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Medicare Part D Notices Are Due by Oct. 14, 2017

Overview

Each year, Medicare Part D requires group health plan sponsors to disclose to individuals who are eligible for Medicare Part D and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan’s prescription drug coverage is creditable. Plan sponsors must provide the annual disclosure notice to Medicare-eligible individuals before Oct. 15, 2017—the start date of the annual enrollment period for Medicare Part D. CMS has provided model disclosure notices for employers to use.

This notice is important because Medicare beneficiaries who are not covered by creditable prescription drug coverage and who choose not to enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll at a later date. Thus, although there are no specific penalties associated with this notice requirement, failing to provide the notice may trigger adverse employee relations issues.

ACTION STEPS
Employers should confirm whether their health plans’ prescription drug coverage is creditable or non-creditable and prepare to send their Medicare Part D disclosure notices by Oct. 14, 2017. To make the process easier, employers who send out open enrollment packets prior to Oct. 15 often include the Medicare Part D notices in these packets.

Notice Recipients

The creditable coverage disclosure notice must be provided to Medicare Part D-eligible individuals who are covered by, or who apply for, the health plan’s prescription drug coverage. An individual is eligible for Medicare Part D if he or she:

  • Is entitled to Medicare Part A or is enrolled in Medicare Part B; and
  • Lives in the service area of a Medicare Part D plan.

In general, an individual becomes entitled to Medicare Part A when he or she actually has Part A coverage, and not simply when he or she is first eligible. Medicare Part D-eligible individuals may include active employees, disabled employees, COBRA participants and retirees, as well as their covered spouses and dependents.

As a practical matter, group health plan sponsors often provide the creditable coverage disclosure notices to all plan participants.

Timing of Notices

At a minimum, creditable coverage disclosure notices must be provided at the following times:
  1. Prior to the Medicare Part D annual coordinated election period—beginning Oct. 15 through Dec. 7 of each year
  2. Prior to an individual’s initial enrollment period for Medicare Part D
  3. Prior to the effective date of coverage for any Medicare-eligible individual who joins the plan
  4. Whenever prescription drug coverage ends or changes so that it is no longer creditable or becomes creditable
  5. Upon a beneficiary’s request

If the creditable coverage disclosure notice is provided to all plan participants annually before Oct. 15 of each year, items (1) and (2) above will be satisfied. “Prior to,” as used above, means the individual must have been provided with the notice within the past 12 months. In addition to providing the notice each year before Oct. 15, plan sponsors should consider including the notice in plan enrollment materials provided to new hires.

Method of Delivering Notices

Plan sponsors have flexibility in how they must provide their creditable coverage disclosure notices. The disclosure notices can be provided separately, or if certain conditions are met, they can be provided with other plan participant materials, like annual open enrollment materials. The notices can also be sent electronically in some instances.

As a general rule, a single disclosure notice may be provided to the covered Medicare beneficiary and all of his or her Medicare Part D-eligible dependents covered under the same plan. However, if it is known that any spouse or dependent who is eligible for Medicare Part D lives at a different address than where the participant materials were mailed, a separate notice must be provided to the Medicare-eligible spouse or dependent residing at a different address.

Electronic Delivery

Creditable coverage disclosure notices may be sent electronically under certain circumstances. CMS has issued guidance indicating that health plan sponsors may use the electronic disclosure standards under Department of Labor (DOL) regulations in order to send the creditable coverage disclosure notices electronically. According to CMS, these regulations allow a plan sponsor to provide a creditable coverage disclosure notice electronically to plan participants who have the ability to access electronic documents at their regular place of work, if they have access to the sponsor’s electronic information system on a daily basis as part of their work duties.

THE DOL’S REGULATIONS FOR ELECTRONIC DELIVERY REQUIRE THAT:
  • The plan administrator use appropriate and reasonable means to ensure that the system for furnishing documents results in actual receipt of transmitted information;
  • Notice is provided to each recipient, at the time the electronic document is furnished, of the significance of the document; and
  • A paper version of the document is available on request.

Also, if a plan sponsor uses electronic delivery, the sponsor must inform the plan participant that the participant is responsible for providing a copy of the electronic disclosure to their Medicare-eligible dependents covered under the group health plan.

In addition, the guidance from CMS indicates that a plan sponsor may provide a disclosure notice electronically to retirees if the Medicare-eligible individual has indicated to the sponsor that he or she has adequate access to electronic information. According to CMS, before individuals agree to receive their information via electronic means, they must be informed of their right to obtain a paper version, how to withdraw their consent and update address information, and any hardware or software requirements to access and retain the creditable coverage disclosure notice.

If the individual consents to an electronic transfer of the notice, a valid email address must be provided to the plan sponsor and the consent from the individual must be submitted electronically to the plan sponsor. According to CMS, this ensures the individual’s ability to access the information as well as ensures that the system for furnishing these documents results in actual receipt. In addition to having the disclosure notice sent to the individual’s email address, the notice (except for personalized notices) must be posted on the plan sponsor’s website, if applicable, with a link on the sponsor’s home page to the disclosure notice.

Disclosure to CMS

Plan sponsors are also required to disclose to CMS whether their prescription drug coverage is creditable. The disclosure must be made to CMS on an annual basis, or upon any change that affects whether the coverage is creditable.

At a minimum, the CMS creditable coverage disclosure notice must be provided at the following times:
  • Within 60 days after the beginning date of the plan year for which the entity is providing the form;
  • Within 30 days after the termination of the prescription drug plan; and
  • Within 30 days after any change in the creditable coverage status of the prescription drug plan.

Plan sponsors are required to provide the disclosure notice to CMS through completion of the disclosure form on the CMS Creditable Coverage Disclosure webpage. This is the sole method for compliance with the CMS disclosure requirement, unless a specific exception applies.

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IRS issues proposed regs on truncated SSNs

September 26, 2017 by Wolters Kluwer Legal & Regulatory

The IRS has issued proposed regulations on truncated social security numbers. The IRS wants to aid employers’ efforts to protect employees from identity theft. The proposed regulations would amend existing regulations to permit employers to voluntarily truncate employees’ social security numbers (SSNs) on copies of Forms W-2, Wage and Tax Statement, that are furnished to employees so that the truncated SSNs appear in the form of IRS truncated taxpayer identification numbers (TTINs). In addition, the proposed regulations also would amend the regulations under Code Sec. 6109 to clarify the application of the truncation rules to Forms W-2 and to add an example illustrating the application of these rules.

BACKGROUND
Prior to being amended by the Protecting Americans from Tax Hikes (PATH) Act of 2015, Public Law No. 114-113, div. Q, title IV, 129 Stat. 2242, section 6051(a)(2) specifically required employers to include their employees’ SSNs on copies of Forms W- 2 that are furnished to employees. In addition, current regulations under §31.6051-1, as well as forms and instructions, require employers to include their employees’ SSNs on copies of Forms W-2 that are furnished to employees. Section 409 of the PATH Act amended section 6051(a)(2) by striking “his social security account number” from the list of information required on Form W-2 and inserting “an identifying number for the employee’ instead. This statutory amendment is effective for statements issued after December 18, 2015, the date that the PATH Act was signed into law. Because an SSN is no longer required by section 6051, the Treasury Department and the IRS propose amending the regulations to permit employers to truncate employees’ SSNs to appear in the form of TTINs on copies of Forms W-2 that are furnished to employees. If the proposed regulations are finalized without change, the IRS intends to incorporate the revised regulations into forms and instructions, permitting employers to use a TTIN on the employee copy of the Form W-2. See §301.6109-4(b)(2)(i) and (ii).
EXAMPLES

EXAMPLE 1

Pursuant to section 6051(d) and §31.6051-2(a) of this chapter, employer files the Social Security Administration copy of employee’s Form W-2, Wage and Tax Statement, with the Social Security Administration. Employer may not truncate any identifying number on the Social Security Administration copy. Pursuant to section 6051(a) and §31.6051-1(a)(1)(i) of this chapter, Employer furnishes copies of Form W-2 to employee. There are no applicable statutes, regulations, other published guidance, forms, or instructions that prohibit use of a TTIN on Form W-2, and §31.6051-1(a)(1)(i) specifically permits truncating employees’ SSNs. Accordingly, Employer may truncate Employee’s SSN to appear in the form of a TTIN on copies of Form W-2 furnished to Employee. Employer may not truncate its own employer identification number (EIN) on copies of Form W-2 furnished to Employee.

EXAMPLE 2

On April 5, year 1, a donor contributes a used car with a blue book value of $1100 to a charitable organization. On April 20, year 1, the charitable organization sends donor copies B and C of the Form 1098-C as a contemporaneous written acknowledgment of the $1100 contribution as required by section 170(f)(12). In late- February, year 2, the charitable organization prepares and files copy A of Form 1098-C with the IRS, reporting the donor’s donation of a qualified vehicle in year 1. The charitable organization may truncate the donor’s SSN to appear in the form of a TTIN in the Donor’s Identification Number box on copies B and C of the Form 1098-C because copies B and C of the Form 1098-C are documents required by the Internal Revenue Code and regulations to be furnished to another person; there are no applicable statutes, regulations, other published guidance, forms or instructions that prohibit the use of a TTIN on those copies; and there are no applicable statutes, regulations, other published guidance, forms, or instructions that specifically require use of an SSN or other identifying number on those copies. The charitable organization may not truncate its own EIN on copies B and C of the Form 1098-C because a person cannot truncate its own taxpayer identifying number on any statement or other document the person furnishes to another person. The charitable organization may not truncate any identifying number on copy A of the Form 1098-C because copy A is required to be filed with the IRS.

Comments are invited

Written or electronic comments and requests for a public hearing must be received by December 18, 2017. Submissions should be sent to: CC:PA:LPD:PR (REG-105004-16), room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-105004-16), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC, or sent via the Federal eRulemaking Portal at www.regulations.gov (REG-105004-16). FOR FURTHER INFORMATION CONTACT: Concerning these proposed regulations, Eliezer Mishory, (202) 317-6844; concerning submissions of comments and/or requests for a hearing, Regina Johnson (202) 317-6901 (not toll-free numbers). (IRS Proposed Regs. RIN 1545-BN35, September 20, 2017.)

 

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2017 Minimum Wage Rates by State

Under the Fair Labor Standards Act (FLSA), the current federal minimum wage rate for nonexempt employees is $7.25 per hour. A number of states have adopted the federal minimum wage rate as their state minimum wage rate.

However, many states require employers to pay a higher minimum wage rate. Whenever employers are subject to both state and federal minimum wage laws, the law that provides the higher wage rate for employees applies.

This Compliance Overview provides a list of minimum wage rates by state or jurisdiction. Note that specific industries or situations may have different rates that apply.

Highlights
MINIMUM WAGE RATES

• Twenty-eight states and the District of Columbia have a minimum wage higher than the federal wage rate.

• Georgia and Wyoming have a minimum wage rate that is lower than the federal wage rate.

• Five states have no minimum wage rate requirement.

• Twelve states have linked their minimum wage rate to a consumer price index. As a result, their minimum wage rates are generally updated every year.

FEDERAL VS. STATE LAW

• When the applicable state and federal minimum wage rates differ, the higher wage rate will apply.

STATE MINIMUM WAGE RATES

The table (available on our site by Clicking Here) provides a list of the minimum wage rates by state. In some instances, the state minimum wage is set to increase to an amount predetermined by law. In other cases, the state minimum wage rate is updated annually to reflect the cost of inflation as determined by a consumer price index (CPI).

LINKS AND RESOURCES

• Department of Labor (DOL) website on Minimum Wage Laws in the States

• DOL Fair Labor Standards Act Advisor

• DOL Handy Reference Guide to the Fair Labor Standards Act

Q&A’s About the Minimum Wage

 

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IRS issues record retention guidance due to Harvey

The IRS has reminded individuals and businesses to safeguard their tax records against natural disasters by taking a few simple steps. Taxpayers should always keep a duplicate set of records including bank statements, tax returns, identifications and insurance policies in a safe place such as a waterproof container, and away from the original set. Keeping an additional set of records is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the internet. Even if the original records are only provided on paper, these can be scanned into an electronic format.

Taxpayers are encouraged to save the scanned records to the cloud, or to other storage devices. Taxpayers are urged to photograph or videotape the contents of their homes, especially items of higher value. The IRS disaster loss workbooks and IRS Publication 584 can help taxpayers compile a room-by-room list of belongings. A photographic record can help taxpayers prove the fair market value of items for insurance and casualty loss claims. Ideally, photos should be stored with a friend or family member who lives outside the area. Emergency plans should be reviewed annually. Personal and business situations change over time. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider. If disaster strikes, affected taxpayers are encouraged to call 1-866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues. Back copies of previously-filed tax returns and all attachments, including Forms W-2, can be requested by filing Form 4506, Request for Copy of Tax Return. Alternatively, transcripts showing most line items on these returns can be ordered by calling 1-800-908-9946 or by using Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript or Form 4506-T, Request for Transcript of Tax Return. (IRS News Release IR-2017-145; FS-2017-11, September 7, 2017.)

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Eliminate Bad Hires – 6 Strategies to Finding the Right Hire

Join TotalHr Solutions on 9/20/17 for a webinar highlighting hiring strategies for HR professionals. Here is a preview of coming attractions:

Does your company struggle when it comes to making good hires? Think about the amount of interview time a candidate spends with you and your team.  When considering this, the approximate interview time is on average less than 10 hours per candidate to start date.  How can you really gain an understanding of a person’s character, behaviors, and integrity after only a few interviews? Even a good interviewer can’t possible size up if the candidate would be a good fit after 2 interviews.

According to a CareerBuilder post, 41% of companies say that a bad hire in the last year has cost them at least $25K and 25% of companies say that a bad hire in the last year cost them at least $50K. Total HR Solutions is pleased to provide you with 6 Strategies for Hiring Right. Join us for a complimentary webinar lead by Dawn Quesnel

Wednesday, September 20, 2017 from 1:00 PM to 1:30 PM EDT – VIEW & REGISTER HERE

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IRS warns tax professionals of W-2 email scam

The IRS has alerted tax professionals to a recent increase in email scams targeting employee Forms W-2. In 2017, the IRS witnessed a surge in the number of businesses, public schools, universities, tribal governments and nonprofits victimized by the W-2 scam increase to 200 from 50 in 2016. Those 200 victims translated into several hundred thousand employees whose sensitive data was stolen.

“These are incredibly tricky schemes that can be devastating to a tax professional or business,” said IRS Commissioner John Koskinen. “Cybercriminals target people with access to sensitive information, and they cleverly disguise their effort through an official-looking email request.”

The scam occurs when a cybercriminal is able to “spoof” or impersonate a company or an organization executive’s email address and target a payroll, financial or human resources employee with a request. The criminals then file fraudulent tax returns that could mirror the actual income received by the employees, making the fraud more difficult to detect.

The IRS, state tax agencies and tax industry partners working together through the Security Summit have launched the 10-week Don’t Take the Bait campaign that is currently underway, highlighting the many tactics adopted by cybercriminals as well as the steps tax professionals can take to protect their clients and themselves from remote takeovers.

August 25, 2017 by 

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IRS Confirms ACA Mandate Penalties Still Effective

OVERVIEW


The Internal Revenue Service (IRS) Office of Chief Counsel has recently issued several information letters regarding the Affordable Care Act’s (ACA) individual and employer mandate penalties. These letters clarify that:

  • Employer shared responsibility penalties continue to apply for applicable large employers (ALEs) that fail to offer acceptable health coverage to their full-time employees (and dependents); and
  • Individual mandate penalties continue to apply for individuals that do not obtain acceptable health coverage (if they do not qualify for an exemption).

These letters were issued in response to confusion over President Donald Trump’s executive order directing federal agencies to provide relief from the burdens of the ACA.

 

ACTION STEPS


These information letters clarify that the ACA’s individual and employer mandate penalties still apply. Individuals and ALEs must continue to comply with these ACA requirements, including paying any penalties that may be owed.

Background

The ACA’s employer shared responsibility rules require ALEs to offer affordable, minimum value health coverage to their full-time employees or pay a penalty. These rules, also known as the “employer mandate” or “pay or play” rules, only apply to ALEs, which are employers with, on average, at least 50 full-time employees, including full-time equivalent employees (FTEs), during the preceding calendar year. An ALE may be subject to a penalty only if one or more full-time employees obtain an Exchange subsidy (either because the ALE does not offer health coverage, or offers coverage that is unaffordable or does not provide minimum value).administration-e83db5092a_180

The ACA’s individual mandate, which took effect in 2014, requires most individuals to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty. The individual mandate is enforced each year on individual federal tax returns. Individuals filing a tax return for the previous tax year will indicate, by checking a box on their individual tax return, which members of their family (including themselves) had health insurance coverage for the year (or qualified for an exemption from the individual mandate). Based on this information, the IRS will then assess a penalty for each nonexempt family member who doesn’t have coverage.

On Jan. 20, 2017, President Trump signed an executive order intended to “to minimize the unwarranted economic and regulatory burdens” of the ACA until the law can be repealed and eventually replaced. The executive order broadly directs the Department of Health and Human Services and other federal agencies to waive, delay or grant exemptions from ACA requirements that may impose a financial burden. However, the executive order does not include specific guidance regarding any particular ACA requirement or provision, and does not change any existing regulations.

IRS Information Letters

Office of Chief Counsel issued a series of information letters clarifying that the ACA’s individual and employer mandate penalties continue to apply.

  • Letter numbers 2017-0010 and 2017-0013 address the employer shared responsibility rules.
  • Letter number 2017-0017 addresses the individual mandate.

According to these letters, the executive order does not change the law. The ACA’s provisions are still effective until changed by Congress, and taxpayers are still required to follow the law, including paying any applicable penalties.

HIGHLIGHTS


  • The IRS clarified that both the individual and employer mandates continue to apply.
  • President Trump’s executive order does not change the law. Taxpayers are still required to follow the ACA, including paying any applicable penalties.
  • Changes to ACA requirements must be made by Congress through the legislative process.

IMPORTANT DATES


April 14, 2017

The IRS issued letters clarifying the executive order’s impact on the ACA’s employer mandate.

June 20, 2017

The IRS issued a letter clarifying the executive order’s impact on the ACA’s individual mandate.

More Information

For additional information on the ACA Executive Order and the current tax filing season, please visit www.irs.gov/tax-professionals/aca-information-center-for-tax-professionals.

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Unpaid Internships: Complying with DOL Guidelines

Unpaid internships are popular across the country, providing benefits for companies and valuable experience for college students or recent graduates. The Department of Labor (DOL) issued guidance in 2010 that addresses how internship programs must be structured to comply with the Fair Labor Standards Act (FLSA).

student-e131b8072a_180A common misconception exists that if a student is willing to work for free to get industry experience, then there’s no harm in taking advantage of it. Unfortunately, this practice leaves many employers open to substantial legal liability. Make sure your unpaid internships meet DOL standards to help avoid significant penalties.

DOL Guidance

The 2010 guidance addresses unpaid internships under the FLSA, clarifying the determination of whether an intern is considered an employee (subject to minimum wage) or a trainee (legally eligible to perform unpaid work). These guidelines apply to for-profit, private sector employers. Unpaid internships in the public sector and for non-profit charitable organizations are generally permissible under the FLSA.

To determine whether an intern can be considered a trainee, the DOL lists six criteria that the internship must meet.

  • The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment.
    • This can often be satisfied by having a student’s university sponsor and oversee the internship and offer course credit for its completion.
  • The internship experience is for the benefit of the intern.
  • The intern does not displace regular employees, but instead works under the close supervision of existing staff
    • If the intern is working under the same supervision as regular employees, then the internship likely does not satisfy this condition.
  • The employer providing the training derives no immediate advantage from the activities of the intern and, on occasion, the employer’s operations may actually be impeded.
  • The intern is not necessarily entitled to a job at the conclusion of the internship and the internship is for a fixed time period.
    • Though an incidental job offer at the conclusion of the internship is acceptable, the employer is generally not allowed to use unpaid internships as a “trial period” for potential future employees.
  • The employer and intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of these conditions are met, then an employment relationship does not exist under the FLSA and an unpaid internship is legally permissible. The DOL has issued a fact sheet on this topic.

Penalties

Employers who are not in compliance with the DOL regulations face legal exposure, including penalties from the government and potential lawsuits. Penalties can include owing back pay, taxes not withheld, Social Security, unemployment benefits, interest, attorneys’ fees and liquidated damages (double the unpaid wages).

Compliance Tips

The following strategies can help your company’s unpaid internships stay compliant with federal law and meet the six criteria established by the DOL.

  • Work with the student’s university. The school will often sponsor the internship and may offer the student course credit. Coordinating with a university can help ensure that the internship is providing the necessary training to make it an educational experience for the student.
  • Make sure the intern is learning skills that are applicable in multiple job settings, rather than being specific to your company.
  • Consider allowing interns to observe various aspects of your company’s operations (for example, job shadowing) without always needing to engage in work.
  • Make clear before the internship begins what the responsibilities and expectations will be, that the internship is unpaid and that there is no expectation of a job offer once the internship is over. Keep records of these written expectations along with any other documentation that describes what the intern does, what training is available, what type of supervision is provided, etc.
  • If the internship program causes any disruption to your company or represents a time commitment for any of your employees, this should be documented as well. An unpaid internship that satisfies the DOL’s requirements should actually be somewhat of a drain on the employer due to the time put in for training and the lack of production coming from the intern.

If your company has unpaid interns, it is essential that you familiarize yourself with the DOL guidelines and make sure your program is in compliance as it could be costly for your company to get caught not complying.

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A Beginner’s Guide to Filling out Your W-4

Thank you to our friends at Lifehacker.com

by Kristin Wong, Contributing writer, Lifehacker.com, Original article found here

Maybe you started your first job or maybe you gave up the freelance lifefor full-time employment. Whatever your scenario, if you find yourself filling out a W-4 for the first time, you may be a touch confused by all the fields, worksheets, and forms. Yes, the IRS can make things confusing. Let’s take it one step at a time.

Step One: Decide If You’re Exempt (You’re Probably Not)

exempt

 

When you start a new job as an employee, your new employer will give you a W-4. Your W-4 is a two-page IRS form that basically tells your employer how much money to take out of your paychecks to cover taxes. One of the first instructions on your W-4 is what to fill out if you’re exempt. But you’re probably not exempt.

Exempt means you’re not on the hook for taxes, so your employer won’t take anything out of your paycheck for federal income tax throughout the year (they’ll still take out money for Medicare and Social Security, though). If you are exempt, you’ll simply write “Exempt” on Line 7 of your W-4.

Generally, you can only claim exempt if you earn less than $10,350 for the entire year. If someone can claim you as a dependent and your earned income is $6,300 or below, you can claim exempt, too.

You definitely don’t want to file exempt if you’re not actually exempt, though. Again, you won’t have any federal income tax withheld from your paycheck. So when you do your taxes in April, you’ll have a giant tax bill that includes late payment penalties.

Step Two: Fill Out the Worksheets

The bulk of your W-4 is worksheets. There are three of them:

  • The Personal Allowances Worksheet (for everyone)
  • The Deductions and Adjustments Worksheet (for people with a bunch of deductions)
  • Two-Earners/Multiple Jobs Worksheet (for people with more than one job or married people who both work)

These worksheets give the IRS a general idea of your taxable income so they know much to withhold for taxes from every paycheck. If you don’t report a second income via the “Two-Earners” worksheet, for example, they might not withhold enough money throughout the year, which means you could end up owing the IRS money when you do your taxes in April.

Calculate Your Personal Allowances

 

allowances

The Personal Allowances worksheet is for everyone, and it’s straightforward. Your “personal allowances” basically represent your deductions. The more allowances you claim, the less money is withheld from your paycheck.

The worksheet guides you through how many you can claim, line-by-line. It’s pretty easy to figure out, but the IRS has a withholding calculator that can help you make sure you’re claiming the right amount of allowances, too. Roberg Tax Solutions suggests the following allowances, depending on your filing status:

You are a student, either in high school or in college. You’re not married and you don’t have kids. Your parents are allowed to claim you on their tax return (you’re under 24 years old.) SINGLE, ZERO ALLOWANCES

You’ve got a job, only one job, you’re living on your own, and you’re single.SINGLE, ONE ALLOWANCE

Now if you have a child, add another allowance for each child. For example, let’s say you’re single with 2 kids, you’d claim single 3 allowances; one allowance for you and one for each of the children.

You’re married and only one person works: MARRIED, TWO ALLOWANCES

You’re married and you both work—you’ll each have your own W-4 and they will be different. Spouse #1 with higher paying job—claim MARRIED and all the allowances for the family. Spouse #2 with the lower paying job—claim MARRIED BUT WITHHOLD AT HIGHER SINGLE RATE, ZERO ALLOWANCES

Once you have the total number you want to claim, you’ll enter that amount on Line H. It doesn’t have to be an exact science. You can claim more or fewer allowances if you like because, again, it’s just meant to get an idea of how much you should have taken out of your paycheck.

If you get a big tax refund every year, you might want to claim more allowances. A big tax refund generally means you’re overpaying your taxes throughout the year, so claiming more allowances can balance that out a bit. Your refund won’t be as big, but your paychecks will be bigger.

On the other hand, too many allowances and you might underpay your taxes. If you claim too many, you may not have enough tax withheld each pay period and you’ll end up owing money in April. It’s probably better to err on the side of overpaying and not claim too many personal allowances. You can always adjust this number later and turn in a new W-4, too.

From there, you have two more worksheets you may need to fill out: the Deductions and Adjustments Worksheet, and the Two-Earners/Multiple Jobs Worksheet.

Decide If You Need to Make Any Adjustments

deductions

 

This worksheet is for any tax deductions and credits that might lower your taxable income. This will give the IRS a more accurate idea of your tax liability so you don’t overpay throughout the year. In basic terms, if you take any major deductions or credits that lower your taxable income by a lot, you’ll want to fill out this form. If you itemize your deductions, you should definitely fill out the form. Many people just take the standard deduction because it’s easier, but Itemizing makes more sense if you have specific, large expenses you can deduct, like mortgage interest payments, charitable contributions, medical expenses, and so on. You might also have credits or other “income adjustments” for things like a IRA contributions, alimony expenses, or student loan interest.

The worksheet instructs you to visit Publication 505 to see all of the credits you might be eligible for, but the IRS has a handy withholding calculator that’ll walk you through the process. The calculator will tell you your total itemized deductions along with your adjustments to income, which makes it really easy to fill out this worksheet.

Fill out “Two-Earners” If Your Household Has More Than One Income

more-than-one-income

 

You’ll use this worksheet if you have two jobs or if you’re married and your spouse has a job, too. The goal of this worksheet is to calculate how much extra you should have withheld from your paycheck, based on the amount of that second income.

This worksheet is pretty easy to follow, though. First, if you filled out the “Deductions and Adjustments” worksheet, you’ll enter your total from that worksheet on Line 1 of this one. From there, use the two tables at the bottom of the worksheet to fill in Lines 2-9. Table 1 is for the lowest paying job and Table 2 is for the highest paying job. These tables help you find your allowances based on both your incomes.

Each line of the worksheet is just basic math to calculate the additional amount you’ll have withheld from each paycheck, and you’ll enter this amount on Line 9.

Step Three: Fill Out Your W-4

fill-out

 

Once your worksheets are completed, it’s time to fill in the blanks of your actual W-4 Form. Lines 1-4 are pretty standard stuff: your name, address, social security number, and tax filing status. In Line 5, you’ll enter the number you calculated from Line H of your Personal Allowances Worksheet UNLESS you filled out the Deductions and Adjustments Worksheet, then you’ll enter the number you calculated from Line 10 of that.

And if you filled out the Two-Earners Worksheet, find the amount you calculated in Line 9 of that worksheet, then write that amount in Line 6 of your W-4.

From there, you’ll sign your worksheet and hand it over to your employer. And that’s it! You should have just the right amount withheld from your paycheck. You won’t owe a bunch of money in April but you won’t get a huge refund, either.

Whenever you run into any major life changes, you’ll want to update this form, too. Obviously, if you get a new job, you’ll fill out a new one, but if you get married, have a kid, or get a second job, you’ll ask for a new W-4, then adjust accordingly.

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Payroll Frequency Requirements – by State

Table of State Payday Requirements
State Weekly Bi-weekly Semi-monthly Monthly
Alaska X X
Arizona X3
Arkansas X
California X9 X9 X
Colorado X
Connecticut X4
Delaware X
District of Columbia X
Georgia X
Hawaii X X5
Idaho X
Illinois X X2
Indiana X X
Iowa X  X6 X X
Kansas X
Kentucky X
Louisiana X X7
Maine X8
Maryland X X
Massachusetts X X
Michigan 9 X X X X
Minnesota X10 X10
Mississippi X11 X11
Missouri X
Montana12
Nebraska 13
Nevada X  X2
New Hampshire X
New Jersey X X21
New Mexico X  X2
New York   X14  X14
North Carolina 15
North Dakota X
Ohio X
Oklahoma X
Oregon X
Pennsylvania 13
Rhode Island X 16 X 16 X 16
South Dakota X
Tennessee X
Texas X   X17
Utah   X18   X18
Vermont X    X19   X19
Virginia 20 X20  X2
Washington X
West Virginia X
Wisconsin X
Wyoming X

Alabama and South Carolina. No regulations or not specified.

Illinois, Nevada, New Mexico and Virginia. Monthly payday requirements for Executive, Administrative, and Professional personnel.

Arizona. Payday two or more days in a month, not more than 16 days apart.

Connecticut. Longer interval (up to monthly) permitted if approved by labor commissioner.

Hawaii. Employees may choose to be paid on a monthly basis under special election procedure. Director of labor and industrial relations also may grant exceptions to the general semi-monthly payday requirement. Payday requirement applies only to private sector employment.

Iowa. Any predictable and reliable pay schedule is permitted as long as employees get paid at least monthly and no later than 12 days (excluding Sundays and legal holidays) from the end of the period when the wages were earned. This can be waived by written agreement; employees on commission have different requirements.

Louisiana. Applicable to entities employing 10 or more employees that are engaged in manufacturing, mining, or boring for oil, and to every public service corporation. Payment is required no less than twice during each calendar month.

Maine. Payment due at regular intervals not to exceed 16 days.

California and Michigan. Frequency of payday depends on the occupation.

10 Minnesota. Under Minnesota statute, employers are required to pay their employees for all wages due at least once every 31 days. Employees engaged in transitory employment must be paid at intervals of not more than 15 days. Employees of “public service corporations doing business within this state” are required to be paid at least semimonthly the wages earned by them to within 15 days of the date of such payment, unless prevented by inevitable casualty.

11 Mississippi. Applicable to every entity engaged in manufacturing of any kind in the State employing 50 or more employees and employing public labor, and to every public service corporation doing business in the State. Payment is required once every two weeks or twice during each calendar month.

12 Montana. If there is not an established time period or time when wages are due and payable, the pay period is presumed to be semimonthly in length.

13 Nebraska. Payday designated by employer.

14 New York. Weekly payday for manual workers. Semi-monthly payday upon approval for manual workers and for clerical and other workers.

15 North Carolina. None specified, pay periods may be daily, weekly, bi-weekly, semi-monthly or monthly.

16 Rhode Island. Childcare providers shall have the option to be paid every two weeks.

Effective January 1, 2014, employers that meet certain requirements outlined in Rhode Island General Law Section 28-14-2.2 may petition the Rhode Island Department of Labor and Training for permission to pay employees less frequently than weekly, but must pay wages at least twice a month.

17 Texas. Monthly payday for employees exempt from overtime provisions of the Fair Labor Standards Act.

18 Utah. Employees on a yearly salary can be paid on a monthly basis.

19 Vermont. Employers may implement bi-weekly and semi-monthly payday with written notice.

20 Virginia. Employees whose weekly wages total more than 150 percent of the average weekly wage of the Commonwealth may be paid monthly, upon agreement of each affected employee.

21 New Jersey. Employer may pay bona fide executive, supervisory and other special classifications of employees once per month.

Note: South Carolina. Employers with 5 or more employees are required to give written notice at the time of hiring to all employees advising them of their wages agreed upon, and the time and place of payment along with their expected hours of work. The employer must pay on the normal time and at the place of payment established by the employer.

Prepared By:

Division of Communications
Wage and Hour Division
U.S. Department of Labor

This document was last revised in January 2017.

The Wage and Hour Division tries to ensure that the information on this page is accurate but individuals should consult the relevant state labor office for official information.

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