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Monthly Archives / April 2018

  • Apr 09 / 2018
What's New

IRS Modifies Some 2018 COLAs

The IRS has announced changes to some of the previously announced 2018 cost-of-living adjustments (COLAs) [Rev. Proc. 2018-18, 2018-10 IRB 392]. The new COLA amounts reflect tax law changes created by the Tax Cuts and Jobs.

Foreign earned income exclusion
For 2018, the maximum foreign earned income exclusion amount under IRC §911(b)(2)(D)(i) is lowered to $103,900 ($104,100 previously). The maximum amount of the foreign housing cost exclusion is $14,546 ($14,574 previously).

Medical Savings Accounts
To be eligible to make contributions to a Medical Savings Account (or to have the employer make the contributions), an employee must be covered by a high deductible health plan. For 2018, a high deductible health plan is a plan with an annual deductible of $2,300-$3,450 for individual coverage (unchanged) and $4,550-$6,850 for family coverage ($4,600-$6,850 previously).
Maximum out-of-pocket expenses now can be no more than $4,550 for individual coverage ($4,600 previously) and $8,400 for family coverage (unchanged).

Health savings accounts
The maximum annual contribution to a health savings account is reduced to $6,850 ($6,900 previously) for family coverage. The other amounts are unchanged.

Adoption assistance
For 2018, the maximum amount that can be excluded from an employee’s gross income for qualified adoption expenses under an employer’s adoption assistance program is lowered to $13,810 ($13,840 previously). The amount excludable from an employee’s gross income also phases out at lower amounts of the employee’s modified adjusted gross income.

Penalties for failure to file correct information returns and to provide correct payee statements
For tax years beginning in 2018 (forms filed in 2019), the penalty amounts per return under IRC §6721, failure to file correct information returns, and the penalty amounts under IRC §6722, failure to furnish correct payee statements, will remain the same However, some of the calendar year maximum penalties have been reduced.

Courtesy of APA

  • Apr 09 / 2018
What's New

California Supreme Court Clarifies Calculation of Overtime on Flat Sum Bonuses

On March 5, 2018, in a unanimous decision, the California Supreme Court in Alvarado v. Dart Container Corporation of California clarified how employers must calculate the regular rate of pay for purposes of compensating an employee for overtime when the employee earns a flat sum bonus in a single pay period.
The regular rate of pay is used to calculate overtime compensation and includes the employee’s base rate of pay, and other remuneration such as piecework earnings, commissions and bonuses. When a flat sum bonus is paid, an employer must recalculate the regular rate of pay for the time period over which the bonus was earned taking into account the hourly value of the flat sum bonus. In California, the formula for dividing the flat sum bonus into an hourly amount has been unclear, with three potential divisors:

  1. The number of hours the employee actually worked in a pay period, including overtime hours (the federal formula and the one used by the employer in Alvarado),
  2. The number of non-overtime hours the employee worked during the pay period, or
  3. The number of non-overtime hours that exist in a pay period, regardless of the number of hours the employee actually worked.

In Alvarado, the court held that employers, when calculating the hourly value of the flat sum bonus during a single pay period, must divide the flat sum bonus amount earned in the pay period by only the non-overtime hours worked by the employee. This decision breaks away from the federal formula and identifies a single proper method for employers to use in recalculating the regular rate. The court, however, expressly limited its decision to flat sum bonuses (i.e., fixed attendance bonus), so this rule does not necessarily apply to the calculation of other types of non-hourly compensation such as commissions, production bonuses, or piecework bonuses that may vary with number of hours worked.
The court also rejected a request by defendant Dart Container for a prospective-only application of the court’s interpretation. Four justices filed a concurring opinion criticizing the California Division of Labor Standards Enforcement for not issuing a clarifying regulation for over two decades, leaving employers with doubt about how to meet their statutory responsibilities, and allowing employees to receive less overtime pay than they were due.
What Employers Should Know Now
Employers must now calculate overtime for employees who earn a flat sum bonus during a single pay period by dividing the total compensation earned by the non-overtime hours worked in that pay period.  Employers who pay flat sum bonuses should review their pay practices to ensure compliance with this formula.
Article from:  https://www.businessmanagementdaily.com/

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