Time Is Running Out On 2019 Tax Planning

Did you unexpectedly owe on last year’s return?  With only a handful of paychecks left in 2019 to ensure you have enough withholding, we recommend you go to the IRS’s Tax Withholding Estimator (https://www.irs.gov/individuals/tax-withholding-estimator) or contact your tax professional to see where you stand.  If you find that you are under withheld, you should determine how much additional withholding you need before 2019 draws to a close, divide that number by the number of remaining paychecks and complete a new W-4 using line 6 to catch up your withheld tax.  Of course, by speaking with a tax professional, they may be able to give you ideas that could help you reduce your tax bill for 2019. 

US Department of Labor Raises Earnings Threshold for Nonexempt Employees

On 9/24/19, the Department of Labor announced an increase in the threshold for the earnings requirement of nonexempt workers.  Effective January 1, 2020, employers must pay their employees a minimum of $684 per week (up from $455 per week), which is equivalent to $35,568 per year. 

The new rule allows for up to 10% of an employee’s earnings to come from nondiscretionary bonuses and incentive payments, including commissions, to satisfy the threshold requirement (standard salary level).  In order for nondiscretionary bonuses and incentive payments to count in the calculation, they must be paid on at least an annual basis.  In addition, the highly compensated employee exemption threshold will increase from $100,000 to $107,432 per year. 

Employers must review your exempt employees’ current salary levels to understand what salary increases need to be made by the end of the year or switch salaried employees whose salaries don’t meet the requirement to nonexempt (hourly) employees.  Nonexempt employees then become eligible for overtime pay.  In addition, employers should review your job descriptions for all your roles to ensure they qualify for one of the Fair Labor Standards Act’s executive, administrative, or professional exemptions. 

NJ Department of Labor’s Paid Sick Law Now in Effect

October 29, 2018 marked the beginning of time when all New Jersey private and non-profit employers must follow the new Earned Sick Leave Act for all employees, whether full time or part time. In addition, Pennsylvania and other states’ employers with employees performing “all of their work in New Jersey” must also be following the new law*. Construction industry employees who work under a collective bargaining agreement, per diem healthcare employees, and public employees with sick leave benefits in place are exempt from the law.

If this applies to any of your employees, you must provide those employees with a copy of the Notice of Employee Rights about the law no later than November 29, 2018, and this notice must also be posted in a conspicuous place (e.g., with your other required employer posters). New employees must get the notice at time of hire.

If the law applies to your employees, you must be tracking the employees’ hours and accruing paid sick leave at the rate of one hour for every 30 hours worked as of October 29, 2018. Employers may set a maximum limit of 40 paid sick leave hours per employee (regardless of part-time or full-time status).

In addition, the employer needs to come up with a benefit year to track future sick leave accruals. That might be October 29 through October 28, January 1 through December 31, or another 12 consecutive-month period that follows your other benefits annual renewal year. This benefit year is how you will track your current/long-term employees, but all new employees begin accruing sick leave on their first day of work, and then fall into place with your benefit year end date.

Employers are allowed to require a 120-day (or something less) eligibility period, which would stipulate that an employee will not receive paid sick leave before that eligibility period, but the time still must begin accruing on their first day of work.

The law stipulates the circumstances for which employees must be allowed to take paid sick leave, how sick time is carried over and/or paid out at the end of the benefit year period, and limits the requirements an employer can put on any advance-notice rules employees must follow. Employers are prohibited from requiring employees to “find a replacement” for their shift if they are using paid sick leave, and employers are required to keep time and pay records for a minimum of five years.

*New Jersey has not yet published the final regulations on this law, so many employers, administrators, and even employment attorneys have unanswered questions, but it is clear that employers must now be providing the paid sick leave to eligible employees.

If this law applies to your employees and you need further clarification of how your company needs to comply with the law, including re-writing of your sick paid leave policy, or need a copy of the Notice of Employee Rights please contact Jill Scheetz at [email protected] or 215-997-7270.

This is a good time to remind PA employers that if you have employees working in Philadelphia but you are not a Philadelphia-based employer, you must still be following the Philadelphia Sick Leave law for those employees.

By Jill Scheetz, PHR, SHRM-CP

A New Way of Comparing Financing Without Hurting Your Credit Score

Credit Karma has rolled out a new service that allows members to compare credit cards and
loans without going through the three credit bureaus.

As you may be aware, when one applies for credit, the lender will request information about
the lender’s creditworthiness from the credit bureaus. This “hard inquiry” impacts your new
credit portion of your credit score. A hard inquiry will impact those with a short credit history
more than it does those with a long credit history.

Credit Karma’s “Marketplace” service utilizes their partnership with lenders and by-passes the
hard inquiry process with the credit bureaus thereby not impacting your credit score. Credit
Karma does the work of comparing the credit cards and other loan products for which a
particular borrower would have a high likelihood of being qualified. In other words, the service
saves you time and a ding to your credit score.

More information can be found at www.creditkarma.com.

Complimentary Lunch and Learn for CASI Clients

Thursday, November 15, 2018
12:00 – 1:00 (Lunch provided)

PA Unemployment Comp

  • Basics of the law
  • How to prevent your company from having claims against it
  • Tips for the appeals and hearing process

This is event is free to CASI clients, but a reservation is required.  Email [email protected] or call 215-997-7270.

Arrive at 11:45 to get your lunch, materials, and to find a seat.  Program will end promptly at 1:00.

Have You Checked your 2018 Federal Tax Withholding?

A government report was recently issued estimating 30 million people (over 21% of taxpayers) will find they have had too little federal tax withheld and will owe money when they file their 2018 income tax returns.  As you may recall, the federal withholding tables were updated in March 2018 as a result of the Tax Cuts and Jobs Act passed in 2017.  Employers should have had all employees complete a new W-4 in March, but the responsibility falls to each taxpayer to make sure they’re withholding the proper amount.  Request a copy of your W-4 from your employer to ensure you’re using the 2018 version.

Due to the major tax law and the withholding table changes the IRS is urging everyone do a “paycheck checkup” as soon as possible.  This paycheck checkup the IRS has recommend would involve working through the 2018 Form W-4 or working though the IRS’s Withholding Calculator that can be accessed through the IRS website at https://apps.irs.gov/app/withholdingcalculator/.

So now that we’re well into the dog days of summer (although it seems more like monsoon season) and you’re probably stuck inside with air conditioning anyway, what could possibly be more fun than to think about your tax situation?  Take one of your missed opportunities to sit poolside or under the beach umbrella to do a paycheck checkup by visiting the IRS website and make sure you’re having the proper amount of federal income tax withheld from your paycheck.

Health Insurance Options

Are you a sole proprietor or small-business employer? Is your health insurance too expensive or completely unaffordable? Keep your eyes open for more information on new entities known as association health plans. The President signed an executive order last year and the Department of Labor issued its ruling. The changes may provide opportunities for lower-cost group health insurance. Different states may also have different rules that you should become familiar with. You should certainly do your own analysis of your specific situation, and your insurance provider may be able to advise you in this area. As always, you may contact our firm for additional consultation.

July 2018 starts the penalty phase of new PA 1099-MISC rules

Earlier this year we announced the changes that the Pennsylvania Department of Revenue was making with Form 1099-MISC reporting through our newsletter and our website (see February blog post below).  This change applies to businesses operating in PA who pay non-employee compensation or business income to individuals or entities outside PA or to disregarded entities (such as LLCs) who have a non-PA resident member.   (Think about those to whom you issue a 1099-MISC with Box 7 payments.)  This change also applies to lease payments made in the course of a trade or business to a non-PA resident lessor who is an individual, trust, or an estate by a lessee of PA real estate.  (Think about those to whom you issue a 1099-MISC with Box 1 payments.)

We wanted to take this time to remind you that if the above scenario applies to you, you should be withholding 3.07% PA tax on payments to these individuals or entities.  Although PA had not been assessing penalties for failure to file for the first two quarters of this year*, PA will start assessing penalties beginning with the third quarter.  If you need help better understanding the impact on your company/entity, please don’t hesitate to contact us or go the PA Department of Revenue website.  (*If the 3.07% tax was withheld in the first or second quarter, you were/are required to make timely deposits and reporting.)

It’s important to note that although the due date for Form 1099-MISC filing isn’t until January 31, 2019, you need to take action on this immediately if you haven’t already.  Our blog post from February gives some helpful reminders on how to stay on top of these vendor payments throughout the year.

Philadelphia Wage Tax

The Philadelphia wage tax rate changes each year on July 1st. Every paycheck dated after June 30th must be taxed at the new wage tax rate. The new reduced tax rate for Philadelphia residents is 3.8809%; non-residents subject to Philadelphia wage tax will now be taxed at the rate of 3.4567%. Although a wage tax reduction may be exciting to hear there will be no noticeable change in your paycheck.