximum Tip Credit = $3.30

American Disabilities Act (ADA) (for companies with 2 employees or more)• Communicate physical requirements in the job description, the

interview process, and the job advertisement• For information regarding accessibility for businesses serving

the public, reference the ADA Guide for Small Business at www.ada.gov/publicat.htm

Key Employment Laws

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ADA: INTERPRETATION:New amendment to ADA-Now covers temporary disabilities. Requires that employee be allowed back to work with temporary restrictions. As long as the EE can do the essential functions(most) of the job. -- Any job availableThe above is for Employers under 50: Although this law takes effect in Illinois with as few as 2 employees

Key Employment Law Cont…

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Immigration & Naturalization – Homeland Security• Before hiring: • To reduce risk of hiring someone not legally able to work

in the U.S.A, verify job applicant’s social security number (SSN#) with a background check company—Under $5 Incorrect SSN #’s may cost the employer • $50. minimum per incident• Expense of filing corrected W-2’s. • Expose employers to immigration fines and/or raids

• Complete I-9 and W-4-FED and STATE of IL. at hiring. Copy identification information.

Key Employment Laws – cont’d

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Payroll 201

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401(k), 403(b), SEP• Calculate gross minus contribution for federal and state

withholding

Section 125: Pre-tax health, dependent care, transportation• Calculate gross minus contribution for federal, state,

social security, and Medicare withholding

Taxable Fringe Benefits• Record all taxable fringe benefits• Process with last payroll of year or with bonus run, to have

wages to draw tax liability from (avoids tax adjustments)

Tax-free/Taxable Fringes & Benefits

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1. Keep a 4-5 day gap between pay period end date and check date

2. Use a bi-weekly or weekly pay cycle Ease in calculating overtime….if you have many hourly employees

3. Use a time clock Reduce waste and improve budgeting

4. Pay via direct deposit - offer payroll debit cards for non-bankable employeesReduce check recon fees, stop payments, and fraud

Payroll & Compliance Tips

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5. Have an employee handbook, give to new hires to read & sign (to verify receipt)Reference during terminationsReduce unemployment exposure

6. Terminate non-performing new hires before 30 working days are completedAvoid being chargeable employer for unemployment

7. Use a service to simplify and streamline payroll processGives you more time for running your business!

Pay & Compliance Tips cont’d

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1. Is there a legal requirement to issue a paper paystub to EE’s each payroll period?—NO—Illinois does not require this- States may vary2. Illinois does require: ER (FLSA) is required to keep accurate records of hours worked and wages paid to EE’s. Can be a time sheet from EE, or from a time and attendance system3. New IRS Rule for Automatic Gratuities: Effective 01/1/2014, automatic gratuities in the hospitality industry (ex. Auto 18% tip for parties of six or more) will be treated by the IRS as service charges rather than tips. Be aware that any such service charge will be considered part of the EE’s regular pay for purposes of calculating the overtime rate. ALSO: Mandatory service charges are part of the cost of food and therefore subject to sales tax!!

THINGS TO KNOW 2014

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HEALTH CARE REFORM: SMALL BUSINESS TAX CREDIT

1. To encourage small ER’s to offer health insurance2. Maximum credit is: 35% of ER’s premium payments made on behalf of EE’s in tax

years 2010-2013. will increase to 50% of ER’s premium payments beginning in the 2014 tax year.

3. TO BE ELIGIBLE: ER must have fewer than 25 full-time equivalent EE’s making an average of about $50K or less.

4. TO BE ELIGIBLE FOR FULL AMOUNT: ER must have fewer than 10 full-time equivalent employees making an average of about $25K a year or less. (owner may typically be excluded from these Calcs)

5. TO QUALIFY: ER must pay at least 50% of full-time EE’s premium costs (EE only coverage). ER does not need to offer coverage to part-timers or dependents.

6. Beginning in 2014-only premiums paid by ER’ for EE’s enrolled in a qualified health plan offered through a Small Business Health Options Program are counted when calculating the credit. HOWEVER THIS was delayed one year until 2015…So exchanges only in 2015

MORE FOR @)!$ or 2014

So what do I do now!

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Your Personalized Payroll Solution

Precision Payroll

of America, LLC.

Small to Mid-sizeCompanies

Financial Institutions& Tax Agencies

Process payroll,Update master file, Originate direct deposits,Transfer tax payments,

Employee DataInput hours and new hire changes, Preprocess via web entry on Precision Payroll’s Client Server

Your dedicated Payroll Specialist

Internal Revenue Service, States(s) Dept. of Revenue, State(s) Dept. of Unemployment, Local(s) Department of Revenue, Social Security Administration,

Company Bank Account(s),Employee Bank Account(s),

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We’re the 30 year old company, whose first

employee and first client still work together

We’d love to be your partner and provide payroll solutions for

you!630-242-1515-Paul

630-785-2205 Leslie-HR

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Questions?Paul SivakEVP/Principal

Precision Payroll of America, LLCDirect number: (630) 242-1515Email: psivak@precisionpayroll.comWebsite: www.precisionpayroll.com

Rev. 4.20.12

Thank You