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Three Tips for Employers Outsourcing Their Payroll

November 1, 2011 2 comments

Three Tips for Employers Outsourcing Their Payroll Special Edition Tax Tip 2011-05, September 2, 2011 via IRS.GOV

Outsourcing payroll duties to third-party service providers can streamline business operations, but the IRS reminds employers that they are ultimately responsible for paying federal tax liabilities. Recent prosecutions of individuals and companies who – acting under the guise of a payroll service provider – have stolen funds intended for payment of employment taxes makes it important that employers who outsource payroll are aware of the following three tips from the IRS:

Employer Responsibility – The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though you forward the tax payments to the third party to make the tax deposits, you – the employer – are the responsible party.If the third party fails to make the federal tax payments, the IRS may assess penalties and interest. The employer is liable for all taxes, penalties and interest due. The IRS can also hold you personally liable for certain unpaid federal taxes.

Correspondence – If there are any issues with an account, the IRS will send correspondence to the address of record. The IRS strongly suggests you do not change the address of record to that of the payroll service provider. That could limit your ability to stay informed of tax matters involving your business.

EFTPS  – Choose a payroll service provider that uses the Electronic Federal Tax Payment System. You can register on the EFTPS system to get your own PIN to verify the payments.The IRS web site – http://www.irs.gov has more information on the responsibilities of employers outsourcing payroll, payroll service providers and EFTPS.

via Three Tips for Employers Outsourcing Their Payroll.

for more information about online payroll services: www.netWorthPayroll.com

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Kilpatrick Townsend & Stockton LLP – North Carolina to Require Employers to Use E-Verify

North Carolina has joined the growing list of states that will require private employers to verify the eligibility of their new hires to work in the United States through E-Verify, a federally administered online system for confirming the identity and employment eligibility of individuals. The new statute, signed by Governor Perdue on June 23, 2011, will phase in its E-Verify requirement over the next two years, eventually applying to all North Carolina employers with twenty-five or more employees.

The New Legislation

The new law will require all North Carolina employers with twenty-five or more employees to enroll in and use E-Verify to check the eligibility of employees to work in the United States. The law applies only to new hires and does not require employers to verify the immigration status of their existing workforce through E-Verify. The law also specifically exempts seasonal temporary employees employed for ninety or fewer days during a consecutive twelve-month period.

The E-Verify requirement will be phased in gradually, depending on the size of the employer. The E-Verify requirement will become effective on October 1, 2012, for employers with 500 or more employees. Employers with 100 to 499 employees will become subject to the requirement on January 1, 2013, and employers with twenty-five to ninety-nine employees will be covered by the law on July 1, 2013.

Once the law takes effect, employers who fail to verify a new hire’s employment eligibility through E-Verify will face civil penalties from the North Carolina Department of Labor, regardless of whether that employee is indeed authorized to work in the United States. The size of potential penalties will vary based on the number of employee verifications the employer failed to make as well as whether the failure constitutes a repeat violation. For any violation, an employer will also be required to submit an affidavit stating that, after consultation with the affected employee, it has requested a verification of the employee’s work authorization through E-Verify.

Potential Legal Questions

Opponents of the North Carolina statute could potentially argue that it is preempted by federal law. Federal immigration law prohibits states from “imposing civil or criminal sanctions” upon those that employ unauthorized aliens, except through “licensing or similar laws.” Although the United States Supreme Court recently upheld Arizona’s E-Verify law in Chamber of Commerce v. Whiting, the Court emphasized that the Arizona law is enforced through suspension of business licenses, rather than through civil or criminal penalties.

The North Carolina law presents a substantially different question from that resolved by the Supreme Court in Whiting. On the one hand, North Carolina’s new statute arguably runs afoul of federal law because it is enforced through civil penalties. On the other hand, the North Carolina law does not directly penalize the employment of unauthorized aliens; rather, it penalizes employers for failing to use the E-Verify system, even if those employers employ no unauthorized aliens. As North Carolina’s law departs from the model of the Arizona E-Verify law that survived a Supreme Court challenge, the new law could face its own legal challenges.

Practical Implications

Employers in North Carolina that have twenty-five or more employees should prepare to enroll in and use the E-Verify system, if they are not already participating in that system. E-Verify compares information provided by a new hire on Form I-9 with information in the federal government’s databases to verify the individual’s identity and eligibility to work in the United States. Although E-Verify is a free service, participating employers will incur costs in using it as a result of the time it takes the employer’s personnel to be trained in the use of E-Verify, to enter data into the E-Verify system, and to respond to E-Verify determinations that information supplied on a new hire’s Form I-9 does not match government records.

via Kilpatrick Townsend & Stockton LLP – North Carolina to Require Employers to Use E-Verify.

Steps For Adding Payroll Services To Your Business

If your small business is growing, and it’s time to add an employee, you may be wondering just where to start to begin this process (our focus for this blog is NC because that’s where we are located, your state requirements may differ). Most of the time, your payroll service provider will give you a checklist and packet of forms to complete in order to add employees to your payroll. There are three major components that will be needed to set your company up for payroll services.

First, you will need a Federal EIN, otherwise known as an Employer Identification Number. You may have already received this when you started your business but if you are a sole proprietor, you may need to apply for a new number:

http://www.irs.gov/businesses/small/article/0,,id=97860,00.html

Secondly, you will need a State Withholding Tax Id Number. If you already collect and file Sales and Use Tax, the number will be the same and you just need to call the state and add withholding tax to that existing number.  To apply for a new NC withholding account number, you can apply online here:

http://www.dornc.com/electronic/registration/index.html

Third, you will need a new NC Unemployment Security Commission account number to collect and remit state unemployment insurance withholding:

https://www.ncesc1.com/business/web604/web604Main.asp

Now that the main peices for the employer portion are out of the way, let’s take a look at what forms the employees will need to provide in order to receive payroll wages. The employer must retain these documents for their records for each employee:

W-4 Form (Withholding Allowance)

I-9 (Employment Eligibility Verification)

NC-4 (State Employee’s Withholding Allowance Certificate)

In NC, employers must also provide New Hire Information to the state. A form can be mailed or you can report your new hires online at www.NCNewHires.com.

For more information about whether a worker is an Employee or Independent Contractor, see: Employee or Independent Contractor?

Contact netWorth Bookkeeping Services for more information about our  easy, affordable, online payroll services

Are Unpaid Internships Legal?

With the down economy, many companies are looking to “hire” unpaid interns as a way to save money. I recently came across this article which explains the “do’s and don’t’s” of unpaid internships, which includes a link to the new federal criteria so I thought I’d share:

http://www.nytimes.com/2010/04/03/business/03intern.html

From the Article:

“If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law,” said Nancy J. Leppink, the acting director of the department’s wage and hour division.

Ms. Leppink said many employers failed to pay even though their internships did not comply with the six federal legal criteria that must be satisfied for internships to be unpaid. Among those criteria are that the internship should be similar to the training given in a vocational school or academic institution, that the intern does not displace regular paid workers and that the employer “derives no immediate advantage” from the intern’s activities — in other words, it’s largely a benevolent contribution to the intern.”

The 6 Criteria:

• The training given in the internship must be similar to what would be given in an educational setting, or vocational school

• The training should be for the benefit of the trainee

• The trainee’s work not replace workers who are regularly paid

• The employer receives no immediate advantage from the trainees’ activities, and the employer’s operations may actually be impeded on occasion

• At the end of the training, the trainees are not necessarily entitled to a job

• Both the trainee and the employer understand that the trainee is not entitled to wages during the training period.

See Also: Compliance Assistance – Fair Labor Standards Act (FLSA)

How Remote Services Can Help Save You Time and Money

Now more than ever, businesses are looking for ways to cut costs and operate more efficiently.  Some contracted services, such as bookkeeping and accounting, are outsourced to local professional firms or independent contractors in order to save the company the hassle and expense of hiring an internal employee.

Traditionally, these services have been provided “onsite” or at the place of business which requires additional time and/or mileage to be paid to the professional. Today, there are various resources and business applications that will allow services like these and even internal functions to be provided remotely from anywhere. With the cost of fuel rising once again, let’s explore some of the ways your business can have “remote” or “offsite” workers to help you grow your business while saving you time and money.

     

  • Online Banking Sign up with your bank to access your accounts, transfer funds, and pay your bills online from anywhere.  You can even link your QuickBooks accounting file to your banking account and download all of your transactions onto your ledger with the touch of a button.  Even those paper statements are becoming a thing of the past and your accountant can download them as needed to work on your books from anywhere.

  • QuickBooks Online Payments In addition to being able to download all of your daily transactions into your accounting software right from your bank account, you can now also accept customer payments via EFT every time you email an invoice. Simply register for this feature and your customers can click the link provided with the invoice and enter their routing and account information.  You receive your payment as an electronic deposit in a few days and only pay a small transaction fee of $0.50 each.  No more running to the bank to make deposits or tracking what payments apply to which invoice.  It’s VERY easy to use, free and convenient for the customer.  My clients love it!
  • Log Me In This service allows you to securely access any computer from anywhere.  Access files, work remotely, or transfer documents on your work computer when you’re not there.  Great for offsite workers and for peace of mind because you can always access your office computer.  For more info:  www.logmein.com
  • ShareFile A secure file transfer system that allows you and your customers to transfer files back and forth that are too large to email (like some QuickBooks files).  They even design the interface to match your website and color scheme.  Customer service is top notch and they are based right here in the Triangle area of NC!  www.ShareFile.com
  • Virtual Phone Number Not in the office? No Problem! Just get a “virtual phone number” to have one main number that is as mobile as you are. Each employee or contractor can have a unique extension that forwards to their cell phone or individual voice mail box.  The system can also forward your voice mails as an MP3 file to your email or transcribe it as a text message right to your phone. The best part? The cost for one business extension starts around $6 per month.  www.phone.com
  • CutePDF Your computer recognizes this nifty little FREE program the same as any other printer. Instead of printing your documents on paper, simply save as a PDF and archive it digitally.  It’s quick, easy to use, and you get to save trees and help our environment, too. www.cutePDF.com
  • Instant Messenger There are various free instant messenger programs out there such as Yahoo, AIM, Windows Live, and even Gmail.  Save on phone charges and stay in touch with remote employees and workers by instantly being able to communicate with them.  You can even set your status if you are busy, away from your desk, or on the phone.  A life saver when you just need information in a pinch!
  • Cloud Computing I’m sure you’ve heard this is all the rage as of late.  Actually, it’s been around for years just not with such a trendy name.  The “Cloud” is actually nothing more than “internet based applications” that allow you to store and access your data and software at an affordable price.  Instead of buying your own server which can cost thousands, you can simply “rent” server space and access your data and software applications over the web.
  • Online Payroll Services Payroll is one of those areas that causes a great deal of stress and forces a lot of business owners to be tied down to their payroll schedule. Enter the online payroll service! These simple to use, convenient web-based services allow you to process your payroll over the internet from anywhere.  Some of them (like the payroll service we offer) even pay your taxes and file all your Federal and State forms electronically so you don’t have to.  It doesn’t get any easier than that!
  • Online Accounting and Billing Software If you need to access your accounting data or bill your clients while you are on the go, consider moving to an online accounting or billing service.  There are many out there to choose from so do some research to see which meets your needs best. Some of the more popular ones are QuickBooks Online, FreshBooks, Outright, and Kashoo.

These are all tools that you, your employees, and contractors can utilize to help save money, time, office space (save on rent!), paper, mileage, and our environment.  What are some ways your business uses to stay green, fast, and efficient?

Are NC Unemployment Insurance Policies Preventing New Hiring?

Recently, a client of mine was considering hiring a temporary employee to help out on a big job they had coming up.  They found the right person and were all set to move forward and hire the worker.  Everything was going well… until they realized that the worker was currently collecting unemployment benefits from being previously laid off from their last job.

What does that matter?  In the state of NC, there is a six month period that a person has to be employed in order to qualify for new unemployment benefits.  However, if a worker has an already established or open claim, and they are hired by a new company, there is no minimum time required before they are eligible to receive unemployment benefits from their “last employer” (even if it is a temp job).   That would mean that if my client were to hire this person temporarily, even for a week, when that job ended, that person could reopen their claim and it would be collected on THEIR unemployment insurance fund, not the employer they were originally collecting from before that.

Because my client is a new business, and has a small payroll that they just started, they have little money accrued in their unemployment insurance fund.  This situation would would have raised their rates and they would have had to keep paying that higher rate into the system to pay off the claim from this temporary worker for years.  Instead of being able to put an unemployed person to work, even if just for a few months, they were unable to hire this person, who is now just  still collecting benefits from their original unemployment claim.

This is a very unfortunate policy because there are millions of people that would love an opportunity to work, even a temporary job, which can lead to permanent employment in some situations.  Additionally, there is always the possibility a new employee won’t work out, even if they are hired permanently.  Employers are aware of the burden they take on when they hire someone who is currently collecting unemployment benefits and may be deterred from doing so.  The system that is designed to help unemployed workers is actually hurting their chances of being rehired by small businesses.  No wonder our state unemployment rate remains so high.

An individual who has established a claim, returned to work and become unemployed again during that one year period, may reopen an existing claim. For reopened claim purposes, the last employer is the one for whom the claimant most recently worked prior to reopening an existing claim, regardless of the duration of the job.

via ESC NC Business Services: UI Information – Claims.