New Overtime Rules

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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.

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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.

Tax Planning Season is Now

Tablet, spreadsheet, calculator, and coffeeTake multiple years of last minute tax law changes, add major sections of the tax code that expire each year only to be extended, and mix in major pre-formulated tax code changes. All this adds up to lots of potential for tax savings, but only if you plan accordingly. This is especially true in the following cases.

Check mark You have a child entering college. There are so many different college tax breaks, it is hard to determine which ones might make the most sense for your situation. This includes the American Opportunity Tax Credit, the Lifetime Learning Credit, Tuition and Fees Deduction, Coverdell Plans, 529 Plans, and student loan interest deductibility.
Check mark You wish to explore charitable giving strategies. Consider donating appreciated stock instead of cash. If you are over the age of 70 consider donating directly from a qualified retirement account instead of using after-tax savings.
Check mark Review the now permanent tax provisions. Late 2015 legislation made many popular tax breaks permanent. Do you know what they are and how they may impact you this year? These include an educator $250 expense deduction, sales tax as an itemized deduction alternative, expanded American Opportunity Tax Credit, and an expanded Earned Income Tax Credit.
Check mark Other changes may require a look. In addition to the tax provisions above, certain events may dictate a need for a quick tax review. Key among them are:

Check Getting married
Check Recently divorced
Check Birth or death in the family
Check Age triggering events (like retirement)
Check Kids entering or leaving school
Check Moving to a new state
Check Major purchase or sale of key assets including your home
Check Large refund or tax bill last year

Please call if you wish a review of your tax situation.

Five Smart Uses for Your Tax Refund

 

1 Pay down debt. Start with debts that carry the highest interest rates first, then move down the line. This is like savings on savings as you are freeing up future cash needed to pay the interest on this debt.Ideas: Pay off credit card debt. Lower your student loan debt. Make a principal payment on a mortgage.
1 Add to savings. Save some of your refund for later use.Ideas: Add to your emergency fund to have enough to cover at least six months of your every-day expenses. Add to a college savings account or a tax-advantaged retirement account.
 1 Invest in yourself. Spend some money improving yourself or your well-being. Investing in yourself can have long-term benefits.Ideas: Take a class to develop a hobby into a career. Consider a fitness membership. Take up meditation. Become accredited in your chosen profession.
1 Spend for permanence. Instead of spending your refund on day-to-day expenses, use some of it for capital purchases. Capital purchases are for items that last longer than one year.Ideas: Replace a worn out couch. Purchase a replacement bicycle. Upgrade an outdated light fixture. Consider a minor home improvement.
1 Have some fun. Finally, consider using part of your refund for a well-deserved break. When balanced with using a portion of your refund to improve your financial condition, you can feel better about a little splurging in your life.Ideas: Shop last minute flight deals for a weekend getaway. Take a road trip to a favorite destination.