What about the elimination of Tax on Overtime?
What about the Extension of the FICA Tip Credit?
Frequently Asked Questions:
Q: Is there anything that I need to do with my payroll now to reduce regular Federal income tax withholding for employees with tips or overtime?
A: No, these deductions will be taken when an annual Federal return is filed and will not reduce current withholding. Tips and OT will be reported on the employees’ W-2. We are awaiting guidance from the IRS as to how they should be reported and will communicate with clients that may be impacted.
Q: Is Prevailing Wage included in the premium calculation?
A: No, only the premium paid for work meeting the FLSA requirements
Q: What needs to be done for employees who terminated prior to the passing of this law?
A:The payroll software will report the tips and overtime premium for all employee within the calendar year.
Q: Will tips automatically added to a check count?
A: No, technically these are not defined as tips. The true definition of tips is a voluntary amount paid by the customer. These automatic amounts will not qualify for the deduction.
Q: Will required, automatic, lunch breaks for 30 or 60 minutes each day create a problem?
A: So long as the employee is not doing any work during that time, it is not considered paid time and would not accumulate overtime pay.
Q: Are bonuses addressed in this law?
A: No, there is nothing direct in the law about bonuses. Bonuses do, however, affect overtime calculations but their impact would be part of the regular overtime reporting
➡️What Employers Should Do Now
For now, no immediate payroll processing changes are required, but preparation is key. Stay tuned as CTR’s tax and compliance experts continue to monitor IRS guidance to ensure your payroll reporting remains accurate and compliant.
✴️Need Help Navigating Compliance? Contact CTR Payroll | HR today!
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