Help Wanted: Disclosing tips to employer
Carrie Mason-DraffenCarrie Mason-Draffen
Mason-Draffen, a business reporter, writes a column about workplace issues.
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DEAR CARRIE: I do facials in a day spa and receive tips for the service. My employer now wants us to disclose how much we receive in tips weekly so it can tax that money. In the past, I declared the tips to my accountant, who files my taxes each year. Do I have any recourse from the new policy at work?
-- Taxing Question
DEAR TAXING: Your employer is acting legally. Internal Revenue Service regulations require you to report your tips to your employer when they exceed $20 a month. Your employer, in turn, has to tax them.
Here is what the IRS said:
"If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips."
DEAR CARRIE: Today an exempt employee terminated his position with us. After that, we determined that he had taken more vacation time than he was entitled to. Can we deduct the overage from his final paycheck, even though he is exempt? He states we would be breaking the law.
-- Excessive PTO
DEAR EXCESSIVE: He is right. You cannot legally take the money out of his check. It doesn't matter whether an employee is nonexempt or exempt from overtime and minimum wage. Here is what the state Labor Department said:
"We don't normally allow employers to do this. An advance can't be recouped from a final paycheck. If the person were to file a complaint, we would investigate."
So what are your options? You can ask the former employee to reimburse you, or you can sue. Hopefully, the former will prevent the latter.
DEAR CARRIE: Can an employer force an employee off the company's health-insurance plan because she has Medicare and a supplemental policy? The policy manual doesn't address this, and it isn't an issue with the insurance company.
-- Legal Policy?
DEAR LEGAL: The answer depends on the size of your company.
Under Medicare law, employers with 20 or more employees generally must offer the same primary group health-plan coverage to employees who are 65 and older that they offer to younger workers and their spouses, said attorney Melissa K. Ostrower, who works in Jackson Lewis' Manhattan office. The same holds true for the employees' spouses who are 65 and older, even if the employees are younger, she said.
Those employees can then decide whether to opt for primary or secondary coverage through Medicare.
"Employees who are eligible for Medicare may choose to reject the employer group health-plan coverage if they would like to enroll in Medicare as their primary coverage while still employed," she said.
The primary coverage pays benefits first and is known as the primary payer, which is followed by the secondary payer.
Employees can't legally be coerced or enticed to forgo the company health plan for primary coverage in favor of Medicare.
"The Medicare secondary-payer rules prohibit employers from offering financial or other benefits as incentives for employees to elect out of participation in the employer's health plan," Ostrower said.
By the way, you're not alone in dealing with this issue.
"This is a very common question as employers try to develop lawful ways to reduce health care costs, particularly in the current high-cost environment," Ostrower said.For more on federal tax laws and reporting tips go to http://1.usa.gov/1aIfmP0
For more on state labor laws and wage deductions go to http://bit.ly/11CMa9u