Posted on Mar 30, 2018

Every company or organization will have different needs for payroll administration based on business and compensation structures, benefit offerings, the specific industry and the state and local tax laws. While determining a good fit for outsourced payroll, anticipate how much time the set-up of such services could take. A long set-up time and possible mistakes could have a significant impact on business management and employee morale. Rather than having our clients input all of their data, we walk them through the data collection process. We also provide consultation on areas where the company has had questions or problems, such as garnishment deductions or shareholder compensation. We alert them to any changes in wage and hour laws or multi-state laws that could affect them.

Our goal is to limit client exposure to penalties as we manage payroll. Common questions include:

  • Structure of the payrollPayroll Outsourcing WP Download
  • How often employees are paid
  • Direct deposit or by check (or both!)
  • Structure of the company and number of offices and employees
  • Location of offices (multi-state?)
  • Types of benefits
  • Unusual deductions
  • Unusual compensation

Collecting this information up front allows us to help clients design an outsourced model that makes sense for them, and doesn’t leave them trying to figure it out for themselves. We find that some clients like to manage parts of the payroll and benefits process themselves, while other parts are best handled through outsourcing.

The Outsourced Payroll Onboarding Process

As a CPA firm dedicated to payroll administration and consulting, Cornwell Jackson has onboarded new clients in less than a month depending on the level of payroll complexity. Our goal is always onboarding within 30 to 45 days. We typically recommend that companies convert at the beginning of a new quarter or pay period — or at year-end — to make the transition align with financial reporting deadlines. A typical onboarding process with our firm looks like this:

  • Client consultation to design the outsourced model
  • Client data gathering
  • Buildout of the payroll account
  • Payroll set-up checklist to cover all items

Once your company has an efficient model for payroll administration, it is much easier to adjust items as needed through the year. For example, we run across a lot of questions regarding personal use of a company-owned vehicle as a benefit. The ratio of personal use must be calculated for the employees’ W-2s and the benefit run properly through payroll. New hires and promotions also bring with them a wealth of payroll questions, but are more easily handled with an efficient system.

When your CPA is in touch with daily business realities through payroll administration, the long-term value extends beyond payroll accuracy. A dedicated team can consult with you on decisions such as when to hire more employees, when to adjust tax planning and cash flow strategies and timing of bonuses. Payroll efficiency even ties into business valuations as a consideration of overall processes and systems in place to run the business.

Payroll is the most up-to-date KPI in a business — and the most expensive.  Business owners we talked to are more than happy to find ways to save money in this area. Are you ready to consider an alternative to your current system of payroll administration? Call the payroll team at Cornwell Jackson.

Download the Whitepaper: With Payroll Outsourcing, Don’t Go it Alone

Scott Bates, CPA, is a partner in the audit practice and leads the firm’s business services practice, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in healthcare, real estate, auto, transportation, technology, service, dealerships and manufacturing and distribution. Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.

Blog originally published May 13, 2016. Updated on March 30, 2018. 

Posted on Mar 20, 2018

Payroll Outsourcing

For many small businesses, payroll may be handled in-house. And yet, the laws and regulations surrounding employee compensation and benefits can challenge owners and back office staff to stay efficient and compliant. Payroll ties directly into individual and company tax reporting as well as employee benefit compliance. If and when companies choose payroll outsourcing, they must weigh the potential benefits against the ability of the payroll provider to deliver a high level of customer service and communication. Companies and industries differ on how they structure payroll and benefits. Laws and regulations also vary state by state. Consulting on payroll structure, schedules, regulatory changes and reporting, therefore, should be part of the relationship while still being cost effective for the company. It’s helpful to start this discussion with your CPA.

What to Ask your CPA about Payroll Outsourcing

Some CPA firms offer payroll administration as part of basic or strategic Payroll Outsourcing WP Downloadaccounting services. The level of administration and services vary widely. The potential benefit of having your CPA firm handle payroll administration, however, is that the team understands the world of taxes and accounting. They can streamline payroll reporting, deposits and filing schedules into the audit or tax deadlines they already handle for the business.

However, not every CPA firm offers payroll administration. Due to its complexity, it’s also important that the firm has a staff of professionals dedicated to this area of your business. If, in fact, the firm offers a focused niche in payroll administration and consulting, there are several benefits to the arrangement:

  • Expanded resources to monitor new compliance issues
  • Reduced overhead costs (assuming a packaged engagement with other services)
  • Multi-state payroll experience
  • Corrected instances of overpayment or underpayment
  • Managed filing and payment schedules with IRS, state and local tax authorities
  • Limited client exposure to potential penalties
  • Consulting on software options and efficient payroll structures
  • Streamlined communication with other tax, audit and business needs

At Cornwell Jackson, we offer payroll administration and consulting services to our clients. We have invested in software and training for a team dedicated to this service, including certification as a CPP through the American Payroll Association.

The need was evident after too many instances of misclassification 1099 errors as well as W2 mistakes at tax time. We also noted mistakes in HSA and life insurance reporting and general improper reporting of cash and non-cash benefits. Our clients were paying for payroll administration, and then paying our firm to fix mistakes. We realized that our experience could help reduce or prevent problems before they even happen — and reduce our clients’ expenses.

After investigating the value our firm could provide in this area, we learned about many differences between payroll providers. When discussing payroll administration with your CPA firm or an outsourced service, there are several questions you should ask:

  • How much experience does the provider have in payroll administration — and is there a dedicated team?
  • Will the team walk you through data collection and set-up or are you on your own?
  • Who is your go-to contact to ask questions about liabilities or deadlines?
  • Is the provider NACHA compliant for ACH direct deposits?
  • Can you arrange for payroll tax payments on a schedule that supports cash flow along with compliance?

This last question is an important business consideration that most companies don’t know about. Some payroll services withdraw all funds from the business account for payroll transfers and taxes all at once, even if taxes aren’t due for a few weeks. If your receivables come in the first week of the month and payroll taxes are due on the 15th of the month, you can schedule payments in a way that supports cash flow while still being compliant. In addition, payroll services may not provide guidance on industry-specific issues like auto dealer comps or law firm shareholder bonuses, for example. Business owners must carefully consider the level of expertise a provider has in your industry.

Payroll is the most up-to-date KPI in a business — and the most expensive.  Business owners we talked to are more than happy to find ways to save money in this area. Are you ready to consider an alternative to your current system of payroll administration? Call the payroll team at Cornwell Jackson.

Continue Reading: Outsourced Payroll Onboarding: Build in time for transition and results

SB HeadshotScott Bates, CPA, is a partner in the audit practice and leads the firm’s business services practice, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in healthcare, real estate, auto, transportation, technology, service, dealerships and manufacturing and distribution. Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.

Blog originally published April  18, 2016. Updated on March 20, 2018. 

 

Posted on Mar 8, 2018

Payroll Outsourcing and Payroll Administration

There is a common story we see across small businesses of all sizes. Owners and operators of the company are focused on top line growth, hitting the pavement to bring in new business. They add employees to support the new business growth. They add benefits to keep those great employees. Before realizing it, the owners and small bookkeeping staff are overwhelmed with benefit and payroll administration. Is the company doing it right? Do owners and employees know what they don’t know?

At this point, the owners seek advice from other business owners and their CPA. Would outsourcing payroll make sense or should they add in-house staff to manage it better? After reviewing a few payroll services, the company is understandably faced with more questions about which service provides the best options — not to mention price.

Once decided on a payroll service, the real education begins. The company is still providing a lot of information to the payroll service to set up the structure and system, such as personnel information, their employment status, types of benefits and how each employee wants those wages and benefits managed through payroll. Later, staff also must reach out when there are new hires, promotions and changes to benefits. Depending on the payroll service, owners and operators might not get a lot of help understanding everything. They are also on their own to figure out internal processes that make information gathering and sharing simpler.

Let’s say the business expands even more to another state. Then the owner is faced with multi-state payroll complications. Although the solution to a well-managed payroll and benefits system takes time and strategy, the opportunity to address payroll complexity first lies with your CPA. This relationship can either simplify or increase complexity, so let’s look at some of the payroll pitfalls and questions every business owner should consider.

Pitfalls of Poorly Managed Payroll Administration

Businesses can face serious fines and penalties from the Internal Revenue Payroll Outsourcing WP DownloadService and other tax authorities for failing to comply with timely payments and reporting. At a minimum, employers must account for federal income tax, federal and state unemployment tax, Social Security and Medicare. Many companies have run into trouble in the areas of paying unemployment taxes, making late payroll deposits, incorrectly classifying employees as independent contractors on 1099s and assuming that depositing payroll is the same as reporting.

Penalties can be classified and pursued as “failure to deposit,” “failure to pay” or “failure to file.” Worst-case scenarios if payroll issues aren’t resolved could include losing the business and/or being charged with a federal crime. Individual shareholders and even corporate officers can be pursued and assessed penalties under certain circumstances.

The Department of Labor’s impending changes to overtime exemption rules are creating even more angst in the area of wage and hour compliance. Employees previously exempt from overtime rules may now be considered non-exempt, leading to the need to track overtime hours and communicate possible changes in benefits. It may even require employers to dictate how employees can take time off or how they work outside of normal business hours. These changes tie directly into payroll administration and tax planning.

On the benefits side, employers can offer a variety of things to compete for talent as well as help employees work efficiently. Properly classifying these benefits and properly withholding for pre-tax or taxable benefits simply adds to the complexity. Handle something wrong, and you will have compliance problems as well as upset employees.

It is fair to say that payroll administration and compliance is a big deal, and the decision on whether or not to outsource should not be taken lightly.

Payroll is the most up-to-date KPI in a business — and the most expensive.  Business owners we talked to are more than happy to find ways to save money in this area. Are you ready to consider an alternative to your current system of payroll administration? Call the payroll team at Cornwell Jackson.

Continue Reading: Things to Ask your CPA about Payroll Outsourcing

SB HeadshotScott Bates, CPA, is a partner in the audit practice and leads the firm’s business services practice, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in healthcare, real estate, auto, transportation, technology, service, dealerships and manufacturing and distribution. Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.

Blog originally published April 6, 2016. Updated on March 8, 2018. 

 

Posted on Sep 14, 2016

ACA word on tablet screen with medical equipment on background

When it comes to Affordable Care Act compliance reporting of eligible employee health coverage for the 2016 tax year, the difference between a small employer and an applicable large employer (ALE) isn’t so clear-cut.

ALEs are defined as organizations with 50 or more employees in the previous year, including full-time equivalent employees. However, the IRS considers subsidiaries or related entities with fewer than 50 employees to be part of the parent company when defining an ALE. Bottom line: the parent and its related entities are all subject to ACA reporting.

WP Download - ACA ReportingThen there are self-insured employers, which are basically regarded as insurance companies by the IRS. These employers are required to submit Form 1095 regardless of the number of people they employ or provide with health care insurance.

In addition to proper reporting, self-insured employers are subject to two fees as part of the ACA that are adjusted annually and have different deadlines for payment. The Transitional Reinsurance fee is paid into a federal fund that could provide reimbursements for insurance carriers that experience financial losses when participating in federal- or state-sponsored health care exchanges. The Patient-Centered Outcomes Research Institute Fee (PCORI) goes toward research of care outcomes and practices at various health care organizations; the goal is to create a central federal database to help patients make the best choices for health care. Although the Transitional Reinsurance fee is expected to go away after 2016, the PCORI fee will continue in 2016 with an expected sunset for plan or policy years ending on or after October 1, 2019.

Plan ahead to avoid penalties later.

Especially for small entities of large employers, Form 1095 can be confusing when listing the proper legal entity that employs each eligible employee. Listing the parent company or the name most people recognize as the company name can trigger a filing rejection. The same goes for the choice of address and a corresponding employer identification number (EIN), a number assigned by the IRS to identify employer tax accounts. Entities that don’t have an EIN have to request one from the IRS in order to complete Form 1095 properly.

In addition, revised Department of Labor overtime rules that go into effect December 1, 2016, could hinder proper reporting as the number of employees eligible for health care coverage shifts. Employers that choose to bump up salaries for key employees may end up increasing the number of eligible employees.  Alternatively, maintaining a larger number of part-time or non-exempt employees could lead to higher levels of overtime pay.

Employers that choose payroll outsourcing and knowledgeable benefit brokers can get support to plan ahead for ACA reporting. They can confirm whether or not the employer (or any affiliated entities) is subject to ACA reporting. Then, their advisors can help improve payroll administration and coordinate a schedule for collecting and reporting data by the January 31, 2017, filing deadline. Employers can face penalties for noncompliance with ACA requirements as well as for missing tax forms — risks that can be mitigated when benefits brokers, CPAs and payroll administration cooperate early in the year.

What if you don’t have to comply with ACA for 2016?

Small employers that are not yet required to either provide affordable health care coverage or report on coverage under ACA can eventually fall under requirements if employment hits 50 employees (or fte) or if they merge or are acquired. Working closely with an ACA compliant payroll provider, benefits broker and your CPA can help your company prepare to respond to those changes in the future.

Cornwell Jackson’s payroll team can help. Partnering with Brinson Benefits, we manage ACA-compliant payroll administration. We can guide employers to the right resources and answer questions about reporting deadlines and other payroll and tax compliance issues. For example, we advise on hourly and salaried employee compliance and new overtime rules, which tie into employee eligibility for benefits and any required ACA reporting. Read our whitepaper on outsourced payroll. Send us your questions and we’ll point you to the experts.

 

SB HeadshotScott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in healthcare, real estate, auto, transportation, technology, service, retail and manufacturing and distribution. Contact Scott at scott.bates@cornwelljackson.comor 972-202-8000.

 

Sharon Alt headshotSharon Alt is Director of Compliance with Brinson Benefits in the Dallas/Fort Worth area. With a focus on Affordable Care Act regulations, she is responsible for ensuring that Brinson and their employee benefit clients meet all regulatory compliance standards in regards to healthcare benefits administration, particularly with regard to healthcare reform and the Affordable Care Act. She regularly guides clients through the ACA 6055/6056 reporting requirements. 

Posted on Aug 30, 2016

ACA word on tablet screen with medical equipment on backgroundUnder the Affordable Care Act, individuals without health care coverage will pay tax penalties for their lack of coverage. However, if they are eligible to receive ACA-compliant affordable health insurance coverage through an employer, they must choose to take that coverage or actively waive that coverage. The employers must document when employees were informed of eligibility in accordance with health care plan guidelines. They must also document if and when an employee waived coverage. If the employee accepts coverage, an employer must document the start and end dates of coverage (including data on dependents and their coverage dates for self-insured plans), within the given tax year.

If the employer meets the definition of an ALE or if it is self-insured, this health care coverage information must be reported to the IRS on Form 1095 for purposes of comparing employer data with employee tax data.

WP Download - ACA ReportingNow here is the wrinkle for eligible employees who waive eligible employer coverage. Let’s say one of these employees decides to get health insurance coverage through a state- or federal-sponsored health care exchange, even though the employer offered “affordable” coverage. And let’s say that same employee receives a federal government subsidy to pay for health coverage through the exchange. If the IRS determines that the employee had affordable health coverage through the employer, the employee could be required to pay back the subsidy — and faces additional penalties which could be hundreds or thousands of dollars over a year. This is a primary reason for such scrutiny of ACA compliance — rooting out misuse or abuse of federal health care insurance subsidies among taxpayers who could receive compliant coverage through an employer.

For the purposes of this article, we won’t delve into the question of what is really affordable health care insurance through employers, particularly for family coverage. The fact remains that the IRS requires accurate reporting of the status of all eligible employee health care coverage, and is far less likely to make exceptions for employer good faith efforts in 2016.

Improve administration and payroll systems for ACA reporting

One of the biggest challenges when complying with Affordable Care Act tax reporting for 2015 was that payroll and administration systems weren’t compatible with the data requested.

Employers struggled with missing data or hard-to-interpret data. For example, coverage start dates were difficult to interpret because many were listed as generic “termination” dates. An employer would list the previous plan as terminated on a certain date, then reenact the plan the next day when adding an eligible spouse or dependent.

Employers that tried to handle ACA reporting in-house were challenged not only with reporting requirements, but also the hassle of form rejections. Payroll outsourcing companies and benefits specialists spent countless hours organizing, untangling and resubmitting forms. The best specialists have been preparing since the last tax season filing to improve their processes and collect data earlier.

Continue Reading: ACA and the Small Employer vs. Large Employer Challenge


Cornwell Jackson’s payroll team can help. Partnering with Brinson Benefits, we manage ACA-compliant payroll administration. We can guide employers to the right resources and answer questions about reporting deadlines and other payroll and tax compliance issues. For example, we advise on hourly and salaried employee compliance and new overtime rules, which tie into employee eligibility for benefits and any required ACA reporting. Read our whitepaper on outsourced payroll. Send us your questions and we’ll point you to the experts.

 

SB HeadshotScott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in healthcare, real estate, auto, transportation, technology, service, retail and manufacturing and distribution. Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.

 

Sharon Alt headshotSharon Alt is Director of Compliance with Brinson Benefits in the Dallas/Fort Worth area. With a focus on Affordable Care Act regulations, she is responsible for ensuring that Brinson and their employee benefit clients meet all regulatory compliance standards in regards to healthcare benefits administration, particularly with regard to healthcare reform and the Affordable Care Act. She regularly guides clients through the ACA 6055/6056 reporting requirements. 

Posted on Aug 19, 2016

ACA word on tablet screen with medical equipment on backgroundThe challenges of Affordable Care Act reporting for the 2015 tax year will likely follow companies and organizations into 2016 — and the honeymoon period with the IRS is over. It will take more than careful administration to ensure proper reporting and avoid kicked back forms or penalties for missing or inaccurate data. Benefits brokers that specialize in ACA reporting recommend a combination of careful administration along with support from payroll outsourcing companies. This planning includes a CPA team that can advise on tax and payroll administration.

The IRS late “Christmas miracle” last tax season gave employers extra time to report compliance with ACA affordable health insurance coverage mandates and the status of employee health care coverage. It is not expected to be repeated for 2016.

WP Download - ACA ReportingIn fact, company administrators and their CPA or payroll advisors should be gathering data now to be ready to fill out and file relevant parts of Form 1095 by January 31, 2017.

Applicable large employers (ALEs), those that have 50 or more employees (or full time equivalent), must show compliance with the ACA employer mandate to provide affordable health care coverage to eligible employees. Both ALEs and employers that are self-insured are required to report which employees were eligible for coverage and when. They also have to report which employees waived coverage and which were in fact covered in any month during 2016.

Starting and ending dates of coverage as well as starting and ending dates of dependent coverage (including birth dates and SSNs) are crucial for accurate reporting. Even eligible employees who left the employer sometime during the year must be accounted for.

Experiences from last year illustrate the complexity and financial costs at stake for employers navigating ACA reporting. Well-intentioned employers can get hung up at various stages of employee and payroll administration, data gathering and IRS reporting. They may also not understand if they fall under the definition of ALE if they are a subsidiary with fewer than 50 employees. However, the IRS views all subsidiaries or entities of large companies as falling under the same employer for the ACA reporting obligation.

Penalties can involve hundreds of dollars for each missing form with no limit on the total penalty per employer.

Last year, approximately 9 percent of all Form 1095 forms were rejected.

Some of the most common errors involved the following:

  • Improper use of EIN numbers
  • Employee and dependent names and SSNs that didn’t match tax forms (e.g. name changes due to marriage were kicked back)
  • Discrepancies with employee and dependent start dates and termination dates

When processing through the new Affordable Care Act Information Return System (AIR), some forms were rejected due to the use of apostrophes in last names or an extra space prior to an employer’s name. The IRS is working to improve AIR for 2016 filing, but employers and their advisors should be aware of IRS tips to avoid common errors and expedite processing.

Continue Reading: Why is the IRS Cracking Down on ACA Reporting?


Cornwell Jackson’s payroll team can help. Partnering with Brinson Benefits, we manage ACA-compliant payroll administration. We can guide employers to the right resources and answer questions about reporting deadlines and other payroll and tax compliance issues. For example, we advise on hourly and salaried employee compliance and new overtime rules, which tie into employee eligibility for benefits and any required ACA reporting. Read our whitepaper on outsourced payroll. Send us your questions and we’ll point you to the experts.

 

SB HeadshotScott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in healthcare, real estate, auto, transportation, technology, service, retail and manufacturing and distribution. Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.

 

Sharon Alt headshotSharon Alt is Director of Compliance with Brinson Benefits in the Dallas/Fort Worth area. With a focus on Affordable Care Act regulations, she is responsible for ensuring that Brinson and their employee benefit clients meet all regulatory compliance standards in regards to healthcare benefits administration, particularly with regard to healthcare reform and the Affordable Care Act. She regularly guides clients through the ACA 6055/6056 reporting requirements.