Payroll Newsletter Fall 2017

Steele Martin Jones & Company

Certified Public Accountants and Business Advisors



Payroll Newsletter

Fall 2017


Changes that did not occur…it’s better this year!



Salaried vs. Hourly Employees

In last year’s payroll newsletter, we told you about the impending big changes on salaried vs. hourly rules, to be effective 12/1/16.  A Federal judge blocked enforcement of that law the week before the change was to take place.  Since our political system was turned upside down on November 6 (for better or worse), the government chose not to pursue an appeal.  As such, the old rules remain in place.

  • The employee is paid on a salary basis that does not fluctuate based on the number of hours worked or the quality of work.
  • Salaried employees must make $23,660 per year.
  • They must meet the job duties test, even if they make over $23,660/year.


As we looked at payrolls last year, it was the job duties test that some of our clients had a problem with (and continue to have problems).  There are five categories of job duties tests that could exempt someone from the overtime rules.

  • Executive Exemption is for someone that supervises at least two full-time employees (or equivalent) and has some authority in hiring / firing.
  • Administrative Exemption is for non-manual work related to the business, and the primary duty includes the exercise of discretion or judgement with respect to matters of significance.
  • Professional Exemption for those that must have gone through a prolonged course of “specialized intellectual instruction” and use that advanced knowledge requiring the consistent exercise of judgement.
    • A comparable creative professional exemption is also available.
  • Computer Employees Exemption in certain computer-related fields.
  • Outside Sales Exemption makes sales, and makes these sales away from the office.


This summarizes in half a page what the US Department of Labor has books on.  For more details, start at their fact sheet 17a


Form I-9

We reminded you last year that ALL employees you hire must have Form I-9 filled out as you hire them.  This would confirm their eligibility to work (immigration status).  Last year, TN had started a program to audit these forms, and had audited some convenience stores that we knew of.


Since then, we’ve seen no further action by TN toward auditing these forms.  On the other hand, the new Federal administration may be more interested in checking immigration status.  Again, no action yet.


The payroll services we provide to clients do not include the I-9 service. Those forms should have been part of the regular employment process, and the info is kept in their personnel file at your location.  Please let us specifically know if you want us to assist you in maintaining I-9 files. 





SMJC Payroll Newsletter, Fall 2017, page two


Work Opportunity Tax Credit (WOTC)

FREE MONEY!  There are tax credits (money back from the IRS) available for hiring some of the people you would be hiring anyway.  It’s the paperwork that becomes the issue.


WOTC is a voluntary federal tax credit program designed to encourage businesses to hire individuals who fall into one of numerous target groups that typically experience significant barriers to employment. These include military veterans, disadvantaged workers within the federal poverty level, the disabled, long-term unemployment recipients, and teens from Empowerment Zones for summer employment.  The most common group is food stamp recipients.


The credit is 25% of the wages if they work 120 to 399 hours in their first year, or 40% of the wages if they work 400 hours or more in their first year.   Generally the cap per person is $2,400, but is higher in a few specific groups (long term unemployed for example).  This credit is per person, but there is no limit on the number of staff this can apply to.


The details:

  • Most advisors would tell you it’s discriminatory to ask ahead of your hiring if they fit into one of the disadvantaged groups.  The question would need to be done as part of their hiring paperwork.
  • After you hire them, but within the first 28 days, IRS Form 8850 would need to be submitted to the TN Dept. of Labor.  They are the ones that certify that your new employee is eligible.
    • The TN filing is on-line; you keep the signed Form 8850
    • Unfortunately, it takes the state 6 to 9 months to make that certification…and TN is one of the quicker ones.  Thus, you can’t make your hiring decision or pay rate based on “hoping” that this employee is eligible.
  • Certain of the disadvantaged groups require additional paperwork to accompany the application.  See the TN WOTC handbook link below.
  • Taking the WOTC is done on the business’ income tax return.  For practical purposes, it’s possible that we’d extend the tax return waiting on WOTC certification, or file an amended return to get a refund with the WOTC.
  • The program is scheduled to run through 2019, but has been extended by Congress multiple times.


Steele Martin can manage your WOTC filings.  Your HR coordinator will have your new hire fill out the Form 8850, and we can file that with the state and track it.


Example 1:  works 40 hours and quits.  No credit.

Example 2:  works 200 hours at $10/hour = $2000 wages paid.  Credit $500.

Example 3:  works 450 hours at $10/hour = $4500 wages paid.  Credit $1800.

Example 3:  works 600 hours at $10/hour = $6,000 wages paid.  Credit max hit at $2,400 (for most).

Remember that a credit is a dollar for dollar reduction in your income taxes.  You do loose the amount of credit as a tax deduction; for many of you a $1000 credit put $650 to 700 in your pocket. 



US Department of Labor fact sheet

IRS Form 8850

TN WOTC Handbook


Disclaimer:  We produce this newsletter for our clients and others who are concerned about planning and managing their tax affairs.  Each business and individual’s tax situation is unique, and the material in this newsletter is not intended to constitute specific accounting, tax, investment, or legal advice.  This newsletter is a general overview of each topic and is not intended to be a substitute for specific advice, as the impact of items mentioned will not be the same for every taxpayer.  Accordingly, where specific advice is necessary or appropriate, consultation with a competent professional advisor is highly recommended.