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Archive for December, 2010

Gift certificates, refunds and credits in Massachusetts

Tuesday, December 28th, 2010

Now that the Holiday gift giving season is over, let’s focus on returns, gift cards, and the rules for these for Massachusetts residents:

Refund, Return & Cancellation Policies:

Massachusetts law requires that a merchant clearly and conspicuously disclose the store’s refund, return, or cancellation policy. A merchant cannot misrepresent the store’s policy or fail to honor it. Generally, clear and conspicuous disclosure means that the merchant must display a written return policy that the buyer can see and understand before the purchase is made. As long as the product is not defective, a merchant can choose any return policy, provided the merchant discloses this policy to the buyer before the purchase. Stating the policy on the receipt would not satisfy this disclosure requirement, because it is not provided until after the sale.

Defective Merchandise:

A store, however, cannot use its disclosed policy to refuse the return of defective merchandise. When the item purchased is defective, you can choose a repair, replacement or refund. This right is contained in the Implied Warranty of Merchantability law. Under that law, merchants cannot limit your remedies. In addition, this means that if a merchant chooses an “All Sales Final” return policy, it must disclose that policy without limiting your rights. For example, the disclosure of the return policy must be similar to a posting which reads:
“All Sales Final, With the Exception of Defective Goods.”

Merchandise Credits:

When a store issues a merchandise credit for returned goods, you have at least seven years from the date of issue to redeem the credit .

Gift Certificates:

Gift certificates must remain valid for at least seven years and are not subject to any fees. Once you have used 90% of the cards’ value, you may choose to take the remaining value in cash or continue with the gift certificate. The definition of Gift Certificate is expanded to include electronic cards with a banked dollar value, and merchandise credits.  Gift Certificates not clearly marked with an expiration date, and issuance date, shall come with those dates clearly printed on the sales receipt, or available on line.  If the dates are not provided, the Gift Certificate shall be good forever.

HIRE Act details, courtesy of Paychex

Tuesday, December 21st, 2010

NEW HIRE Act (Hiring Incentives to Restore Employment Act)


Frequently Asked Questions

Qualified Employers

Qualified Employees

Form W-11

Form W-2

Business Tax Credit

Qualified Employers

S-Corps

How does this legislation apply to S-Corporations?

S-Corps are not specifically excluded from taking advantage of the HIRE Act’s tax benefits. The business tax form instructions will address how to claim the business tax credit once the 2011 version is released.

LLCs

Are LLCs eligible as well?

LLCs are not specifically excluded from taking advantage of the HIRE Act’s tax benefits.

Temporary Staffing

Are temporary agencies eligible for the credit?

Temporary agencies can claim the benefits under the HIRE Act like any other employer as long as the employee meets the qualifications under the Act.

Are there any restrictions for temporary staffing businesses?

No, temporary agencies can claim the benefits under the HIRE Act like any other employer as long as the employee meets the qualifications under the Act.

Qualified Employees

1099- Independent Contractors

Does a new employee that previously worked as independent contractor (1099) within the previous 60 days before employment qualify for the tax exemption?

The IRS has not yet issued guidance pertaining to 1099 contractors. We will provide an update as soon as we receive direction. Property of Paychex, Inc. 2 All Rights Reserved

Age

Is there an age limit for the new employees?

No, there are no age restrictions as long as the new hire is eligible to work.

Family Members

If the employee was working for their brother during the previous 60 days, would they qualify?

Yes, as long as the employee is not being hired by the brother’s company and the employee has worked less than 40 total hours over the past 60 days.

Does an owner’s spouse fall into the category of a “related party” under the HIRE Act?

They may, but it depends on the percentage of ownership that the spouse who is hiring the other has in the business. If you have a question whether a particular spouse would qualify, you should contact your CPA or Tax Advisor.

Leave of Absence

If an employee has been on FMLA for more than 60 days, are they eligible for a credit when they come back?

The IRS has not yet issued guidance pertaining to employees on FMLA or on leave. We will provide an update as soon as we receive direction.

If the employee goes on unpaid leave, how does that impact the 52 week wage requirement for the $1,000 business tax credit?

The IRS has not yet issued guidance pertaining to employees on FMLA or on leave. We will provide an update as soon as we receive direction.

Full-Time/Part-Time

Does it matter if the new employee works full-time or part-time?

No. As long as the new hire meets the requirement of a qualified individual, the employer can take the payroll exemption.

I have two companies and hired a previously unemployed person in both entities, both part-time. Can I take the credits on both employers or just for one? The IRS has not yet addressed this question specifically through guidance. However, we would make the educated guess that only the first company that hired the qualified individual would be eligible for the HIRE Act benefits.

Household Employee

What is a household employee?

Household employees are generally employees that are hired to work within a person’s home. Examples are chauffeurs, nannies, or live-in housekeepers. They are generally not people or firms that you hire on a one-time or per-fee basis.

Highly Compensated

Are highly compensated employees eligible?

Yes, there are no salary restrictions, but the HIRE Act Social Security tax credit is naturally limited by the Social Security wage base meaning the maximum amount an employer can save is $6,621.60. Property of Paychex, Inc. 3 All Rights Reserved

Laid-Off Employee

I have employees that were laid off for the winter and re-hired in the spring. Several of them worked under 40 hours for us this winter. Do the employees who did not work at all but were re-hired qualify, and do the employees who worked under 40 hours qualify?

Under this scenario, all of the employees would be qualified since they have not worked greater than 40 hours total over the past 60 days.

Does this apply to those employees called back from lay off for a period of time?

Yes, as long as they meet the definition of a “qualified individual” meaning they have not worked greater than 40 hours total over the past 60 days.

We laid off an employee in January due to lack of work. He returned to work in April. Is he considered a “new hire”?

The same person can be rehired and can be eligible for the credit as long as they have not worked 40 hours over the past 60 days.

New or Replacement Position

If an unemployed individual is hired into a position that was vacant as a result of an internal promotion would that qualify for the Social Security tax credit?

Yes, as long as they meet the definition of a “qualified employee” meaning they have not worked greater than 40 hours total over the past 60 days.

An individual worked for the state government but was laid off and was unemployed the previous 60 days. Would this individual qualify under the HIRE Act?

An individual in this situation would be considered “qualified” as long as the employer is not a government entity and the hire meets the qualifications as an “eligible individual” meaning they have not worked greater than 40 hours total over the past 60 days.

If we lay off an individual person in one position but hire an individual into another position, can we get the credit on the new hire even though our net headcount is the same?

Yes, there is no restriction on this type of transaction, as long as the employee you let go was for cause or they quit voluntarily.

Seasonal Employee

Can you please explain the seasonal employee rules and what happens if the employee is let go before the end of the year?

A seasonal employee would qualify for the HIRE Act incentives as long the employee meets all the eligibility requirements. The employer Social Security tax forgiveness is not dependent on the employee staying on for a year. The employer would not be eligible to take the business retention credit since the employee did not work for 52 consecutive weeks. Property of Paychex, Inc. 4 All Rights Reserved

Self Employed

Does a new employee that was previously self-employed qualify for the tax exemption?

The IRS has not yet issued guidance pertaining to self-employment. We will provide an update as soon as we receive direction.

Severance Pay

We hired someone on March 31, 2010. They were laid off effective December 27, 2009 but received severance pay through February 6, 2009. The new employee believes he did not WORK in those 60 days. Is he an eligible employee?

The IRS has not yet issued guidance pertaining to severance pay. We will provide an update as soon as we receive direction.

A qualified employee received severance pay for the nine months of unemployment. Does he qualify for the Hire Act?

The IRS has not yet issued guidance pertaining to severance pay. We will provide an update as soon as we receive direction.

Student

If a college student received a grant to perform duties as a research assistant during the school term, does this count as employment and exclude him from being a “qualified individual” under the HIRE Act?

This is an employment law question. You should consult with your attorney or employment law expert about your specific situation.

What about hiring a new graduate from college is that person eligible?

Yes, there are no restrictions on hiring high school, college, or graduate students. They are eligible as long as they meet the definition of a “qualified individual” and the employer is in compliance with labor laws.

Temporary Staffing

Are there any restrictions for temporary staffing businesses?

No, temporary agencies can claim the benefits under the HIRE Act like any other employer, as long as the employee meets the qualifications under the Act. Employees hired by a business through a temporary agency are qualified as long as they otherwise fit the definition of a “qualified individual,” meaning they would have worked for the temporary agency or any other business for less than 40 total hours over the prior 60 days.

Tips

Do tips also qualify for the Hire Act credit?

Yes. Property of Paychex, Inc. 5 All Rights Reserved

Union Employees

Do the same rules apply to union employees?

There are no restrictions on union employees in the legislation.

Visa

Does this Act apply to an F-1 employee?

This is an employment law question. You should consult with your attorney or employment law expert about your specific situation.

Are H-2B employees included in the act?

This is an employment law question. You should consult with your attorney or employment law expert about your specific situation.

Are there any visa restrictions on a new employee (i.e. a new graduate doing an OPT)?

This is an employment law question. You should consult with your attorney or employment law expert about your specific situation.

Workers’ Compensation

If an employee has been collecting workers’ compensation and is now coming back to work, does this apply?

The IRS has not yet issued guidance regarding workers’ compensation. We will provide an update as soon as we receive direction.

Form W-11

What is the legal or proper way for the employer to ask the new hire/employee if they qualify for the Social Security tax exemption? Can we compile the list guidelines along with the W-11 form and have it in with the new hire paperwork?

This is an employment law question. You should consult with your attorney or employment law expert about your specific situation.

Is there a deadline to the W-11 form? Can a new hire fill out the W-11 form weeks after being hired as long as the new hire was hired within the eligible date range?

The IRS has indicated that as long as the Form W-11 is signed and received by the employer by the qualified individual by the due date of the Form 941 that the credits are being claimed on, then the credits can still be claimed. In some cases, claiming the credits may have to be done via Form 941-X if the due date for that return has already passed. For more detail, visit www.irs.gov. Property of Paychex, Inc. 6 All Rights Reserved

Form W-2

Why are exempt wages reported on the W-2? What is the impact for the employee on their W-2?

The IRS determined that the Form W-2 was the most convenient way to report these amounts and balance against the total amount reported on Forms 941.These amounts do not impact an employee’s tax situation nor does this amount get reported on the employee’s personal income tax return.

Business Tax Credit

If an employee is laid off for three weeks, but remains on the payroll, would they still be considered a qualified employee for the 52 consecutive week requirement?

As long as you do not formally terminate the employee, we would make the educated guess that the employee would continue to qualify.

Does the 80 percent wage rule, include overtime, paid-time off, tips, commission, etc?

Yes, for purposes of the HIRE Act, all these would count as wages paid and count toward the 80 percent rule.

Does the 52 consecutive week period begin with the employee’s start date or when the employee is first paid?

The IRS has yet to provide guidance surrounding the 52 consecutive week definition.

Is the 52 week period to determine the 80 percent wage rule start with wages paid February 4 or March 19?

The IRS has yet to provide guidance surrounding the 52 consecutive week definition.

Small Business Health Care Tax Credit Summary

Saturday, December 11th, 2010

If you are a small employer and cover the cost of a portion of your employees’ health insurance there is a new credit that you may qualify for.  The following is a summary of the more important points:

ELIGIBILITY

Both taxable and not-for-profit entities qualify for the credit.  Tax-exempt entities will receive a smaller credit though.  The following bullet points cover the points that you’ll need to apply for the credit:

  • You must provide health care and cover at least 50% of the cost of a single rate plan under a qualifying arrangement (amount is capped at the average premium amount for the small group market in the state or area of the state)
  • Your payroll must count less than 25 full-time equivalent workers (owners, partners or family members of such and seasonal workers are generally not counted)
  • The average annual wages of your payroll must be below $50,000

AMOUNT OF CREDIT

  • The credit will be 35% of employer’s health care premium costs incurred during 2010, which gradually increases to 50% in 2014. (25% and 35% for tax-exempt employers).
  • The credit phases out gradually for firms with average wages between $25,000 and $50,000 with full-time equivalent employees between 10 and 25.

The credit will be claimed on the employers annual income tax return, (you must have taxable income unless your organization is tax-exempt).  If you cannot use the entire credit, it will be carried forward to future years.

Those are the basics.  As with most things, more details will follow as people begin applying the rules.

Why Does Your Business Need A Written Information Security Program ?

Friday, December 10th, 2010

In an attempt to protect its residents from the common types of identity theft, the Commonwealth of Massachusetts has adopted a new data security law, commonly known at attorney’s water cooler as “201 CMR 17.00″.  While the regulation became effective on March 1, 2010 many small businesses have not yet implemented the comprehensive Written Information Security Program (WISP) required under this new
law.

201 CMR 17.00 applies to any person or business that receives, stores or transmits personal information of Massachusetts residents.  If during the course of business with your clients you obtain their first name or initial and last name in combination with one or more of the following this law applies to your business:

  1. Their social security number;
  2. state issued id number, such as a driver’s license number;
  3. financial account information including bank account numbers, and;
  4. credit or debit card numbers.

The law requires that every person or business that handles the personal information of a Massachusetts resident develop, implement and maintain a WISP that contains a description of administrative, technical and physical safeguards in use by your business to protect personal information. Some safeguards may be as simple as locking file cabinets that contain personal information while others may be more technical in nature and require data encryption or other electronic security protocols.

Developing a written information security program requires a thorough assessment of your business’s needs, current practices and security methods. Fines for not complying with this law are hefty. Why take the risk of not protecting your business? Please call us to schedule an appointment, our knowledge of your business and the provisions of this law will help you be compliant in no time.