Payroll Legal Alert

A federal appeals court has ruled that a bankrupt company’s severance payments qualified as FICA-free supplemental unemployment benefits—also known as SUB pay. Therefore, the court concluded, the company’s $1 million FICA refund claim was proper.

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Commercials for holiday gifts have been running on TV since at least Halloween. So naturally, em­­ployees are making their lists and checking them twice. Perhaps they’re counting on a holiday bonus to pay for it all. If holiday bonuses are in your future, be sure to cover these bases.

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Single employees earning more than $200,000 and joint filers earning more than $250,000 will pay an additional 0.9% in Medicare taxes in 2013. To avoid the additional tax, employees may take some extraordinary steps regarding their noncash compensation before the end of this month. That means additional payroll headaches for you.

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Q: The company grosses up the fair market value of health benefits provided to employees’ same-sex domestic partners. One employee already had family coverage for his children before he enrolled his partner. How is the gross up calculated, if the cost of coverage doesn’t increase because the plan charges employees a flat amount for family coverage, regardless of the number of individuals covered?

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Question: Our company makes interest-free loans to employees so they can buy home computers. The purpose of the loan program is to allow employees to hone their computer skills. Employees can take up to four years to repay their loans. Must we report the loans on their W-2 forms?

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It would be great if you could wave a magic wand and convert some of employees’ taxable wages into nontaxable business reimbursements. But you can’t. A new revenue ruling reiterates that employees’ expenses must have a business connection before you can reimburse them tax-free.

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A court has ruled that the IRS doesn’t have to return to defrauded clients a bankrupt payroll service bureau’s tax deposits that were collected from them but were used to make deposits for other clients. The defrauded clients, therefore, have paid twice …

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The Fair Labor Standards Act and the IRS can throw kinks into your holiday plans. Watch out for these lumps of coal: four rules on holiday pay, two rules for holiday work, requirements for holiday hiring.

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Regardless of what you call it, tips are amounts customers willingly determine and leave of their own accord; service charges are added to the bill. According to a new IRS revenue ruling, service charges are immediately taxable as wages; tips are taxable when employees report them to you.

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This year, completing W-2 forms will be even more challenging for employers that must report employees’ health benefits. Here’s the scoop on what you need to know to get W-2s right the first time.

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