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STAFFING AGENCIES

Payroll Cards Under Investigation by N.Y. Attorney General

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If your company uses payroll cards to compensate its employees, watch out. New York Attorney General Eric Schneiderman has launched an investigation into companies that pay hourly employees by depositing payroll onto pre-paid cards. Why the concern? Payroll cards, like debit cards, typically have fees associated with inquiries, card replacement, ATM withdrawals, or inactivity. Schneiderman’s concern is that the fees associated with these cards may be insufficiently disclosed or excessive and that the fees reduce employees’ take home pay. Payroll cards can raise a host of legal issues for the employer as well. For example, federal law prohibits mandatory use of the cards as a condition of employment. It has been reported that many employees have been forced to accept the card. It would be highly advisable for employers to seek competent counsel to ensure their compliance before it’s too late.

 

Supreme Court Decision Impacts Same-Sex Couples

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The Supreme Court’s ruling that a key component of the Defense of Marriage Act (DOMA) is unconstitutional was perceived by most as a victory for same-sex couples. The Court decided to leave the definition of a “marriage” to the States, 12 of which currently permit same-sex marriages. Same-sex couples living in one of those states will now be entitled to the same federal benefits as traditional couples. The 12 states include NY and all of the New England states, MD and DE. This has many far-reaching implications, including:

  • Medical insurance coverage will become more affordable, as they will now be recognized as a married couple. Employers must offer insurance to same-sex spouses of employees in the 12 states.

 

  •  They will be able to file jointly on their federal tax returns to ensure tax savings, and will be able to amend prior year tax returns (most likely as far back as 3 years).

 

  • Federal benefits, such as Social Security, military and veteran benefits, pension and health benefits for federal employees will be available.  

 

  • The federal gift and estate tax marital deduction will be available to same sex married couples. As a result, they will be able to transfer assets between one another without payment of a transfer tax. This also means they can amend prior year estate tax returns to claim refunds previously disallowed due to DOMA.

 

 Sounds like cause for celebration, right? Welcome to married life. While the ruling is clearly a victory for equality, it actually has a negative tax implication for many same-sex couples. They will now be subject to the “marriage penalty,” a penalty that has become more significant due to several recent changes in tax law. Under the Patient Protection and Affordable Care Act (“Obamacare”), for example, an additional 0.9% Medicare tax on wages and self-employment income, as well as a 3.8% tax on investment income will be imposed. While the threshold is $200,000 for a single taxpayer, married taxpayers only get a $250,000 threshold. As a result of this ruling, many married same-sex couples that would have previously avoided the new tax by filing their federal income tax returns separately will now have to pay the tax.

All this is just the beginning. With over 1,000 federal rules and regulations that need rewriting, aside from tax, time will tell just how far reaching the implications will be.

 

Attention NJ Employers: 2013 FLINT Deadline is June 23rd

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What is the Flint assessment?

The NJ DOL borrowed money from the federal government to pay Unemployment Insurance Benefits. NJ law requires the government to pass on the interest costs of the loan to NJ employers.

Is this something new?

It’s comparatively new. This is the third year of the assessment.

How much is it?

The assessment is 0.73% of employer unemployment contributions made for 2012. The minimum assessment is $5. You should have received a bill in the mail recently. However, if you thought it was junk mail or moved and did not inform the state of your new address you might not have received it. It’s due June 23, after which it will accrue a 15% interest penalty, and you won’t know about it until NJ sends you a delinquency notice. Ouch!

How do I pay it?

Payment options include:

  • Check or money order payable to: NJDOLWD
  • EFT
  • E-check
  • Credit Card

To make a payment online, click here: NJ Division of Revenue On-Line Filing Service

 

Pamela Avraham Quoted in Sunday Star Ledger

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The Newark Star Ledger recently turned to Pamela Avraham of Urbach and Avraham, CPAs for her take on the effects of the 2012 FUTA increase for NJ employers . This FUTA increase is now payable in Jan. 2013 and came as a surprise to many employers. Pamela was quoted in the January 20, 2013 edition, describing the challenge that many staffing agencies face due to the increase. Urbach & Avraham is especially attuned to concerns regarding the FUTA increase, as we service many staffing agencies and small businesses. These firms are going to be impacted more significantly, as they tend to have a larger number of low wage employees.

Pamela Avraham Achieves Fraud Examiner Certification

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Congratulations to Partner Pamela Avraham on her well-deserved certification as a Certified Fraud Examiner (CFE). It comes as no surprise that Pamela passed all four sections of the CFE exam on the first sitting, as she has used her forensic skills in preventing and detecting fraud for over 25 years. Clients who have gained from her expertise are from a wide range of industries, including medical and health care practices and staffing agencies.

Pamela has also applied her forensic accounting abilities in the reconstruction of books and records for fiduciaries, and has frequently prepared court accountings for executors, trustees and guardians. Her unique expertise and experience is reflected in the outstanding success of the U&A forensic team.

Budgeting for 2013 FUTA Payments

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The “standard” current FUTA tax rate is 0.6%. However, the rate could be higher under certain circumstances. When a state lacks the funds to pay UI benefits, as was the case for New Jersey in 2011 and 2012, it may obtain loans from the federal government. If the loan is not repaid within a certain time period, wages paid in that state are subject to higher FUTA tax rates.

In 2011, as a result of the federal loan, the FUTA rate on New Jersey wages was 0.9% instead of 0.6% on wages up to $7,000. Since New Jersey has not repaid its loan from Uncle Sam in 2012; the rate increases from 0.9% to 1.2% retroactively as of January 1, 2012.

The important issue here is that payments so far in the first three quarters of 2012 were only required at the “standard” rate of 0.6%. The difference between 1.2% and the 0.6% that was actually paid plus the fourth quarter at 1.2% is due January 31, 2013 for all of 2012. If you remember getting hit with a large FUTA deposit requirement in January 2012, the 2013 hit will be double since last year you paid for a 0.3% increase over the “standard” rate and in 2012 you are paying a 0.6% increase over the “standard” rate.

This increase should be taken into consideration by businesses in which labor is a major component of cost of goods sold, such as staffing agencies and construction companies, when doing year end budgeting. Make sure you account for this tax payment in your January 2013 cash flow considerations.

 Unless NJ repays the loan in 2013, the penalty tax will increase again to 0.9% for 2013. You might want to budget for this in your April, July and October 2013 FUTA payments.