Vision Payroll

November 27, 2013

Tip of the Week: Schedule Additional 2013 Bonus Payrolls Now

Filed under: News — Tags: , , , — Vision @ 3:46 pm
Schedule Additional 2013 Bonus Payrolls Now

Schedule Additional 2013 Bonus Payrolls Now

Are you planning an end-of-year bonus payroll for employees? With only five weeks left in 2013, now is the time to schedule any additional payrolls you need.

Schedule Separate Pay Runs for Bonuses

Many employers like to distribute bonus checks at a firm party or get-together. If the bonus checks are included with a regular pay run, the year-to-date amounts on the employees’ stubs will reflect the bonus. To keep the bonus amounts off the pay stubs from the regularly scheduled payroll, schedule an additional payroll dated after your last regular payroll, but before the party or other event where you plan to distribute the bonuses. Remember to allow at least two days after the day you plan to transmit bonus amounts for the payroll to be processed and shipped.

Stop Direct Deposit to Create Live Bonus Checks

If processing your payroll online, check the Stop Direct Deposit box on the Payroll, Dates screen to stop direct deposit for all employees. To stop direct deposit for selected employees, check the Stop Direct Deposit box on the Pay Detail screen. Otherwise, indicate which direct deposits you would want stopped when you submit your payroll. Stopping direct deposits in this manner would apply only to that payroll and direct deposit would be reestablished for the next payroll.

Schedule Bonus Payroll Early

By scheduling bonuses early, Vision Payroll can work with you to help ensure that your bonus checks arrive on time.

November 7, 2011

IRS Rules on Deductibility of Accrued Bonuses

Filed under: News — Tags: , , , , — Vision @ 4:14 pm
IRS Rules on Deductibility of Accrued Bonuses
IRS Rules on Deductibility of Accrued Bonuses
In Revenue Ruling 2011-29, the Internal Revenue Service (IRS) ruled that a taxpayer can establish the “fact of the liability” under §461 for bonuses payable to a group of employees even though the employer does not know the identity of any particular bonus recipient and the amount payable to that recipient until after the end of the taxable year.

Bonus Deductibility a Three-Prong Test

For accrual-basis taxpayers, a liability is incurred, and is generally taken into account for federal income tax purposes, in the taxable year in which:

  1. All the events have occurred that establish the fact of the liability,
  2. The amount of the liability can be determined with reasonable accuracy, and
  3. Economic performance has occurred for the liability (collectively, the “all events test”).

Rev. Rul. 2011-29 Addresses First Prong Only

Revenue Ruling 2011-29 addresses only whether the first prong of the all events test is met. The first prong of the all events test requires that all the events have occurred that establish the fact of the liability. Generally, all events occur to establish the fact of a liability when:

  1. The event fixing the liability, whether that be the required performance or other event, occurs, or
  2. Payment is unconditionally due.

Liability Is Established by the End of the Tax Year

Under the employer’s plan, its liability to pay a minimum amount of bonuses to the group of eligible employees is fixed at the end of the year in which the services are rendered. The employer is obligated under the program to pay to the group the minimum amount of bonuses determined by the end of the taxable year. Any bonus allocable to an employee who is not employed on the date on which bonuses are paid is reallocated to other eligible employees. Thus, the fact of the employer’s liability for the minimum amount of bonuses is established by the end of the year in which the services are rendered.

Employers Should Consult Their Tax Advisors

Vision Payroll recommends that employers consult their tax advisor with questions as to the deductibility of bonuses in a year other than when they are paid.

October 14, 2011

Question of the Week: Do We Need to Include Bonuses in Overtime Calculations?

Do We Need to Include the Bonus in Overtime Calculations?
Do We Need to Include the Bonus in Overtime Calculations?
This week’s question comes from Sylvia, a payroll manager.

Sylvia asks:

We have employees who worked overtime this past week and received bonuses. Do we need to include bonuses in overtime calculations?

Answer: The bonuses may or may not have to be included in the overtime calculation. Discretionary bonuses are not included in calculating overtime pay, but non-discretionary bonuses are included.

Both the Decision to Pay a Bonus and the Amount of the Bonus Must Be Discretionary

Under 29 USC §207(e)(3)(a), in order for a bonus not to be included:

Both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly.

Regulations Further Clarify the Law

The regulations issued under this section (29 CFR §778.221(b)) expand upon the explanation under the law:

In order for a bonus to qualify for exclusion as a discretionary bonus under [the law stated above] the employer must retain discretion both as to the fact of payment and as to the amount until a time quite close to the end of the period for which the bonus is paid. The sum, if any, to be paid as a bonus is determined by the employer without prior promise or agreement. The employee has no contract right, express or implied, to any amount.

State Laws May Be More Beneficial

State laws may provide rules that are more beneficial to the employee and must be followed. Vision Payroll recommends that employers contact a labor law attorney to ensure that their bonus plans will be considered discretionary if they plan to exclude the bonus from the overtime calculation.

November 27, 2009

Question of the Week: How Much Time Do We Need to Process a Bonus Payroll?

Filed under: News — Tags: , , — Vision @ 3:35 pm

This week’s question comes from Abby, a company vice-president. We’re planning to give out bonuses to our employees. How much time do we need to process a bonus payroll? Answer: Vision Payroll recommends that you schedule bonus payrolls as soon as possible. You’ll need at least two business days after the day you plan to transmit the bonus amounts in order to process and ship the payroll. If you schedule the bonuses early, Vision Payroll can work with you to help ensure that you receive your bonus checks when you need them.

August 4, 2009

QuikTrip Will Pay Almost $750,000 in Overtime Back Wages

The US Department of Labor (DOL) has announced that QuikTrip Corp. (QuikTrip) will pay $747,729 in overtime back wages for violations of the Fair Labor Standards Act. The 3,819 current and former employees affected will receive an average of $196 each.

In announcing the settlement Secretary of Labor Hilda L Solis said, “I am pleased that this case has resulted in almost $750,000 in back wages being paid to thousands of workers across nine states. I am committed to ensuring that every worker is paid the full wages he or she is due, and that those who work overtime receive the compensation to which they are legally entitled.”

Non-exempt employees must be paid overtime at one and one-half times their regular rate of pay. QuikTrip erred by failing to include the amount of non-discretionary bonuses when calculating the regular rate of pay to be used in the overtime premium calculation to employees in Arizona, Georgia, Illinois, Iowa, Kansas, Missouri, Nebraska, Oklahoma and Texas.

Vision Payroll strongly recommends consulting a qualified labor law attorney to ensure that overtime pay is properly calculated.

February 14, 2009

US Department of Labor Issues Opinion Letter on Bonuses and Overtime Rates

The US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA2008-12. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA). This Opinion Letter discusses whether bonuses must be included in the regular rate of pay for overtime calculations under the FLSA.

On December 22, 2005, a city paid a bonus to generally all full-time emergency communications operators “in recognition of the high stress level of the employees’ duties.” The city had not previously promised this bonus, but the union representing the employees needed to approve it before payment. Since discretionary bonuses may be excluded from the regular rate of pay for overtime rate calculations, the Opinion Letter must resolve if the bonus be discretionary.

The city was concerned that even though it considered the bonus discretionary, it might be construed as non-discretionary since the city reached a memorandum of understanding (MOU) with the union representing the workers on December 14, 2005 and did not pay the bonus until December 22, 2005. The DOL concluded that the bonuses were not issued “pursuant to the MOU, but rather used the agreement to formalize a decision previously made.” Therefore the bonus was considered discretionary and “excludable from the regular rate of pay under §7(e)(3).

State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.

December 3, 2008

Tip of the Week: Schedule Additional Bonus Payrolls Now

Filed under: News — Tags: , , — Vision @ 11:28 pm

Are you planning an end-of year bonus payroll for employees? With only four weeks left in 2008, now is the time to schedule any additional payrolls you need. Many employers like to distribute bonus checks at a firm party or get-together. If the bonus checks are included with a regular pay run, the year-to-date amounts on the employees’ stubs will reflect the bonus. To keep the bonus amounts off the pay stubs, schedule an additional payroll dated after your last payroll before the party or other event where you will distribute the bonuses. Remember to allow at least two days after the day you plan to transmit bonus amounts for the payroll to be processed and shipped. By scheduling bonuses early, Vision Payroll can work with you to help ensure that your bonus checks arrive on time.

October 4, 2008

US Department of Labor Files Suit to Recover Overtime Wages

Following an investigation, the US Department of Labor has filed a lawsuit seeking more than $5 million in underpaid overtime. The suit was filed against CEMEX, Inc., a Houston-based provider of cement and concrete products. Employees in Arizona, California, Florida, Georgia, New Mexico, North Carolina, South Carolina, and Texas were allegedly underpaid overtime hours for piece rate and incentive bonus pay. The Fair Labor Standards Act (FLSA) requires that employees eligible for overtime be paid at one and one-half times their regular rate of pay, which should include most commissions, bonuses, and incentive pay. Vision Payroll provides a continuing series on the FLSA, but you should contact your labor attorney with specific questions on overtime hours and pay rates.

July 13, 2008

IRS Clarifies Withholding on Supplemental Wages

Filed under: News — Tags: , , , , , , , — Vision @ 1:05 pm

In Revenue Ruling 2008-29, the IRS clarified the amount of federal income tax to be withheld on certain supplemental wages. Situations covered include sales commissions, draws, signing bonuses, severance pay, annual leave, vacation and sick pay, and sick pay paid at a different rate. Contact Vision Payroll if you have any questions on this ruling.

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