PAYROLL
The IRS has issued interim guidance in section 9 of Notice 2018-92 suspending the requirement to notify the IRS when an employee with a lock-in letter is no longer with the employer. Employers had been required to send a written response to the IRS that the employee is not employed by the employer. This is no longer required.
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Agencies are reminded to review and ensure employees have valid forms on file for 2019. The exemptions expire on Feb. 15, 2019, and employees must submit new forms to continue exemptions for 2019. If you receive an exempt W-4 after Feb. 15, 2019, do not process a tax refund to the employee or submit one to OMES for processing. The W-4 will take effect on the next pay cycle; it is not retroactive to the beginning of the year. The PeopleSoft HCM query: GO_PY_TAX_EXEMPT_STATUS - Fed or State Tax Exemption can be run by agencies to see who currently is claiming an exemption from income tax withholding. The IRS has posted the 2019 W-4 form on the IRS website. The OTC form can be found on their website.
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OMES Form DER for reporting payments made on behalf of deceased employees has been updated and is available on the forms section of the CAR website. Changes are minor and include:
- Clarification of Section 3, please only include payroll warrants processed after the date of death,
- Address to send form once completed.
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All compensation to employees and former employees, no matter what form, constitutes wages unless specifically excluded by the Internal Revenue Code. This includes stipends, allowances, employee lawsuits and settlements, gifts, prizes, awards and fringe benefits to name just a few. Before compensation is given to employees or former employees, agencies must determine the correct method of payment (payroll vs accounts payable) and reporting required (W-2, 1099, or none). In an audit, the Internal Revenue Service will focus on the reason for the payment.
If the payment settles a lawsuit, the auditor will focus on the basis of the lawsuit. The IRS has a recorded webinar that provides valuable information regarding the taxability of lawsuits and settlements. Agency payroll, finance, human resources and legal departments should obtain the knowledge needed to accurately process compensation to employees or former employees. Agencies are responsible for complying with IRS requirements for withholding and reporting.
If an agency has a settlement agreement that requires the payment be processed through accounts payable instead of the payroll system to expedite processing, and the payment is reportable as compensation, then applicable federal, state and FICA taxes must be remitted to OMES on the same day the item is processed. If taxes are not withheld on the payment, the agency must gross up the amount and pay both the employee and employer share of taxes. The employee’s record will be updated for year-end reporting. If additional guidance is needed, please contact Lisa Raihl at 405-521-3258 or [email protected].
NOTE: The Internal Revenue Service has determined that Oklahoma public school teachers receiving payments from a state agency are to be treated as employees of the state. As such, any payments to teachers need to be evaluated to see if the payments should be considered wages. If so, the amounts must be paid through the payroll system, not accounts payable, to be reported on Form W-2 by the paying agency.
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For settlement proceeds paid to an attorney, the agency must ensure the correct account code is used so the amount is reported on a 1099-MISC to the attorney at year end. In addition, the taxable amount of the payment must be reported to the claimant. If the claimant is a current or former employee and the settlement or judgment payment is income that constitutes wages, the payment is reportable as compensation and included on the W-2 and all applicable taxes and deductions must be withheld. For any payment that is income but doesn’t constitute wages, the payment will be subject to reporting on Form 1099-MISC to the claimant. The agency must get the claimant’s reporting information (name, address, ITIN) and provide to OMES so that a 1099-MISC is created for the individual. If the payment is excludable from gross income (i.e. paid on account of personal physical injuries or physical sickness) there is no reporting required to the claimant. Agencies are responsible for complying with IRS requirements for withholding and reporting. If additional guidance is needed, please contact Lisa Raihl at 405-521-3258 or [email protected].
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Repayments from employees made in the current year (2019) that are for overpayments of wages in a prior year (2018 or earlier) must be repaid at the gross overpayment amount in accordance with Internal Revenue Service regulations. A W-2c must be completed and sent to OMES. Only Social Security and Medicare wages and taxes are corrected on the W-2c.
DO NOT correct federal or state taxable wages or income taxes. The employee received and had use of the funds during the year of overpayment and as such, the amounts are taxable for federal and state purposes. The employee may be able to take into account such repayments on their current year (2019) income tax return. Please advise the employee to speak to a tax accountant. Additional instructions for Form W-2c are available on the IRS website. For assistance, contact Lisa Raihl at 405-521-3258, [email protected] or Jean Hayes at 405-522-6300, [email protected].
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When an employee chooses to reimburse an overpayment of salary or wages using annual leave, the amount of annual leave reduced should equal the gross amount of the overpayment. In the past there have been instances where agencies have incorrectly reduced the annual leave by the net amount of the overpayment.
If an employee reimburses an overpayment using terminal leave, an OMES Form 94P must be submitted to correct the retirement amounts reported on the check which included the overpayment. Terminal leave is not included in retirement wage calculations; therefore, a payroll earnings adjustment is required.
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40 O.S. § 165.3a, allows employers to provide employees the option of designating a beneficiary for wages and benefits payable upon an employee’s death. There is no requirement for an employer to allow employees to select beneficiaries, but agencies may want to consider adopting such a policy. Providing the option to employees relieves stress and anxiety on the family members and provides agencies with clear guidance on who is to receive final wage payments.
This statute does not include any longevity payment that may be due as of the date of death of an employee. 74 O.S. § 840-2.18, subsection H.2, authorizes any longevity payment to be paid to the decedent’s surviving spouse, or if there is no surviving spouse, to the decedent’s estate.
For more information or sample forms and instructions, please contact Jean Hayes at 405-522-6300, [email protected] or Lisa Raihl at 405-521-3258, [email protected].
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MISCELLANEOUS
By this time agencies should have printed the forms from the CD received from OMES. Employers are required to provide Form 1095-C to ACA full-time employees. Employees that had an ACA eligibility status other than ‘Eligible’ are not required to be reported and will not have a form. The last agency on record at the end of 2018 will have received the 1095-C form for the employee with information for the entire year related to the employee’s status.
Corrections for Form 1095-C must be submitted to OMES/HCM by Feb. 22, 2019. Please send the original form, a copy of the corrected form, and a memo explaining why the correction is needed. Please send corrections to the attention of: Kristin Elsenbeck, Human Resources Coordinator, 405-521-6030. Any corrections needed after the deadline should still be sent to OMES for us to notify the IRS. This will ensure reporting is as accurate and complete as possible.
If a form was not created for an employee and should have been, the agency must manually create one, provide the employee a copy, and submit a copy to OMES/HCM for inclusion on the IRS file.
For correcting a 1095-C after providing the original to the employee and before the file is submitted to the IRS, correct the form as needed and write, type, or print CORRECTED somewhere on the new 1095-C furnished to the employee.
ONLY enter an “X” in the CORRECTED box after the file has been submitted to the IRS (this won’t be done until after the Feb. 22, 2019, correction deadline).
In addition to the form corrections, please ensure the data entered on the ACA Employee Eligibility (0674) page in the HCM system is correct. The data entered on this page is critical to correct reporting of an employee’s offer and periods of coverage.
For additional information or questions related to ACA reporting, please contact Kristin Elsenbeck, Human Resources Coordinator, 405-521-6030, [email protected].
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Higher Education Entities
As a reminder, when an MWC or EWC is submitted to cancel a payroll warrant, a corresponding PFT Reversal file must be submitted to remove the funds from the 789 class-funding and place them back in the originating class-funding. The amount in the PFT reversal file should be the gross to net amount and employer share of taxes and benefits that processed on the original warrant.
The PFT Reversal process is also used to process amounts in or out of the 789 fund based on business needs. This includes:
- processing of taxes which were not processed through the normal 500Misc/PFT process but must be submitted through the ACES system;
- corrections necessary for overpayment refunds; and
- correction of items improperly reported or omitted from the original PFT submitted.
Additional information on processing PFT Reversal files can be found on the CIO website.
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When processing the Alpha List (Open Books) file, please include the full warrant number. The warrant numbers should all begin with the required ‘2’ which designates in the PS Financial system that the warrant is a payroll warrant for an institution of higher education. Not including the ‘2’ in the file creates difficulties when processing open records requests.
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1099 INFORMATION
All 1099 corrections for 2018 or for previous years need to be submitted to OMES and we will report the corrections to the IRS. If you should have any 1099s that are returned by the vendor requiring changes, please issue a ‘Corrected 1099’ to the vendor using the blank forms provided with the original 1099s or you may contact OMES to print them for you. Send copies of the incorrect 1099, the correct 1099 and any documentation to support the change to OMES. If you have any questions, please contact Beth Brox at 405-522-1099 or [email protected] or Alicia Reel at 405-522-9479 or [email protected].
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ACCOUNTING
Central Accounting and Reporting has been reviewing the reconciliations and data presented on the Form 11 and 11A for agency clearing and ASA accounts in depth. Each account will be reviewed annually to ensure that the reconciliations are being completed correctly and supported by backup documentation. During the process of the reviews, we are finding some common errors or deficiencies which are noted below. Agencies should review their reconciliation process and avoid these errors. Many of these items are also being covered in the Clearing and ASA Reconciliation Assistance – Form 11 training offered by OMES.
- Stat cancel warrants are not being reported, or are being reported incorrectly. Warrants that have been outstanding over 90 days are stale dated warrants and cannot be cashed. Those warrants should be removed from the outstanding warrant amount and should be shown as a negative expenditure in the voucher area of Section A. A journal entry reducing (crediting) the expense account should be created in the State Accounting System. The entry will be posted when the completed Form 11 or 11a is processed by CAR.
- Deposit Transfers could include money being transferred into or out of the account. Transfers out must be reported in the voucher area of Section A and must be shown in the transfers area. Transfers in must be presented in the receipts area of Section A. Do not net the transfers in and out. Do not report the transfers out in the ‘Vouchers and EFT Payments’ area.
- Adjusting items related to deposit corrections are being included, but corrections are not being completed. If there is a deposit correction necessary, the Form 76 must be completed and submitted to OST. The agency should be following up on deposit correction requests to ensure that they are completed. These items should be clearing in a timely manner.
- The beginning balance in Section B must be the ending cash balance from the prior month. If the prior month’s Form 11 or 11a has been revised, use the ending balance on the revised form.
- Section B should not include any adjustment items. For ASA accounts that have investments (a rare item), a line has been included to report the investment balance. No other entries should be made in Section B.
- If accounts have unreconciled or unknown differences in either Section C or Section D, these amounts should be presented on a separate line from known reconciling items. Agencies should be actively researching to determine what caused the unreconciled difference. This difference should not be changing each month as that would be indicative of another issue.
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ACCOUNTS PAYABLE
Agencies are reminded to wait for their OMES vouchers to build before processing the OMES Inter Unit Billing Invoices. Manually keying vouchers for the invoices increase the chances of invoice duplication errors and the payment of duplicate invoices. Going forward Transaction Processing will ‘Close’ unprocessed OMES Invoice vouchers that have been marked as Completed by OMES Accounts Receivable instead of ‘Deleting’ the vouchers. This will prevent a gap in voucher numbers and allow for a better audit trail.
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A problem we are still seeing with Form 20R, Warrant Replacement, is that some agencies continue to send the second page to vendors. The following was presented in the May 2018 newsletter:
- Vendor Notary When sending the 20R form to a vendor for notarization, it’s best that the agency does not send the second page [the form submission page] to the vendor. Vendors are using the submission information and submitting the 20R directly to OMES. This will delay the replacement process, as OMES will then send the form back to the agency for the Approving Officer’s Signature.
To avoid replacement delays, please do not send the second page submission information to the vendor. Agencies should be reviewing what vendors supplied prior to submitting the request to OMES.
As always, if your agency has any questions, comments, or concerns; please feel free to contact Warrant Replacements at [email protected].
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P-CARD/TRAVEL
The OBT/Travel class will no longer be scheduled in conjunction with the Works editing class
Newly appointed travel arrangers who need this class should contact their agency P-card Administrator to get registered.
Watch for all p-card and travel-related classes to be posted on the OMES portal and the Works home page.
PURCHASING
The current Statewide Accounting Manual states in Section 6.8.1:
"Obligations to another state agency do not require an encumbrance document since they do not constitute an obligation from the state to an outside party. However, encumbering such expenditures is highly encouraged and recommended in order to set aside funds for those obligations."
No Ratification Agreement is necessary for interagency payments. The requirement to complete an Agreement of Obligation for Expenses Incurred in Prior Year form is still required for payments from a prior year for which budget has lapsed.
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