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The Certified Payroll Professional Corner: Penalties

Christopher Wood, CPP  

· 5 minute read

Christopher Wood, CPP  

· 5 minute read

This edition of the CPP Corner will go over a previous quiz question on overtime and set up this edition's question regarding penalties.

In our last edition of the Certified Payroll Professional (CPP) Corner, we talked about overtime.

Important overtime happenings. As mentioned in the last edition, the U.S. Supreme Court has agreed to decide whether a supervisor of offshore oil rig workers is entitled to overtime pay under federal law even though he earned more than $200,000 a year [Helix Energy Solutions Group Inc v. HewittU.S. Supreme Court, No. 21-984].

Labor department considering overtime revisions. Also, the U.S. Department of Labor (DOL) finished up its series of listening sessions on June 3, 2022 regarding possible revisions to overtime provisions of the Fair Labor Standards Act (FLSA) for the appropriate salary level above which the exemptions for bona fide executive, administrative, and professional employees may apply.

Investigations result in many penalties. In 2021, the DOL’s Wage and Hour Division (WHD) recovered more than $138 million in overtime back wages for more than 145,000 workers. In its investigations, the WHD found that overtime back wages represented 80% of all back wages due.

Last edition’s question. We asked: “What is the current weekly salary basis for the FLSA exemption from overtime pay?” This is an important dollar amount because certain tests must be met for an employee to be considered exempt from overtime pay.

The answer to the question was: “b. $684 per week.” This weekly salary threshold is discussed in the following Payroll Guide sections: Payroll Guide ¶18,015Payroll Guide ¶18,075Payroll Guide ¶18,080Payroll Guide ¶18,085Payroll Guide ¶18,090Payroll Guide ¶18,096Payroll Guide ¶18,097Payroll Guide ¶18,098, and Payroll Guide ¶20,904a.

Also, the DOL’s Fact Sheet #17 discusses the exemption from FLSA overtime and includes the $684 weekly salary threshold. A final rule in 2019 increased the salary threshold from $455 per week to $684 per week.

Penalties. There are a number of payroll-related penalties that can come from the IRS. The IRS may charge a penalty for various reasons that include the failure to: file a return on time, pay a tax on time and in the right way, prepare an accurate return, and provide accurate information returns.

The IRS charges interest on a penalty if the taxpayer does not pay it in full. The IRS may also charge some penalties every month until the taxpayer pays the full amount owed. It is possible to dispute a penalty from the IRS.

Avoiding penalties by filing accurate returns, paying taxes by the due date and furnishing any information returns in a timely manor is the best course of action.

Form W-2 filing season. During the June 2, 2022 IRS monthly payroll industry telephone conference call, a representative from the Social Security Administration provided a 2021 filing season update for Forms W-2 (Wage and Tax Statement) by noting that the federal agency processed more than 256 million Forms W-2 for tax year 2021 so far.

Employers must annually submit Forms W-2 to the SSA. The due date for submissions is January 31, unless the due date falls on a Saturday, Sunday or legal holiday. In this case, the due date is the following business day.

The IRS charges separate penalties for failing to file a correct information return on time and provide correct information on the Form W-2. The amount of the penalty is based on when the taxpayer files the corrected Form W-2. Penalties are indexed for inflation. There are exceptions to these penalties that we will discuss next week.

CPP quiz question. There are different penalty amount thresholds for filing a Form W-2 late. There is a penalty per return if a Form W-2 is correctly filed within 30 days of the due date. The next penalty level is if the return is correctly filed more than 30 days after the due date but before August 1. The third penalty level is if the Form W-2 is filed after August 1. There is additionally a penalty for intentional disregard regarding late or incorrect filing of Forms W-2.

CPP exam question. What is the penalty amount for each Form W-2 correctly filed more than 30 days late but before August 1?

  1. $100 per return.
  2. $110 per return.
  3. $120 per return.
  4. $150 per return.

Good luck! We’ll have the answer and more information and the following CPP exam question.

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