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May I utilize a “fluctuating workweek method” and pay overtime at a lower rate and potentially reduce our overtime expense?

Q:     My company pays overtime at time and one-half, and its overtime costs are soaring.  Somebody mentioned to me that my company may be able to utilize a “fluctuating workweek method” and pay overtime at a lower rate and potentially reduce our overtime expense.  What is this method?

A.    While the general rule is that overtime hours must be paid at one and one-half (1.5) times the employee’s regular hourly rate, the fluctuating workweek method (“fww method”) of computing overtime permits payment for overtime at a “half-time” rate. ...

We have an employee coming to work here in the US on a H1-B visa, how would we tax the employee's wages?

The type of Visa an individual holds will dictate whether or not the individual is exempt from Social Security or Medicare taxes. For H-Visa holders, they are not exempt from Social Security or Medicare taxes so the employer would need to withhold these taxes as well as pay the employer's share. He would also be subject to income taxes.

We pay 100% of employees' disability premiums and "gross up" employees' wages so that, if they become disabled, their pay would not be taxable. Do we have to account for this on each payroll or can we just add this at the end of the year on the W2?

It can be handled in a number of different ways depending on what the employer wants to do. Here are some options:

  1. Enter the cost of the premium each pay as a taxable fringe. (Annual premium divided by 24 or 26 depending on how many pays per year.) This way, the employee pays for the taxes each pay and nothing needs to be grossed up.
  2. Employer pays the amount for FICA & Medicare (SS Tax) only - multiply the per pay premium by 5.65% (or 7.65 after 2/29/12 if Congress doesn't extend the relief) and add that to other wages, thereby paying the employee for the FICA...
FAQs Regarding Employer-Provided Health Coverage Informational Reporting Requirements for 2012

Starting in tax year 2011, the Affordable Care Act required employers to report the cost of coverage under an employer-sponsored group health plan. To allow employers more time to update their payroll systems, Notice 2010-69, issued last fall, made this requirement optional for all employers in 2011. IRS Notice 2011-28 provided further relief by making this requirement optional for smaller employers in calendar-year 2012. Notice 2011-28 also provides guidance for employers that are subject...

One of my employees quit and has not returned a company-owned laptop that was provided to the employee. Can I withhold the employee’s final paycheck until the laptop is returned or deduct the cost of the laptop from the final paycheck?

This will also depend on the wage payment law of the state in which your employee is employed.   As a general matter, employers are not permitted to withhold an employee’s final paycheck beyond the date by which the law requires it to be paid, even if the employee has not returned property belonging to the employer.  As for deducting the cost of the laptop (or other company property that is not returned), this may not be permitted or, such as in the District of Columbia, Maryland and Virginia, it may only be permitted if the employee has signed a voluntary written...

How soon after employment termination must a terminated employee be given his or her final paycheck?

This will depend on the wage payment law of the state in which the employee is employed; these laws are not all the same.  Typically, the final paycheck must be provided by no later than the day on which the employee would have been paid if employment had not terminated (e.g., by the next regular payday).  Payment may be required sooner, however, depending on the state.  The time by when payment is required may also depend on whether the employee was fired or resigned.  For instance, in Maryland and Virginia, the final paycheck is required to be paid by the date on...

Can an employer log in to an employee's personal email account to review his communications?

Question:

We suspect that an employee has been using his personal email account (e.g., Gmail) to communicate confidential company information to a competitor. Our company has a policy that employee use of company computers (including the internet) is subject to monitoring at any time.  Since the employee is using company computers to access his personal email account, can we log in to that employee’s personal account to review his communications?

Answer:

Unless your employee has explicitly authorized you to access his personal web-based email accounts (like...

Retired employees returning to payroll

Question:

We have retired employees that are converting to faculty members and will be returning to our payroll.  Should we code their earnings so that we are able to differentiate them in the system? We want to be able to identify the earnings as a faculty member vs. when they were employees on the payroll.  In addition, they will be receiving a w-2 and are also receiving pension pay. Is it legal to receive a W-2 and a pension 1099?

Answer:

You may set up a special code for your own internal purposes to differentiate these earnings from regular salary...

Employer in DC has employees who work in DC, Maryland and Virginia and some who work in multiple jurisdictions. Where should he report wages for unemployment purposes?

Question:

A company headquartered in DC has employees who work in DC, MD and VA.  Some employees work only in DC, some only in MD, some only in VA, some work in multiple jurisdictions.  The company is reporting all wages in DC for state unemployment purposes. It seems to me that wages for employees who work only in MD should be reported in MD, those who work only in DC should be reported in DC, and those who work only in VA should be reported in VA. Those who work in multiple states should be reported in DC. The employer has gotten no guidance from their current payroll...

What is the tax withholding rule concerning an employee who is a resident of Delaware working in Pennsylvania?

In the situation you have described, the Delaware resident is required to have Pennsylvania taxes withheld. Pennsylvania and Delaware do not have tax reciprocity.

Disclaimer: The above Question and Answer are for informational purposes only. Any tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the  purpose of avoiding penalties which may be imposed on the recipient by the IRS or State or Local...