Overtime Rules Go Into Overtime

Time Clock

The fate of a Labor Department rule extending mandatory overtime pay to workers by doubling the eligible salary cap is uncertain under the new presidential administration.

The rule introduced by the Labor Department under the direction of former President Barack Obama increases the salary cap for workers eligible to receive mandatory overtime to $47,476. It extends mandatory overtime, or time-and-a-half pay, to workers primarily in managerial or administrative roles in the retail, restaurant, and nonprofit industries.

Opponents of the rule won a court injunction blocking it in November 2016. The case may be abandoned altogether depending on the priorities set by President Donald Trump’s appointee to lead the Labor Department. Andrew Puzder, chief executive of fast food corporation CKE Restaurants Holdings Inc. (owner of Hardee’s and Carl’s Jr.) is undergoing Senate confirmation for the role. Until the case is resolved, the previous salary cap of $23,660 remains in place.

 

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Reminder: It is Tax Scam Season Too

hidden person

Imagine you receive a call from an IRS agent who says you owe back taxes and threatens to arrest you if you don’t immediately make a payment over the phone.

Thousands of Americans faced this situation in 2016, though the people on the other end of their phone lines weren’t actually from the IRS. They were scam artists calling across the world from Mumbai, India. Their aggressive intimidation of U.S. taxpayers brought in $150,000 a day until police cracked down on their call center.

Amazingly, con artists impersonating IRS agents were involved in a quarter of all the consumer fraud incidents reported to the Better Business Bureau last year, making it by far the most common financial scam. With the new tax-filing season underway, now is the time to be especially vigilant.

Top scams of 2016 graphic

The threatening approach used in Mumbai is just one variety of IRS scam. Another involved sending emails from fake IRS addresses telling taxpayers that due to a mistake they were owed larger refunds. According to the email, all they had to do was provide their bank information and prepay the tax due on the larger refund. Once they made the prepayment, both the scammer and their supposed refund disappeared.

See through any IRS scam

By following a few guidelines you can see through any IRS scam:

Bullet Point Digital communication is a big no. The IRS will never initiate contact with you via email, text message or social media, nor will they request personal or financial information over those channels. If you do get an email communication purporting to be from the IRS don’t click on any links or open any attachments. Instead, forward the email to phishing@irs.gov.
Bullet Point Mail first. The first contact from the real IRS will be through the mail. If you get a letter from the IRS that is unexpected or suspicious, it should have a form or notice number searchable on the IRS website, www.irs.gov. Compare what you find there with what you received. If it doesn’t look right, you can call the IRS help desk at 1-800-829-1040 to question it.
Bullet Point  Never pay by phone. A legitimate IRS agent will never make a call to demand immediate payment of a bill or ask you to provide your debit or credit card information over the phone. If you are suspicious, ask for the employee’s name, badge number and phone number. A real IRS agent won’t hesitate to provide this information. You can then politely end the call and dial the IRS at 1-800-366-4484 to confirm the person’s identity.

 

Holiday Money Savings Tips

Happy holidays giftTo many the holidays are “the most wonderful time of the year” but, to those on a tight budget the holidays can be very stressful. Why not save money this season by following some of these easy tips:

 

 

 

Question Holiday Cards: Send a holiday postcard rather than a card or letter to reduce postage costs. You can even recycle old cards you did not use from prior years.
Question Wrapping Paper. Use your children’s artwork, or have them help you decorate a roll of plain paper. Ask your local wallpaper store if they have old samples they would be willing to give you. You will not only save money, but you will make a gift that is much more memorable.
Question Decorations. Decorate with nature–use pinecones and evergreen boughs around your home. Fill glass vases with peppermint, colored M&Ms, pistachios, or your favorite candy.
Question Entertainment. Check out your favorite holiday movies from the library, drive around town to see Christmas lights, take a winter wonderland hike, or go caroling.
Question Gift-giving. Ask your family or friends to consider drawing names this year. Have everyone bring one gift and then play a gift-swapping game to see who gets what. To make gifting even less expensive, ask everyone to bring something from their home that they enjoy but no longer need.
Question Don’t buy it, make it. Why not give a gift that truly comes from you. It might be something you make, or bake, or it might be a gift of your time. Some ideas? Offer free babysitting service, dog or cat watching, lawn care or gardening services. Your limit is your imagination.

Breaking News: 2017 Retirement Contribution & Social Security Limits

If you have not already done so, now is the time to plan for contributions into your retirement accounts in 2017.

Retirement Contribution Limits

Retirement Program 2017 2016 Change Age 50 or over catch up
IRA: Traditional $5,500 $5,500 none add: $1,000
IRA: Roth $5,500 $5,500 none add: $1,000
IRA: SIMPLE $12,500 $12,500 none add: $3,000
401(k), 403(b), 457 plans $18,000 $18,000 none add: $6,000

Social Security

Item 2017 2016 Change Comment
Wages Subject to Social Security $127,200 $118,500 +$8,700 Annual Social Security employee tax: $7,886.40
Average Estimated Monthly Retirement Benefit $1,360 $1,355 +$5 Change in estimated amount

Don’t forget to account for any matching programs offered by your employer as you determine your various funding levels for next year.

2017 Health Savings Account Limits Announced

Stethescope around hunderd dollar bills

The savings limits for the ever-popular Health Savings Accounts (HSA) are now set for 2017. The new limits are outlined here with current year amounts noted for comparison purposes.

What is an HSA?

An HSA is a tax-advantaged savings account to pay for qualified health care costs for you, your spouse, and your dependents. When contributions are made through an employer, they are made on a pre-tax basis. There is no tax on the withdrawn funds, the interest earned, or investment gains as long as the funds are used to pay for qualified medical, dental, and vision expenses. Unused funds may be carried over from one year to the next. To qualify for this tax-advantaged account you must be enrolled in a “high deductible” health insurance program as defined by HSA rules.

The limits

Health Savings Account (HSA) Limits NEW! 2017 2016 Change
Maximum Annual Contribution Self $3,400 $3,350 +$50
Family $6,750 $6,750 nc
Add: 55+ catch up
contribution
$1,000 $1,000 nc
Health Insurance Requirements
Minimum Deductible Self coverage $1,300 $1,300 nc
Family coverage $2,600 $2,600 nc
Out-of-pocket Maximum Self coverage $6,550 $6,550 nc
Family coverage $13,100 $13,100 nc

Source: IRS Rev Proc 2016-28

Note: To qualify for an HSA you must have a qualified High Deductible Health Plan (HDHP). A plan must meet minimum deductible requirements that are typically higher than traditional health insurance. In addition, your coverage must have reasonable out-of-pocket payment limits as set by the above noted maximums.

Not sure what an HSA is all about? Check with your employer. If they offer this option in their health care benefits, they will have information discussing the program and its potential benefits.

 

 

New Overtime Rules

Timeclock

Employer and employee alert

On May 18, 2016 President Obama and Labor Secretary Perez announced new Department of Labor overtime regulations that go into place December 1, 2016. The Federal Labor Standards Act (FLSA) has information everyone needs to know to comply with these new rules.

Watch icon

Any worker making $47,476 or less must be paid overtime for hours worked in excess of 40 in a given week. This is true whether the employee receives a salary or hourly pay. The overtime rate must be at least time and one-half.
Watch icon Up to 10% of the compensation amount can be in the form of nondiscretionary bonuses or incentives.
Watch icon Highly compensated employees (HCE) is now defined as $134,004 or higher. The old rate was $100,000. Those above these income levels are exempt from the overtime rules as long as a minimal duties test is met.
Watch icon The new rule is effective December 1, 2016
Watch icon The wage amount will automatically reset every three years. The next change will be January 1, 2020.
Watch icon Actual implementation documentation has not been published in the Federal Register. Final regulations could still change slightly.

What this means to you

Watch icon There will be change. Any salaried employee who makes less than the $47,476 amount will see a change. It could take any of the following forms:

Point move from salaried employee to hourly employee
Point a raise to $47,476 or more
Point move from a flexible work-week to a scheduled work-week to comply with a strict 40 hour work week
Point increase in the tracking of hours
Watch icon Flex hours a thing of the past? Your work hours must now be tracked. Because of this, working from home and working flexible hours is more difficult. While the legal burden of reporting is placed on employers, employees will now need to track their work time.
Watch icon Required reporting. While the Department of Labor provides flexibility on how employers track hours, the standard of reporting will probably be tested through legal action. Here are some of the options per the Department of Labor.

Point Time clock. Have everyone track their hours by punching in and out.
Point Personal recordkeeping. Have each employee track their daily hours and report them to the employer each pay period on a timesheet.
Point Hard scheduling. Publish a schedule of hours for each employee. Record any deviation from the schedule and place the documentation with payroll records.

Note: Please refer the U.S. Department of Labor Fact Sheet #21 for a summary of the FLSA’s recordkeeping regulations.

Watch icon More than a raise. While many are touting this as a potential raise for more than 4 million employees, many believe two other objectives are in play. The first is to broaden employment. Employers may hire additional people to avoid the necessity of paying overtime. The second possible objective is to help re-establish a work and leisure balance.

No matter what the pundits say, the true impact of this change is unknown. The only certainty is that all employers now face additional administrative duties and potential legal action for non-compliance. This includes businesses, schools, and non-profit organizations. What is important at this point is to be aware of the upcoming change and plan for it.

2015 Tax Quiz

Pencil and quiz

The states must be crazy

Historically, nexus laws protect consumers and businesses from paying taxes to states where they do not visit or live. These laws are intended to protect interstate commerce. With the lack of strong federal tax guidance, many states are now passing fairly creative laws to reach into the pockets of their fellow states’ tax revenues. Can you match the creative law with the state?

 

 

 

Question Consultants pay more tax than employees. This state wants income tax on your consulting work as a non-resident but does not require you to pay tax if you are a non-resident “employee” doing the exact same work despite the fact you never set foot in their state.
Answer California
Question A non-resident gets married and pays tax to a state he has never visited. A widower who lives and works in Florida marries a widow from another state. The widow’s state demands income tax on the new husband’s earnings made while living and working in Florida.
Answer Utah and others
Question New gross receipts tax concept. This state’s recent law introduces a Commerce Tax based on a business’ gross receipts and the type of business they conduct. This departure from traditional sales/use tax and income tax is placed on any business that has $4 million or more in state gross receipts. The tax is owed even if the business is located in another state. To make matters worse, the law requires the out-of-state businesses to pay for any audit related expenses should the state wish to examine their books. Expense reimbursement could be required even if no tax is due as a result of the audit.
Answer Nevada

Question Tax your inheritance. The federal government and most states will tax the estate of a person who passes away. But a few states also tax the other end of the death spectrum; those who receive an inheritance. If you expect money from a rich relative, you will not want to live in any of these states when your new found wealth arrives.
Answer Iowa, Nebraska, Pennsylvania, Kentucky, New Jersey, Maryland

IRS Announces Dirty Dozen Tax Scams

IRS Scams

Each year the IRS announces “Dirty Dozen Tax Scams” they encounter regarding frivolous tax arguments and fraud. While six of the “scams” are related to, “don’t cheat we have our eyes on you,” the other six are scams that all of us should be on guard to detect.

Bullet Icon Identity theft. Identity theft tops the list of the dirty dozen this year. This reflects a truly bad year for the IRS. Three times in the past twelve months the IRS has acknowledged the theft of 100,000′s of taxpayer’s private information. Thankfully, the IRS is taking precautionary measures to curtail this huge problem. In addition to limiting the number of direct deposits it will make to any single account, the IRS is working with states and tax preparation software vendors to put more controls in place. This includes some states requiring drivers license numbers on their tax forms, delays in early processing of tax refunds, internal tracking within software programs, and continual checking for heavy filing activity. There are taxpayer single use tax id’s attached to tax returns that have had identity problems. Here is a link to the IRS identity protection page should you wish to know more. IRS Identity Protection: Prevention, Detection and Victim Assistance

Bullet Icon Phone scams. Phone calls from thieves representing themselves as IRS agents continues to get more sophisticated. These thieves often have some of your personal information. The caller ID may show as coming from the IRS and the scam may involve numerous phone calls instead of a single contact. How would you react if someone threatened you with jail time, deportation or license revocation? Remember, never give information over the phone to someone claiming to be from the IRS when they call.
Bullet Icon Phishing. This recurring scam involves receiving fake emails and creating websites that look like the real deal. The IRS will not send you billing information or refund information via email. Do not click on any link from an email received from the IRS unless you requested it. Remember the IRS does not initiate contact through emails.
Icon Return preparer fraud. In conjunction with Identity Theft, many temporary tax preparation offices set up shop and generate fraudulent tax returns. These folks often file a return using stolen information, create refund fraud and other scams that leave you holding the tax obligation when caught.
Bullet Icon Offshore accounts. The IRS has taken many enforcement actions in this area after breaking the long-standing secrecy wall of Swiss bank accounts. If you have money in foreign accounts, you must understand the reporting requirements or you could be subject to substantial fines.
Bullet Icon Fake charities. After major disasters, many charitable givers are scammed into making donations to fake charities. In addition, new IRS charitable organization reporting requirements are not being followed by many organizations. This makes donations to them non-deductible. To protect against this, prior to donating funds make sure the charity is both legitimate and deemed a qualified charity by the IRS.
Icon Other scams. The other six scams that round out the IRS list include; inflated refund claims, falsely padding deductions, excessive business credit claims, falsifying income to claim credits, abusive tax shelters, and frivolous tax arguments.

If you wish to know more, the IRS has posted information on these scams on their web site, www.irs.gov. Simply click on the News and Events tab.

A Couple IRS Wrinkles That May Impact You

IRS logo

The IRS made two recent announcements that may impact you this tax-filing season. Being aware of these announcements may keep you from unknowingly delaying filing your tax return.

One topic is regarding proof you have qualified health insurance and the other topic is an error in notices sent to victims of IRS identity theft.

Extension in Form 1095 reporting

For 2015 tax returns, everyone employed by a company with 50 or more employees will receive a new Form 1095. This form is in addition to the Form 1095-A’s received by other taxpayers using the Marketplace to purchase their health insurance. You need this form to file your taxes as it provides the necessary proof that you have adequate health insurance for the year. Without this proof you could be subject to the new shared responsibility tax.For 2015 tax returns, everyone employed by a company with 50 or more employees will receive a new Form 1095. This form is in addition to the Form 1095-A’s received by other taxpayers using the Marketplace to purchase their health insurance. You need this form to file your taxes as it provides the necessary proof that you have adequate health insurance for the year. Without this proof you could be subject to the new shared responsibility tax.

 

What is happening

The IRS has granted an extension for Form 1095 B and 1095 C being sent to employees. Here are the old and new dates.

Form Purpose Original
due date
New
due date
1095 B & 1095 C Report to employees of adequate health insurance coverage by month 2/1/2016 3/31/2016
Summary forms 1094 B & 1094 C Summary forms sent to the government confirming employee health care coverage 2/29/2016
(3/31 if filing electronically)
5/31/2016
(6/30 if filing electronically)

Note: This delay does not impact the timing of Form 1095 A, Health Insurance Marketplace Statement. 1095 A is the form you receive if you purchase your health insurance through the Marketplace and not through your employer.

What it means to you

Since the IRS understands that taxpayers do not wish to wait to file their 2015 tax returns, the IRS is allowing you to file your 2015 tax return without receiving this form. Here are some suggestions.

Check Check with your employer. If you work for an employer with more than 50 employees, check with your human resources department to find out when you can expect to receive the 1095 form. If there is no delay, then wait for Form 1095.
Check Look for other supporting documents. For 2015, the IRS will allow you to support your insurance coverage with means other than Form 1095. Simply collect this proof of insurance and save it in case of a future audit.
Check Wait. If you changed jobs or have a situation that suggests there may be a gap in insurance coverage you may wish to wait until you receive your documents. There is no corresponding delay granted to file your tax return. Federal taxes owed are still due on or before April 18th.

Identity theft PINs are for 2015 not 2014

If you are one of the unfortunate victims of IRS identity theft you will need a one time PIN to file your tax return. This numeric identifier is sent to you via mail by the IRS.

What has happened

IRS PIN notice ( letter: CP01A) is being mailed to identity theft victims right now. The tax year on many notices is incorrectly stated as 2014, when the PIN is to be used for your 2015 tax return. This mistake is causing confusion among taxpayers.

What to do

Check Do not throw out the notice! This PIN is for your 2015 tax return. Without it you cannot file your 2015 tax return.
Check File your tax return. Remember identity theft victims who are provided this PIN must submit their tax return with this PIN entered in the correct field. You may not efile your tax return without it.

 

Time to Start Preparing

Magnifying glass and papers While most see January as the start of something new, you should also see it as a time to start the collection of your prior year information. Here are some things to consider:

Receive and Review Informational Tax Forms. Create a list of all your anticipated W-2s, 1099-MISC, 1099-DIV, 1099-B, and SSA-1099s. Check them off as you receive them, but not before confirming the information is accurate.

Be aware of other informational tax form needs. Here are some of the more common.

Arrow W2-G for any gambling winnings
Arrow 1099-G for any tax refunds or unemployment payments
Arrow 1099-K for any credit card activity over $20,000 and 200 transactions. Look for this if you are a heavy seller on sites like Amazon or E-bay.

Don’t forget your 1098s. Like 1099′s, Form 1098′s provide information to help maximize your possible tax deductions. Here are some of the most common.

Arrow 1098 mortgage interest statement
Arrow 1098-T for confirmation of tuition and fee payments to colleges and universities.
Arrow 1098-C for confirmation of the value of contributed property like a used car to a charitable organization.
Arrow 1098-E to report any student loan interest

The NEW 1095. Most taxpayers will now need to provide proof of adequate health insurance. This proof will be required to file your tax return and is typically done using Form 1095. Your employer will usually provide this to you if you are not purchasing insurance through Medicare or through the new Federal Affordable Care Act marketplace. Please be aware of this new form and look for it.

Other records; Collect your receipts and sort them. Using last year’s tax return, begin to gather and sort your necessary tax records. Sort your tax records to match the items on your tax return. Make sure you have the necessary documentation. Here is a master list of the more common in no particular order:

Check Informational tax forms (W-2, 1099, 1098, 1095-A, plus others) that disclose wages, interest income, dividends, and capital gain/loss activity
Check Other forms that disclose possible income (jury duty, unemployment, IRA distributions and similar items)
Check Business K-1 forms
Check Social Security records
Check Mortgage interest statements
Check Tuition paid statements
Check Property tax statements
Check Mileage log(s) for business, moving, medical, and charitable driving
Check Medical, dental and vision expenses
Check Business expenses
Check Records of any asset purchases and sales
Check Health insurance records (including Medicare and Medicaid)
Check Charitable contribution receipts and documentation
Check Bank and investment statements
Check Credit card statements
Check Records of any out of state purchases that may require use tax
Check Records of any estimated tax payments
Check Home sales records
Check Educational expenses (including student loan interest expense)
Check Casualty and theft loss documentation
Check Moving expenses
Check Retirement contribution records

Remember, if in doubt whether something is important for tax purposes, retain the documentation. It is better to save unnecessary documentation than to wish you had saved the documents to support your deduction. By starting now, you can identify missing items in time to meet the tax filing deadline.