Doug Houser: From Rea & Associates studio, this is Unsuitable, a business and financial services podcast for entrepreneurs, tenured business leaders, and others who are ready to look beyond the suit and tie culture for meaningful measurable results. I'm Doug Houser. On this weekly podcast thought leaders and business professionals break down complicated and mundane topics and give you the tips and insight you actually need to grow as a leader while helping your organization to grow and thrive. If you haven't already, hit the subscribe button, so you don't miss future episodes. And if you want access to even more information, show notes and exclusive content, visit our website at www.reacpa.com/podcast, and sign up for updates. When you think of Labor Day, you might be thankful for a day off and thinking about spending time with family or relaxing. But did you know that the week of Labor Day annually is National Payroll Week? I know I didn't. Founded in 1996 by the American Payroll Association, National Payroll Week celebrates employees and the payroll professionals that pay them. While there may not be a better feeling than payday, do you know about the process that gets the money in your pocket? Our guest on today's episode of Unsuitable is client service specialist and payroll services manager here at Rea, Dee Gray. Dee helps businesses understand the future of their payroll and the systems behind their payroll. Welcome back to Unsuitable Dee. Dee Gray: Hi, Doug. Thanks for having me. Doug: It's always great to have you on because this is an area that just, I think it's more and more complicated, it seems each and every year. You probably feel that way too, right? Dee: I do feel that way. I feel like the mantra for 2020 and 2021 is change. Doug: Yes, indeed. But so much to know and understand. We'll get into some of that here. One of the hot topics of course recently that we've seen in the news with regard to payroll is tax treatment. Once everybody went obviously remote, there was kind of, what do I want to say? Grandfathered period where we were still paying taxes if we were not remote. And now there's some change to that. So can you give us maybe a brief overview of where we stand with that and how payroll companies and payroll processors as well as consultants such as yourself, how do you deal with all of that? Dee: Sure. The new legislation is interesting. The legislation that passed during COVID for municipalities specifically, was that you could continue withholding workplace tax, regardless of whether your employees were working in the workplace or whether they were working remotely from some other taxable location or non taxing location. That is all set to expire on December 31st and businesses need to have a new plan going into 2022. Currently it's actually optional. You can either continue to tax based on the workplace location or where your employees are working, but starting January 1st, you're going to have to tax a municipality where the employees are working. And that's going to be interesting for businesses to try to track that. Doug: Right. I mean, you think about it because we're all doing some type of, kind of hybrid sort of thing, largely. We're back in our offices, but still there's differing locales and we're still seeing some of that hybrid type of work in a lot of professional firms. So how do they figure all that out? Right. And how do they run that through their payroll? Dee: Essentially, that can go one of two ways. I think that they're going to have an option to continue withholding the workplace tax based on where the business is located, but they're going to have to track the days that the employees are in that location versus some other taxing location. And the employees, if, for instance, if they work in a remote location from their home where there's no tax obligation, they could then request a refund from the taxing location based on the number of days worked at home versus in the office. Doug: Yeah. Dee: If they live in another taxing municipality, they're going to have to track that separately. I think that the businesses then are going to have to withhold based on the number of hours or the number of days worked in each business location, which for Rea & Associates can get kind of interesting because even if you go to another office, then that opens up the liability for withholding in that office for the days that you work there. It hasn't done anything different for the casual inferent role though. So you still have 20 days to work on municipality before you're obligated to withhold for that. Doug: Yeah. We see this a lot of course, in the construction client base that I deal with. They're very used to this, but for a lot of firms of course, where they were essentially centered in one locale, this is all new so. Dee: Yeah. And it's going to be a big change. Doug: Absolutely a lot for them to learn and try to adopt into their current payroll systems. And as you said, you really almost have to do contact tracing for every employee. Dee: Yes. Doug: Really. Yeah. So you better be prepared to do that from a system perspective, right? Dee: Yes, absolutely. Doug: Now what are some of the other things that we should be aware of? Obviously we know the employee retention credit is a big, big thing that we keep hearing about and are trying to help a number of clients with. Can you speak a little bit to that and how that impacts payroll tax and those types of things? Dee: Sure. The employer retention credit is claimed on your form 941. So it clearly does go through payroll. The rules have changed between 2020 and 2021. The rules have changed between second quarter and third quarter of 2021. And it appears that the rules may be changing again, or it may even be ending at the end of the third quarter, except for new startup businesses that qualified for it. So it's constantly changing. I would say that employers, I would hope that they're aware of it. I would hope that they're consulting with a professional CPA firm that can help them navigate that because it's just ever changing. Doug: Right. Yeah. We started last year, right? You had to have a 50% decline in revenues quarter over quarter. And then for this year, correct, it changed to 20%. Dee: It did change to 20%. And this year the credit is up to 70% of each employee's wages up to $10,000. And that's a per quarter credit. Where in 2020, it was $5,000 for the whole year. Now it's $7,000 per quarter. So we're talking large dollars for the, Doug: Significant. Dee: Employers that qualify. But the flip side of that is they're going to owe tax on that money. That credit has, well essentially increase their tax obligation because it's reducing their wage expense. So they need to understand that they're going to need to put a portion of that back to pay the tax that they owe when they also amend their tax return. So there's a lot more than just payroll that goes into it as well. Doug: Yeah. And you've got to be careful of course, because you can't double dip those payroll costs with the PPP forgiveness. And, Dee: Correct. Doug: So the calculation with some of that can be a little more nuanced and sophisticated, and I know we've spent and you spent certainly a fair amount of time dealing with all those. But now, as you said, they're talking about using that, doing away with it for the fourth quarter of this year as a pay for, for this infrastructure bill so. Dee: Right. So that hasn't gone through yet, but it'll be interesting to see where that goes because some people already know that they qualify for it, but it just may not be there for them to claim. Doug: Yeah. So let's shift a little bit and talk about technology. What are some of the big changes you've seen in technology in recent years? And where do you see us going with that in terms of payroll assistance with all those types of things? Any updates there? Dee: Well, technology for the amended 941 returns is not terrific. The IRS does not accept e-files for any amended returns. So you have to pay per file and you have to send them in the mail. And then they sit somewhere. One of the IRS calls that I was on within the last couple of months indicated that e-filing amended returns is one of the top things on their list to try to get through in the next year or two, which would be a real help. That would be an excellent technological benefit if we could file, Doug: Absolutely. Dee: Amended returns electronically. The other things that we're seeing is with a more remote workforce, a lot of the employers are going to direct deposit, all direct deposit, the ability to check your pay stubs online. A lot of manufacturing firms have maybe lagged behind on that because the people that work there aren't necessarily technologically advanced and they've wanted to hang onto their paper pay stubs, but the pandemic has changed a lot of that. Now they just want to get paid. And if that means that they have to learn how to use the internet to check their pay stubs, they're willing to do it. And employers are pushing this out as a benefit for their employees. Doug: Yeah. And we see a lot of the big payroll processors out there. Have they continue to advance their technology along those lines and to assist companies with being able to do a lot of those things? Or has there not been much movement there? Dee: As far as being able to check your pay stubs online, direct deposit, pay cards, all of the big companies are doing that. What they're not doing is assisting their clients with amended returns or amending prior returns. And if they are assisting with that, it's cost prohibitive or they're referring them to another firm that that's all they're doing right now. And again, it's cost prohibitive. I would say if you have a contact with a CPA firm, I would definitely go with somebody that I know versus somebody that one of the big providers is recommending. Doug: Yeah. Now with, I know in the construction world, for example, there's been a lot of technological advance with wearables and things like that. So at job sites and places like that time is tracked. It's just automatic now and okay, this person spent two hours and 15 minutes over here doing this and 45 minutes then over here. To the point where they can really allocate wage costs and payroll and do all those things. I mean, have you seen a lot of that morphing into industries as well, manufacturing or distributions? Dee: Actually, not a lot. Honestly, most of the manufacturers are at a fixed site, so. Doug: Okay. Dee: They don't find it necessary to pay for that type of detail. I do think that it's interesting. I think that it's interesting that the way that it could keep time based on job sites could be different than what you need to track for the municipal withholding. Doug: Sure. Dee: So in the background, they have to have multiple systems that are working with this so that you can pull data for payroll this way and data for job costing this way. There are a lot of technological advances. 10 years ago you wouldn't have been able to do that automatically. You would've had to manually calculate all of that. Doug: Yeah. I know it helps a lot when we have folks that are doing say prevailing wage calculation, because certain parts may be prevailing wage, certain parts may not. And as you said, rather than kind of manually allocating that to the extent you can automate it, so much the better. But of course, as you noted, it's not cheap. Dee: Right. Doug: But in some ways it all feels a little bit big brother-ish too, but I get it. I'd read there are a couple of companies that, and I would never do this. I couldn't imagine, but I know there's a company in Wisconsin that actually did implants in their employees to track their, it was a very technologically advanced company obviously and they had a lot of stuff that needed to be very secure, but they did these little implants in all their employees, so they could track exactly when and where they were at all times. And that's how they got access to certain parts of the facility. I mean, that just, when I hear about, Dee: I find that pretty disturbing. Doug: Stuff like that... I know. It's like, hey, okay. I mean, I love my firm and all that, but you're getting into some dangerous territory with some of this technology, right? Dee: I agree with that. Now I will say some of the manufacturing companies are using the biotechnology, like fingerprints to clock in and out, in order to avoid somebody clocking in for their buddy or stuff like that. So I am seeing that type of technology moving forward, but I think that there is a line to be drawn. Doug: Right. Yeah. I definitely think so as well, but it's just, it's interesting when you just, you can take all this just, it's exponential that the advances that we see and all these different technologies. And if you continue to sort of think ahead, boy, it's yeah, it's amazing what it can and can't do. Dee: Absolutely. Doug: So what else, in terms of payroll, payroll processing, what else should our business owners be aware of out there? What can they do to make their lives easier and more efficient when it comes to this? Dee: I would say another thing that should be on their radar, it's back to the remote workforce. It's not only municipal tax that you have to be concerned about, but it's also state tax. And if you have employees that are working in other states where you traditionally have not had a physical presence, it can open you up to nexus for actual tax filings to be done in that state. So it's really easy to say, yeah, we have the technology, we can work from anywhere now, but you have to really consider the ramifications and the background. Nobody wants to get caught with a big tax bill that they didn't know was coming because they've missed some obligations created by having a remote workforce. Doug: Yeah. That's a great point as well. And certainly I know our state and local tax team has been very busy trying to counsel clients through that process to recognize the risk that they may have. And okay, how are we going to deal with that? As you said, does it create nexus or what should we do? But you don't want to be caught. Dee: One thing that kind of gets lost in the wayside is worker's comp coverage. If you're an Ohio employer, only your employees in Ohio are covered on your policy. Now, Ohio does have the option to add other state's coverage onto your policy, but it's not automatic. You have to go through a process. It's actually, I think, insured by Zurich insurance company. So it's essentially a rider on your policy, or you can in most states get private insurance through your insurance carrier. But it seems like that one is something that people are a couple of months down the road going, oh gosh, I didn't even think about that. What do I need to do with worker's comp? Doug: Yeah. And you don't want to be unprotected when it comes to that. Dee: Don't want to be unprotected. Doug: That would be very, very dangerous. But yeah, that's a great point too, because of course Ohio operates very differently than any other state when it comes to workers' comp as you suggested so. Dee: Yes. Doug: Yeah, it's an ever complex world. So that's fascinating stuff. Well, Dee what else? Anything that, as we think about some, maybe couple of parting words of wisdom for our business owners out there that they should really be focused on and make sure they're in contact with a professional payroll consultants, such as yourself. Dee: I would say Ohio is releasing new tax tables that actually take effect September 1st. So if you're manually calculating your payroll for any reason, you'll need those updated tax tables. I believe Ohio has a minimum wage increase coming again in January. So maybe find a blog, find a website that you trust, just try to stay on top of the changes because they don't stop coming. Doug: They don't. It keeps you and your team very busy. Dee: That's right. Doug: I know. And you're such a tremendous resource for us, for our clients and others. When we have payroll questions, we know who to call. So we're glad to have you and the team as part of our team, for sure. Dee: Well, thank you. Doug: Absolutely. Well, great to talk to you again, Dee and we'll, I'm sure have you on again, because as you said, there's just so much changing and so much going on that owners need to be aware of and make sure they're on top of. So look forward to having you on again. Dee: All right. Thank you, Doug. Doug: Yes. And if you want more business tips and insight, or to hear previous episodes of Unsuitable, please visit our podcast page at www.reacpa.com/podcast. And while you're there, sign up for exclusive content and show notes. Thanks for listening to this week show. Be sure to subscribe to Unsuitable on Apple podcasts, Google podcasts, or wherever you're listening to us right now, including YouTube. I'm Doug Houser. Join us next week for another Unsuitable interview from an industry professional.
