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PuzzlingPayroll Predicaments
Laura KushnerHuman Resources
League of Minnesota Cities
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AgendaElection JudgesFringe Benefits Independent Contractor
UpdateMinnesota Minimum Wage
Law Fair Labor Standards ActExpansion of sick leave (if
time)
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Election Judges
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Fringe Benefits
Benefits provided to employees are taxable, unless there is a specific exemption in the tax
code.
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Accountable Plan
Business connection to the expenditure
Reasonable accounting for expense Excess reimbursements or
advances repaid to city
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Accountable Plan
Example: City provides city manager with a
monthly car allowance of $500. The city manager does not need to substantiate the business connection and does not need to turn in receipts or track miles.
Taxable or not
taxable?
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Fringe Benefits
Taxable unless a specific exclusion applies; or
Unless “de minimis”
“De Minimis” -- amount is so small that accounting for it would be administratively difficult
IRS Publication 15-B:
www.irs.gov
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Fringe BenefitsExamples of fringe benefits excluded
from income: Accident & health benefits
Major medical, HRA’s, VEBA, Cafeteria Plans
Achievement awards (limits) Dependent care (limits) Health Savings Accounts (limits)
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Athletic & Fitness MembershipsExample:City has a fitness facility in community center. Employees are provided free memberships.
Taxable or not taxable?
Taxable or not taxable?
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Athletic & Fitness Memberships
To be excluded
from income: Substantially
all of the use of the facility is by employees, spouses, and dependents
No public use / access
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Gift Cards
Example:City offers gift cards in varying amounts as incentives and prizes for participation in its wellness program.
Taxable or
not taxable?
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Gift Cards Treated same as cash Any amount is taxable income
No “de minimis” for gift cards
$5.00 gift card to Caribou = $5.00 of taxable income to employee
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Independent Contractors New guidance issued by DOL Strong area for compliance/audits,
etc. “Economic realities” test
Is the work integral part of the city? Does worker’s skill affect profit/loss? How does worker’s investment compare
to employer’s investment? Work require special skill and initiative? Relationship permanent vs. indefinite? Nature and degree of employer control?
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Independent Contractor?City Hall Custodian
City Attorney
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MN Minimum Wage Law
Small Employer Total budget
amount under $500,000
$7.25/hour (8/1/15)
$7.75/hour (8/1/16)
Indexed by economic indicators after that
Large Employer Total budget
amount over $500,000
$9.00/hour (8/1/15)
$9.50/hour (8/1/16)
Indexed by economic indicators after that
Employees under 18 $7.25 – 8/1/2015 $7.75 -- 8/1/2016
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YOUTH & MN Minimum Wage LawFirst 90 days of employment
– IF UNDER AGE 20
$7.25/hour (8/1/2015)
$7.75/hour (8/1/2016)
Indexed by economic indicators after that
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ONE MORE THING ….Definition of Employee does NOT include:…
(1) elected official or commission member
(2) person ineligible for membership in PERA because:• Less than $5,100/year
($3,800 schools)• < 23 yrs, full-time student
(3) under 18, <20 hrs., recreation program employee
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FAIR LABOR STANDARDS ACT – IT’S COMING ….
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Expansion of Sick Leave Benefits
#1
#2
#4
#5
#3
#6
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Resources Internal Revenue Service
Public Employees Retirement Association
Your City Auditor League of Minnesota Cities
[email protected] (E-MAIL IS OFTEN FASTEST!)
651-281-1200 800-925-1122
Ask for HR DEPT