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[Webinar] Sprinting to the Finish Line: Potential Refund of FICA Taxes Paid on Severance and Other Opportunities to Act on Now

2014-01-21 13:00:00

This webinar brings you timely information on programs that can help make a difference to your business’ bottom line.

First and foremost is the looming deadline to file protective claims for a refund of FICA taxes remitted on severance pay. The opportunity to reserve the right for a potential refund of Social Security and Medicare taxes remitted by employers on severance pay in 2010 closes on April 15, 2014… and you may want to file well ahead of that, given sometimes lengthy IRS processing times, to help avoid further delays. Learn what you may need to do now to help ensure that you don’t miss out on what could potentially be a significant refund opportunity.

And with the window to file under the Retro Hire Act closing on April 15, 2014 as well, you’ll learn how this program could help result in significant benefits to your business if you act quickly.

Lastly, we’ll cover some of the latest information on federal hiring credits, including the outlook for 2014 and beyond. You won’t want to miss this information-packed hour of actionable insights that could help result in significant savings for your organization.

Speakers:

  • Kerstin Nemec, VP of Business Incentives, ADP
  • Evan Migdail, Partner, Partner, DLA Piper
  • Charles Asensio, VP of Government Affairs, ADP
  • Jeffrey Camloh, Tax Manager, ADP
  • Paul VanHuysen, Director of Tax, ADP

Specific areas of focus will include:

  • Refund opportunity for FICA taxes on severance pay: Make sure you don’t let the deadline to file a protective claim pass you by.
  • Hire Act: The window for claiming credits is almost closed… don’t miss out!
  • Federal Hiring Credits: From WOTC to the IEC… the outlook for these programs in 2014 and beyond.

This webinar is eligible for 1 RCH or 1 CPE credit.

Kerstin_Nemec_blog

Kerstin Nemec
Vice President of Business Incentives for ADP’s
Added Value Services division

Kerstin Nemec is Vice President of Business Incentives for ADP’s Added Value Services division and is responsible for overseeing tax credit teams across the country, as well as the National Tax Benefit Exchange and Economic Development Services teams. She is also responsible for leading Fortune 500 client engagements and negotiating economic incentive packages on behalf of those clients. Kerstin brings a strong, comprehensive background in traditional multi-state tax compliance, technical research and consulting to ADP with more than 12 years of experience in the Big 4 public accounting environment working in several related areas of state and local taxation specifically – including negotiating economic development incentives, property tax, tax credit compliance delivery and real estate services.

Guest Speakers:

Evan Migdail
Partner, DLA Piper

Evan Migdail represents corporations, associations, tax-exempt organizations, and governments before Congress, the Administration, and federal agencies with a concentration on tax, trade, government ethics, and matters affecting international law and commerce. In private practice for almost 20 years, Mr. Migdail previously served as an assistant to a United States senator, assistant legislative director for a national trade association, and as an attorney/advisor to an independent federal government agency. Mr. Migdail’s experience in tax law is both in the legislative area and in substantive representation of clients in controversies before the Internal Revenue Service, and at the highest policymaking levels at the Department of the Treasury.

Charles Asensio
VP Government Affairs, ADP

Charles Asensio has over 25 years of experience working with tax credit-based employment and training initiatives. He has served as a subject matter expert before members of the U.S. Senate Finance & House Ways & Means for more than twenty years, is a member of the round table that designed the Work Opportunity Tax Credit (WOTC), is a Board Member of the National Employment Opportunity Network, and is an Employment & Training Development Specialist with USDOL, ETA Region III & IV.

Jeffrey Camloh
Tax Manager, ADP

Jeffrey Camloh is a Tax Manager in the Tax Credits group for ADP’s Added Value Services division, specifically specializing in helping to identify and secure federal and state tax credits for Fortune 50 clients.  Prior to joining ADP, Jeff spent over ten years in the Big Four accounting firm environment, including PricewaterhouseCoopers and Arthur Andersen, in both federal and state and local tax consulting, research, and compliance areas.

Paul VanHuysen
Director of Tax, ADP

Paul VanHuysen has been in the tax credit and incentives industry for over 13 years and specializes in applying technology to assist with the capture, tracking, and calculation of Federal and State Tax Credit opportunities. Prior to ADP, Paul spent twelve years at Ernst & Young, LLP building out numerous tax credit and incentive business lines. Throughout his career, he has worked on and led tax consulting projects for over 50 of the Fortune 500 companies.

 

Tax Credits and Incentives Can Help Lower Your Effective Tax Rate

Learn more about how you could leverage available tax credits and incentives with help from ADP, or watch the overview video below.


ADP

 

Moderator:  Kira Lakin

01/21/14

1:00 PM ET

                               

 

 

Kira Lakin:                           Hello and welcome to today’s webinar, Sprinting to the Finish Line–Potential Refund of FICA Taxes Paid on Severance Payments and Other Opportunities to Act on Now.  My name is Kira Lee Lakin, Director of Marketing at ADP.

First, just a few housekeeping items.  This is one of a number of complimentary webinars that ADP offers to tax, finance, and HR professionals throughout the year.  Today’s webinar will last just about 60 minutes, ending at two o’clock Eastern time.

I’d also like to mention that today’s webinar is being recorded, and you’re currently in a listen-only mode.  If you’d like to download a PDF of today’s slides, we will make those available at the end of the session.

Today’s webinar is eligible for CPE or RCH credits for those who qualify, and certificates will be mailed to you via email within 30 days of today’s broadcast.  During today’s presentation, we will ask for your feedback via a few polling questions, which will appear on the right-hand side of your screen once the poll has been opened.  Please click on the radio button that corresponds to your answer to place your vote.  If you could go ahead and let us know whether you’re interested in credits today, then we’ll make sure to get those out to you.  And if for any reason you change your mind after the session, just let us know; we’ll get it all sorted out.  Great, thank you.

So just a little bit about ADP.  We have over 600,000 clients worldwide, and we pay one out of every six employees in the US, which is over 33 million around the world.  We’re one of just four AAA-rated US companies by S&P and Moody’s.

With that, I’d like to introduce our speakers.  Today’s webinar is hosted by Kerstin Nemec, the Vice President of Business Incentives here at ADP.  Kerstin is responsible for overseeing tax credit teams across the country as well as the National Tax Benefit Exchange and Economic Development Services Team.  She’s joined by this excellent lineup of guest speakers.  We have Evan Migdail, Partner at DLA Piper, as well as Charles Asensio, Paul VanHuysen, and Jeff Camloh, all of ADP.

 

Today’s session will start with an introduction by Kerstin.  Following that, Jeff will speak to us about the significant opportunity around FICA taxes paid on severance.  Paul will cover the Hire Act, which is a rapidly closing opportunity, and then Charles and Evan will be covering off with the latest on federal hiring credits.

So, Kerstin, I’ll now turn it over to you.

Kerstin Nemec:                    Thank you so much for joining us today.  There are a lot of interesting things going on in the tax world right now and in Washington, DC, and we thought this would be a good time to provide you all with an update, especially on some things that have some significant deadline coming this April, the FICA protective claims that need to be filed as it relates to the Quality Stores case that we’re talking about.  There’s also the Hire Act; there’s some deadlines in April.  And as many of you know, the federal hiring credits, as well as some other–not just the hiring credits, but other credits–are in hiatus right now, so what should you all be doing in the meantime while these are in hiatus?

So with that, I’d like to introduce Jeff Camloh, who is a manager with ADP.  He’s been with ADP two years now.  And in his role, he monitors and analyzes legislative and judicial issues.  And he’s been following the Quality Stores and the FICA case very, very closely.  He was actually in Washington last weekend, sitting in on the Supreme Court hearing.

Jeff, can you share with us what’s going on with the FICA severance?

Jeff Camloh:                        Sure. Thank you, Kerstin.  As Kerstin mentioned, a main area of focus has been keeping clients and companies up to date on current developments.  And as she mentioned, the United States versus Quality Stores case was heard last week in the Supreme Court.  And in that case, the IRS has asserted that there’s potentially over $1 billion in taxpayer refunds at stake.

Now, the purpose of today’s presentation is to talk a little bit about the issues that is being litigated, give you a little history on the Quality Stores case, how we got here today, very briefly discuss the positions and arguments that both the IRS and Quality Stores raised in their court filings as well as during oral arguments last week.  We’ll also discuss whether this could affect your company, what you may wish to do to protect your right to a potential refund in light of the approaching statute of limitations, as Kerstin mentioned, and also what ADP is doing to assist companies in this regard.

So what is the issue we’re talking about?  As you can see, the question at hand, and in front of the courts, is and has been whether certain types of severance pay which, under the Internal Revenue Code, are typically referred to as Supplemental Unemployment Benefits, or SUB pay, in certain circumstances, is whether certain types of severance pay is subject to tax pursuant to the FICA statutes.  FICA, as most of you know, is a shared employer and employee tax that’s comprised of Social Security tax as well as Medicare tax.

And the facts in this case involved the retailer, Quality Stores, forced into bankruptcy by its creditors.  And as part of that bankruptcy, many facilities were closed, there was a reduction in workforce.  And consequently, Quality Stores offered two severance payment plans, with criteria such as length of service, position, their current salary, all to determine the actual severance that each affected employee was to receive.  Those payments were made both over time as well as–and part of the regular payroll–as well as in lump sum distributions,

Quality Stores, as part of these payments, paid FICA to the IRS on these amounts.  And later the company filed a claim for refund of approximately $1 million, which represented both the employer’s share and part of the employees’ share of FICA taxes.  They never heard back.  The IRS neither allowed nor denied the claim, so in 2005, Quality Stores took action.

So just a little bit on the background to catch you up on how we got here today.  As I said, in 2005 Quality Stores took action.  They did this in the Bankruptcy Court of Western Michigan, and in 2008 the Bankruptcy Court found in favor of Quality Stores.  The IRS appealed, and the Federal District Court of Western Michigan in 2010 affirmed the Bankruptcy Court ruling.  So the IRS appealed again, this time to the United States Court of Appeals for the Sixth Circuit, and the Sixth Circuit Court of Appeals affirmed that lower ruling in 2012.

So in May of last year, the IRS petitioned the United States Supreme Court to review that US Court of Appeals ruling, and the Supreme Court granted the request in October.  Now, what makes this case a little unique is that the Supreme Court doesn’t typically take too many tax cases, specifically payroll tax cases.  But it’s important to note that another circuit court, namely the Court of Appeals for the Federal Circuit, had found, on this same issue, a different result, and that it was a taxable item in the case of CSX versus the United States.  So that may have had something to do with–the circuit split may have had something to do with the Supreme Court taking this case.

So as we mentioned earlier, I had the privilege a week ago today of attending the Supreme Court oral arguments on this case in front of eight Justices, and I’d like to spend a couple of minutes just giving a high-level, more 30,000-foot view of some of the technical arguments.  Don’t want to spend too much time, but it’s important to know some of the arguments that were made.

Specifically, Quality Stores is just arguing that the statute is clear–SUB payments are not wages for purposes of FICA.  And the IRS responds that essentially, the statute–they also agree the statute is clear, but that the exception that Quality Stores is referring to is an income tax statute, not a FICA tax statute.  So additionally, the IRS argued that the entire FICA statute covers the entire employer-employee relationship, rather than just specific pieces of that.

And to that, the Quality Stores argues, “Well, wait a minute.  If you’re saying that all part of the employer-employee relationship represents is taxable for FICA because they’re SUB payments, why do you have certain revenue rulings with exceptions?  And you can’t point to any statutory authority for those exceptions.”

So in these arguments, they went back and forth a little bit, and at the end of the day, it is a statutory interpretation argument related to–with the interplay of Congressional intent as well as the effect or the weight of law of IRS administrative rulings, specifically revenue rulings.

So now we don’t know when the Court will rule on this issue.  It could be weeks, it could be months.  So we’ve laid out a couple of potential outcomes of this case.  And should the Supreme Court affirm the Sixth Circuit Court of Appeals ruling, which essentially states that these types of SUB payments are not taxable for FICA purposes, then we’d have to look further into the ruling to see, does the Supreme Court give a very broad application, or did they provide some more specific rules?  But in either case, refunds would be available, depending on that.

Should the Supreme Court overturn the Sixth Circuit ruling, then the issue is basically resolved, and FICA would be taxed on SUB payments.

So what should taxpayers think about, should companies think about as to how this may affect them?  Now, as most of you know, payroll taxes are paid quarterly on Form 941.  For administrative ease for purposes of the statute of limitations, they’re all deemed to have been filed on the April 15 in the year following the year to which they’re applicable.  So we’re going to talk a little bit about the tax year 2010, because payroll taxes paid for the tax year 2010 will be up against the statute of limitations on April 15 of 2014.  So what we don’t know is when the Court will rule, and what we would encourage taxpayers to do that may be affected by this would be to protect their right to a potential refund before April 15 so they don’t lose the opportunity to do so on these taxes.

And to do that, of course, one of the first questions a company is going to want to determine is did they make severance payments in 2010?  When did they make them?  If they believe that there’s an opportunity here for them, then we can assist, and partnering with a tax practitioner, we’re able to assist in the preparation of Forms 941X, Form 8275, as well as a cover letter to assist companies get in their protective claim before April 15 and protect their rights.

So as part of this, ADP has created a protective claim service for this service.  And in addition to partnering with our tax practitioner to file your returns, we’ll also be tracking the claims, the IRS responses, evaluating the opportunity, certainly following any action at the Supreme Court level, and keeping our clients up to date.

And also, one thing about FICA taxes is an employer cannot simply go and claim refund on their share of FICA taxes.  There needs to be an outreach, an attempt to obtain the consent of affected employees.  And we would assist in that endeavor as well.

Kerstin Nemec:                    All right, great.  Thank you, Jeff.  We are at our first polling question.  So for those of you on the line, look at the question and get ready to answer.

Do you plan to file a protective claim for FICA taxes paid on severance?  (A) I have already filed a protective claim; (B) Yes, I plan to do so; (C) No, I don’t plan to file a protective claim; and (D) I am not sure.

Unidentified Participant:    And the polls are open, and a quick reminder to place your votes.  Just click on the radio button and then click on the Submit button in the lower left-hand corner of that panel.

Kerstin Nemec:                    Correct.  Thank you.  And for those of you that want to get CPE credits, you need to answer all the poll questions in order to be eligible.

And so just to give you all some perspective while you’re answering this question, when we looked at the Warren Act, which requires companies to register if they’re having massive layoffs or plant closings, when we looked at 2010 alone, there was over 180,000 workers in the United States that were laid off that year.  So you can see this is going to be a significant issue, because the outcome of this court case not only impacts 2010, it goes all the way back to 2009 and carries forward until there’s a decision. So what we’ve seen in various media outlets and statistics out there, that there’s $1 billion in refunds at risk in the United States right now.  All right.  I think we can close the polls.

Unidentified Participant:    Okay, the poll is closed.  And would you like me to move to the next poll?

Kerstin Nemec:                    Sure, thank you.

Unidentified Participant:    Okay.

Kerstin Nemec:                    So this question’s a little bit more technical in nature, so hopefully, you all were paying attention.  What should be filed with the IRS to preserve rights to a refund for FICA taxes?  Is it (A) Form 1120X, (B) Form 941X, (C) Form 8275, or (D) both B and C?

It’s always interesting to see the outcomes of these polls, because some of these questions can be very technical.  All right.  Let me wrap up the poll.

Unidentified Participant:    Great, I’ll close the polls now.

Kerstin Nemec:                    All right, thanks.  So we were talking about the magnitude of what was happening in 2010, because we were still in a recession at that time, and there were thousands of companies impacted, almost 200,000 employees laid off in the United States.  We saw, when you’re looking at the industry breakdown of where this happened, it was in retail, healthcare, banking, transportation.  And then we also looked at it from a geographic perspective–and again, this is no surprise, because these are just large states with a lot of companies and a large population.  So we saw big impacts in California and New York, Florida, Illinois, and Pennsylvania.  All right.

And so the answer to Polling Question Number 2 is (D).  It’s both (B) and (C).  You need a 941X, Form 8275, and you need to put a cover letter with it when it’s submitted.  All right, thank you.

Oh, one more thing before we move on.  We have Evan Migdail from DLA Piper on the line, who is an attorney in Washington, DC, and very active in legislative issues and tax issues.  Evan, is there anything else you wanted to add or any insight you wanted to add to the Quality Stores?

Evan Migdail:                      Just one thing.  We know the Supreme Court is going to rule on this issue some time before the end of the term, which is usually the end of June.  They’ll probably do it earlier.  They save some of the more controversial cases to the very, very end.  But it is very important to file protective claims.  It’s a very easy thing to do.  You don’t have to list all of the refund you would have.  You simply have to put the IRS on notice that you would be potentially entitled to a refund.

The problem is, if you do not file a protective claim and the tax year closes, it’s virtually impossible to then get your refund.  Once the year closes, the only way to reopen the year is by an act of Congress, and that is wholly unlikely in a case where taxpayers would get money back from the Congress.  So I urge you to work with ADP’s tax practitioner and your own tax people to make sure that you’ve kept those years open to be able to take advantage of  a potentially favorable judgment by the Supreme Court.

Kerstin Nemec:                    All right, thank you, Evan.  Yes, it’s like an insurance policy. Thank you very much.  Next, we’re going to talk about the Hire Act.  This is another pending deadline that’s coming up this April.  It stems from 2010, and there’s still a window of opportunity to take advantage of some things that have to be done by April 15.  I have Paul VanHuysen, who is a Director of Tax with ADP.  He’s been with ADP for almost a year now, and he has been in the tax credit and incentive business for 20 years.  At ADP, he specializes in tax strategy, product, and process.  Paul, you want to go ahead and get started on Hire?

Paul VanHuysen:                Thank you, Kerstin.  Yes, as Kerstin was mentioning, yes, I’m going to talk to you about the Hire Act, and it is another tax issue from 2010, and it is focused, again, on that same 4/15/2014 deadline.  And so if we just jump right into it, many of you may remember the Hire Act from 2010, and many of you may have actually claimed it as well.

Now, just to give you a brief refresher, the Hire Act was enacted on March 18 of 2010, and it was created as an incentive that created two incentives for businesses to hire individuals who were previously unemployed.  A qualified employee for the Hire Act was defined as somebody who was unemployed or worked less than 40 hours in the 60-day period prior to their hire date in 2010.  And these individuals had to be hired between February 4 and 12/31/2010.

Individuals, to claim both of the benefits associated with the Hire Act, and we’ll will go into what those are a little bit later.  But an individual needed to sign or make an attestation on an IRS Form W11 or another similar document that collected similar information.  And then just a technical note, individuals who were claimed for the WOTC, the federal Work Opportunity Tax Credit, you cannot double-dip on one employee for the payroll tax exemption component and the Hire Act benefits and take the WOTC as well, although the retention credit is completely available for individuals where you make that election to take the WOTC.

So if we move on to the next slide, let’s go in a little bit deeper into what the Hire Act benefits actually are and what the qualification is in a little bit more depth.  Really, what the payroll tax exemption side is, it’s a payroll tax holiday for employers, exempting them from the 6.2% of Social Security taxes between the dates of March 19 and 12/31/2010.  Now, for individuals going back to perform Hire Act studies now, you’d be seeking the refund from the IRS, because those payroll taxes were already paid on qualified individuals.  The maximum value on an individual for 2010 would be about $6,600 per qualified employee.

And then the next benefit associated with this is an income tax benefit, and it’s for retained employees that meet the qualifications and also signed the W11 form.  And it’s $1,000 per retained individual who was retained for 52 weeks.  Now, the one other caveat there is that that individual, that eligible employee, needed to be paid at least 80% in the second 26 weeks of that 52-week period, their wages during that period need to be at least 80% of the wages that were paid during the first 26 weeks of that 52-week period.

We mentioned it earlier, but a qualified employee for the purpose of the Hire Act was hired between February 3 and before January 1, 2011.  They must attest on the W11, and one interesting note is that the eligibility for the Hire Act, when we were doing this and screening for it prospectively in 2010, is that the eligibility across all industries was 50%, which is dramatically higher than what you see for a lot of tax credit programs out there.

So if we can move on to the next slide, I perform a Hire Act retroactive look-back now.  Talking with companies over the past two years, we’ve seen many companies have not taken the Hire Act at all.  Additionally, even more of those companies, or even more companies that we’ve talked to that did take it certainly didn’t maximize it.  Then the qualified employees who are still currently working for an employer, when you did this via a retroactive study, those qualifying employees that you identify now, since they’re still working in 2013, often qualify the employer for both benefits.  So the average value per qualified employee is dramatically higher than what it was during the 2010 prospective screening.

Additionally, the refund that you would seek for the payroll tax filings, you need to file 941X’s for 2010.  And as Jeff and Kerstin both mentioned, the 2010 statute of limitations is set to run on 4/15/2014.  Employers who failed to maximize that Hire Act value need to take action to seek that refund before that 4/15/2014 date.  And as time goes forward from 2010, there’s more hires terminate every day.

And so if we go to the next slide, the process for capturing the benefits right now is relatively simple.  You need to identify your target population, taking into account if you’ve done it before or if it’s a completely new opportunity.  You need to determine which 2010 hires are still presently employed at your company.  And then next, you need to screen that targeted population to determine which of those 2010 hires are eligible and meet that criteria, being unemployed in the 60-day period prior to getting their job.

Additionally at this point, it also makes sense to create an electronic screening process right there so you can capture their electronic attestation on that W11 form, because tracking down the paper and keeping track of that paper with such a tight deadline going on just really isn’t feasible, and you’re not going to reap the good results from that.  Next, you need to calculate out what your benefits and make sure that you get those filed on the quarterly 941X filing.

So then, if we can move on to the next slide, this is a sample value proposition, just of a typical employer of what he might see via retro.  Now, this particular example has a very low retention rate.  If a company has a higher retention rate, they need much less 2010 new hire activity.  But it’s just thinking as though if you have 20% of your individuals still working with the company, that leaves you about 4,000 individuals currently employed from 2010.  If you achieve 75% compliance or screening compliance on those, you might screen about 3,000 of those.

An employer with this type of high hiring volume and low retention often saw about a 55% Hire Act eligibility rate, which was slightly higher than the industry composite that we showed earlier, and so at $500 per qualified employee, because of the lower retention rate, and that’s what we saw.  You might see a higher value than that, doing this retroactively, because the employees were retained longer, but that piece of the benefit, the payroll tax exemption, is about $825,000.

And so next, if you look at that, if you take the 1,650 Hire Act eligibles, say that 90% meet all the requirements for the retention credit, that leaves you about 1,485 individuals times about $950 instead of $1,000, just to maintain conservatism, because not everybody maxes out the benefit.  And that’s another $1.4 million.  So together, just by screening that small set of individuals, you could put up $2.2 million relatively quickly.

And so if we move forward now, just a few notes on claiming this benefit retroactively.  We talked about you have to file the 941X for the second quarter, the third quarter, and the fourth quarter.  Your first quarter values are filed with the second quarter for the Hire Act.  And everybody we’ve hammered in on the 4/15 deadline.

The W2C for anybody who–needs to be filed with the individual for anybody appearing in the calculation and who you’re claiming value via that 941X.  And as a result of issuing the W2C, you also have to file your W3C with the Social Security Administration.  The retention credit is filed on the 5884B as part of the general business credits filed on Form 3800, and usually for year-end filers, it’s filed on the 2011 tax returns.

And so I think we can move that one, and I think we’re back to the polling questions.

Kerstin Nemec:                    All right, thank you, Paul.  So Polling Question Number 3.

How would you describe your organization’s performance in taking advantage of the Hire Act incentives in 2010?  (A) We took advantage of the incentives and maximized the credit; (B) We took advantages of the incentives and performed well but did not maximize; (C) We captured a portion of what’s available; (D) I am unsure of the results; or (E) We did not take advantage of the Hire Act incentive.

And Paul, what are some of the common mistakes that you see with companies trying to take advantage of the Hire Act?

Paul VanHuysen:                Usually, this was a law that was put into place on March 18, so it kind of–and targeted individuals hired earlier in the year.  So usually it took a little while back in 2010 to get a viable screening process up and running.  So usually, that window between February 4, where you had eligible hires come in through whenever you got a viable screening process up and running, which was often during the summer, there’s a large window of hires there that was kind of untapped because it was hard to go back and get those individuals.

Kerstin Nemec:                    Sure, to get something set up that quick.  All right, thank you, and I think we’ll close this polling question out and go on to the next one.

All right, Polling Question Number 4.  How is a qualified individual for the Hire Act defined?  (A) An individual who is unemployed or worked less than 40 hours in the 30-day period prior to their start date; (B) Individual who was unemployed and worked less than 40 hours in a 60-day period prior to their start date; (C) The same thing, except a 120-day period prior to their start date; or (D) None of the above.

And so, Paul, while folks are answering this question, this can seem, I imagine, overwhelming or a lot to have to do by April.  To streamline it, what do you recommend to companies if they’re concerned about the effort involved to take advantage of this before April 15?

Paul VanHuysen:                I think the first step you should take is to get your arms around the population that’s still currently working, understand immediately whether or not you took it, and then if you understand whether you took it, and you understand the population of individuals you still have employed that were hired in 2010, you should start generating what the value prop might look like on those individuals to make sure, or guarantee that you know that going back to screen them and get those attestations is a worthwhile endeavor.

Kerstin Nemec:                    Okay, great.  Thank you.  And we can close the polls now.

Unidentified Participant:    Great, polls closed.

Kerstin Nemec:                    All right.  And the correct answer to that question is (B) An individual who was unemployed or worked less than 40 hours in a 60-day period prior to their start date.

And for those of you on the line that are concerned about Hire Act or are not sure if you took advantage of it and it’s really worth your time, if you’re having a hard time pulling together the information or assessing whether it warrants effort, Paul has put together a calculator that we can drop in some basic data to estimate the benefit.  So if any of you all need help with that, just let us know in the survey, the polling survey after the webinar, and we can certainly follow up with you.

All right, and finally, we are going to move on to an update on what’s happening in Washington, DC.  And we only have a few minutes to do that so we have time for Q&A afterwards.  And Charles and Evan are going to do their best to summarize all the craziness in DC in a few-minute period.  So Charles Asensio is our Vice President of Government Affairs with ADP, and Evan Migdail, who we heard from earlier, is a Partner with DLA Piper in Washington, DC.  Charles and Evan?

Charles Asensio:                  Hey, thank you, Kerstin.  I’d like to thank everyone for their patience in participating in this webinar.  I’d like to focus on the Work Opportunity Tax Credit program, which on January 1, 2014–next slide, please–entered into a hiatus, but I would characterize as a temporary hiatus.  Now, this program has expired on numerous occasions in the past since its inception in 1997.  However, historically, the program has been renewed retroactive to the date of expiration.

In line with this renewal pattern, the Employment and Training Administration with the US Department of Labor issued a Training and Employment Guidance Letter on January 2, 2014, providing specific guidance to the State Employment Security Agencies to accept, date stamp, and file IRS Form 8850 received for all new hires during the hiatus.

Pursuant to this TEGL and the historical renewal pattern, we are suggesting to employers that they accomplish two tasks.  First, review program participation with your worksite managers, and insist on nothing less than 100% program participation.  Second, reach out to your account managers and ask them to report the issue or report illustrating any outstanding documentation for new hires through 12/31/2013.  This documentation will be filed with the SESAs and hopefully obtain certifications that are still outstanding.  As I said earlier, I characterize this hiatus as temporary.

Our next presenter, Evan, will provide an overview of how program renewal could occur sooner rather than later.  Evan?

Evan Migdail:                      Yes, good afternoon, and again, thank you all for participating on the webinar.  I’ll be brief, but I’d like to start by saying there is a great deal of activity in Washington to get WOTC renewed early this year.  Sometimes it’s a very long hiatus.  This one may actually be fairly short, for a number of reasons.  And they are that the Majority Leader of the Senate has already made this a priority issue for him.  He introduced a renewal bill in the closing hours of the first session of the Congress. That bill is still a live bill, and the leader has said that he would like it taken up by the Finance Committee very quickly.

The committee is about to switch chairmen.  Chairman Max Baucus, who’s been a very strong WOTC supporter, is moving on to become US Ambassador to China.  He should be confirmed in that post very soon.  And his incoming successor, Senator Wyden of Oregon, is also a WOTC supporter.  But in addition, he has said that one of the changes he’d like to make in how the Congress works is to renew provisions that expire very quickly rather than to wait a long time to do them.  So we’re very hopeful that extending WOTC will be one of Senator Wyden’s first priorities as Chairman of the Finance Committee.

In terms of where this renewal could occur, it is unlikely that an extension bill will move by itself, but there are a number of larger bills being talked about in the Congress that could be what we would call a vehicle to move it along to enactment.  Congress is considering a long-term extension of unemployment benefits.  Because WOTC deals with long-term unemployed people, it potentially could be a complement to that bill.

In March or so, Congress will need to raise the federal debt ceiling.  That’s the amount of money that the President can borrow, and it is likely also to be accompanied with tax provisions.  Also, there’s an important Medicare extension.  Without this extension, known as the Doc Fix position, reimbursements under Medicare will fall by 30%.  It is something Congress will do, and the extenders could go there.  They actually could also be added–if Congress were to decide to increase the minimum wage, they could be added to that.

And then also, the discussion in Washington is all about jobs and long-term unemployment, and it is possible that in the context of one of these bills or otherwise, Republicans and Democrats will come together on some kind of jobs package.  So the Senate is likely to move first on an extension, the business community will back that extension and is becoming more and more vocal about doing it, and that probably will put pressure on the House of Representatives to go along as well.

And the last thing I’d like to mention is there’s actually discussion about adding a category to WOTC.  We have not added new categories for several years.  But this category would be to get a credit if you hire somebody who has exhausted his or her unemployment benefits, and that could be of great benefit to reducing long-term unemployment and also for companies that do so.

So I would simply close prior to questions by saying there is a lot of activity to get WOTC renewed.  Charles is right.  This is more likely than not a very temporary extension, and there is enough movement this year to suggest that the program might actually be extended sooner than it has in prior hiatuses.

Kerstin Nemec:                    All right, thank you, Evan.  So Polling Question Number 5.  How would you characterize your company’s engagement in a WOTC screening and credit program?  (A) We’re actively engaged and use a mail-based system; (B) Actively engaged and use a phone-based system; (C) Actively engaged and use a Web-based system; (D) Actively engaged and use Web-based system integrated with the applicant tracking system; (E) You’re actively engaged and not sure what kind of system you use; or (F) You’re not actively engaged.

And then for those of you that have questions, we’re going to be moving into Q&A right after this, so feel free to type in your question now.

All right, you want to close out that poll and go to the final polling question?

Unidentified Participant:    Okay, we’ll close the poll in 15 seconds.

Kerstin Nemec:                    Okay.  So we got quite a few questions from people on, “Will this presentation be made available to participants?”  And yes, you all will be able to download it after the presentation today.  I know there was quite a bit that we went over in a really short timeframe.

Unidentified Participant:    And Kerstin, Poll Number 6 is open now.

Kerstin Nemec:                    Okay, great, so Polling Question Number 6.  What are the important things for you to be doing now when it comes to WOTC?  (A) Strive for 100% WOTC participation of all new hires; (B) Continue to monitor worksite program adherence; (C) Be sure you have a clear picture of outstanding documentation for employees hired before January 1, 2014; or (D) All of the above?

Give people a few more, 10 to 15 more seconds to answer the question.  All right, let’s go ahead and close it out.  And the answer to that was (D) All of the above.  So just because, like Charles said, just because we’re in a hiatus, we expect to come out of hiatus fairly quickly, so it’s really important to keep your activities going.

So with that, we’re going to go, in the few minutes that we have left, go to a Q&A session.  So we have quite a few questions, so we will take a few on the webinar today, and then there are some that are very specific to certain company situations.  On those, we will be reaching out to you in the next day or two to see if we can’t help you all out.

Around the Quality Stores and the potential FICA refunds, there was a question, “Was 2010 the first year that this was in effect?”  No, the first year this was in effect was 2009, but due to the statute of limitations, it’s too late to file a protective claim for 2009.  But there’s still time for 2010.  And like Evan and Jeff spoke about earlier, it’s almost, it’s like an insurance policy.  It’s like even if you’re not sure what the ultimate outcome is going to be or what the overall applicability is going to be, it’s a good, safe bet to get a protective claim in and buy yourself some time to figure it out.  At least that way you know you have a place in line.

Okay, so it says, “Are these services available for clients that were not ADP tax services or payroll services in 2010?”  And here the person was asking about the FICA refund with filing the protective claims and if ultimately there’s an outcome that leads to a refund, helping with employee reach-out and helping process the claim.  Yes, those services are now open to both ADP clients and non-clients that want to become ADP clients.

Let me see here.  “Is there a dollar threshold for filing a protective claim?”  I think it depends on your company and ultimately what the outcome is.  But filing a protective claim on the front end is relatively low effort, so again, it’s better just to get that placeholder and to get in line for it.  Whether you ultimately implement and execute on it could be a different story.  And so what we’ve done–and again, this is on our website, and we’ll be sending a link out to you–there’s a calculator built into our FICA website where you can put in, answer some basic questions about your company’s situation and activities, and it will give you a ballpark idea of what could be at stake.  And so that might help answer that question for you.

Let’s see.  Okay, we’re closing in here, so I’m going to look for one more question here.  There’s, “How do we file a protective plan via ADP?”  We’re going to send out instructions after this webinar that will take you to a website, and it has the detailed instructions on what you need to do.

There was a question for protective claims.  “Why do the employees have to be contacted?”  Because the employees are entitled to a refund of the share of taxes that they paid.  So in these situations in the past, the IRS has ruled that the company needs to make a reasonable effort to reach out to those terminated employees and let them know that they have an opportunity to get a refund.

And Evan, I would think, Evan, you can weigh in here if that’s not done, then I don’t think the employer has the right to their portion of it, correct?

Evan Migdail:                      That’s correct, although you don’t have to contact the employees until the Supreme Court rules.  So you can file the protective claim.  You can even file a protective claim for $1.00, and then courts have said that you don’t need to contact the employees until you have succeeded in securing the refund.  The prospective plan filing is a very simple thing to do.

Kerstin Nemec:                    Okay, and then I’ll do one more question.  This one, Paul, is for you.  “Does the Hire Act apply to students that were hired?”

Paul VanHuysen:                Yes.  It applies to any–it’s not just somebody who’s receiving unemployment.  It’s really anybody who wasn’t working.  And so oftentimes, you’ll even see a higher eligibility rate for people who are being hired off of campus.

Kerstin Nemec:                    Okay, great, thank you.  And I just want to clarify one thing.  I see a host of questions coming in on 2010 and filing a protective claim, and a lot of questions like, “Should we only be concerned about 2010 at this point?”

Should there be some ruling that impacts employers where they would be entitled to a refund, it could impact employers all the way back to 2009 to the time of the ruling.  So there’s a huge window.  But the reason that we’re talking about 2010 today and making this the focus is in order to protect a refund for the 2010 tax year, you have to file a protective claim by April 15.  But should there be a favorable ruling, it should impact future years.  But since the statute of limitations for future years is still open, you don’t have to worry about filing a protective claim right now  You can worry about that next year if this drags out.

With that, I’m going to turn this back over to Kira. And hopefully, you got out of this what you had hoped for.  Kira?

Kira Lakin:                           Thanks so much, Kerstin, and thanks to everyone else as well.  I’m also seeing an awful lot of questions here and being cognizant of the fact that we didn’t get to cover them all.  I just want to reiterate that we will be reaching out to folks who had questions that did not get addressed during today’s session.  We’ll be emailing you individually to make sure that we get you those answers that you’re looking for.  So thanks for sending those in.  And if you have any others, feel free to submit those as well.

I’d like to invite everyone to also follow us on our blog at adpcomplianceinsights.com.  We do archive all of our past webinars.  You can also find archives of other past sessions we’ve had, as well as a listing of any upcoming webinars that you can register for.

And again, we really appreciate your feedback on how we’re doing, so please tell us how we can make these programs even more helpful for you as you fill out today’s post-event survey.  Thank you for joining us again, and have a great day.

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