New Overtime Rules for Employees – What you need to Know

11/30/2016 – DELAYED!
As of right now, the new overtime rules do NOT go into effect tomorrow.   On November 22nd, a US District Court Judge in Eastern Texas granted an Emergency Motion for a Preliminary Injunction which stayed the implementation of the updated Overtime rule.

In my opinion (take it for what it’s worth) this is a double edged sword.   Would the new rule have hurt business?  Yes some, but mostly those businesses who were abusing the employee’s stated position (ie Manager, Director) to get around paying overtime to individuals who were earning a mere $10/hour while those same employees did not meet the Criteria to be considered Exempt from Overtime.   This new rule attempted to rectify that classification so that workers could not be exploited.

On the other edge of the sword are the workers themselves.   The new rule was an attempt to ensure that employees who did not meet certain managerial job duties were not miss-classified as managers denying these employees overtime pay for work over 40hrs.   This new rule didn’t say you needed to necessarily give your employees a raise if they were Exempt salaried, it merely helped to define a living wage for those who were working over 40 hrs and not compensated for that work.   An employer has 2 choices under the new rule – Either Pay overtime to employees that clearly are not Management (either by pay scale or duties) or Hire additional Labor to fill in the hours that were not being compensated under the old rule.   Assume this person was working 50 hrs a week and only compensated for 40 at $10/hr – 2 things happen under this scenario (1) the person’s hourly wage is effectively reduced to $8 when not compensated for the other 10 hrs (2) their time away from their family is effected and (3) something most probably don’t think about, resentment and employee dissatisfaction become an issue.   The later may be something that actually costs an employer more than if the employee were happy and enjoyed their job.

Stay posted to this page.   I will update this information when more is available.  But as of now, no changes are in effect regarding overtime pay.


Effective December 1st, 2016, new Exempt Overtime rules go into effect.   As an employer you will need to start paying Overtime to your SALARIED employees whose salaries are under $47,476 per year and even if they meet the other regulation criteria to be considered exempt.

What the new legislation does is merely lift the pay threshold from $23,660 ($455/week) to the new higher threshold for anyone earning under $913/week.    You won’t necessarily have to change your Salaried employees over to hourly, but you will need to find some method of tracking those hours so that overtime can be accurately calculated and paid.

A bit of History on who could be classified as Exempt

You could classify an employee as exempt from overtime if they met certain job/pay related tests.   The main tests are the employment classification:  Executive, Administrative, Professional, Computer or Outside Sales.   On top of these general classifications, the employee would need to have a position of responsibility – managing employees, exercising discretion/judgement, have advanced knowledge among other related qualification type tests.   However, under each of the tests, the minimum weekly pay for each of the classifications was $455/week.   This had the tendency to lead to employees being misclassified as exempt from overtime even though, the employee may not meet the other Employment Classifications.

Keep in mind, you can and could still pay employees based a Base Salary even if they didn’t meet the exempt standards, but you were and are required to pay overtime (time WORKED over 40 hours in a given work week) to salaried employees even if they did not qualify for exempt status. The term “Salary” was not and should not be confused with being exempted from earning overtime pay.

How to implement the New Rules

Effective on Dec 1st, employers will be required to pay overtime to every employee who does not meet the Exempt Work regulations – those rules have not and are not changing.  What has changed is the weekly earnings in ADDITION to the exempt criteria.    The weekly minimum pay is being increased from $455/week to $913/week.

Attached (via this link)  is the U.S. Dept of Labor fact sheet on WHO is exempted from overtime.  For any employees that you are not paying overtime to, you should review that employees job responsibilities to see it they meet the exemption standards for overtime.   If they do not, you need to begin paying overtime to the employees covered under this new change.   You may want to review these rules now to see if you are in compliance as you could potentially owe your employees hundreds (potentially thousands) if you have had them misclassified incorrectly all alone.   For those employees who do meet the job duty classifications but are under the new pay threshold, you have a couple options – (1) Raise that employees salary to an amount that exceeds $913/week, (2) Leave their salary as is but convert their Salary to hourly so their overtime hours can be easily determined or (3) Leave the Salary as is and weekly recalculate their hourly rate and pay overtime according to you state’s overtime rules.

What hours Qualify for Overtime

Overtime hours are those hours an employee WORKS in excess of 40 hours per week.  If your employee works 40 hrs but has 8 hours of vacation, the 8 hours of vacation is not Worked time and therefore no overtime is payable.   However, if your employee is continually working 45 hours per week, they will be due 5.0 hrs of overtime each Week – do not confuse this with pay periods.  If you pay on a bi-weekly period or some other pay period, you will need to determine if the employee worked over 40 hours in a given WEEK.

Example:  You pay your employees every other week (your pay cycle is Bi-Weekly).  Your employee who makes $15/hr and does not meet any of the exempt criteria turns in their time sheet for 80 hrs.  However, that 80 hrs consists of them working 45 hrs on week 1 and 35 hours on Wk 2 – The employee is entitled to 5 hours of Overtime pay for week 1 even though their total hours equal what would normally be 2 weeks at 40 hrs per week.

Each state has it’s own laws on what the overtime rate is.  Wisconsin is 1.5x the regular hourly rate.  Under these laws, in the example above, this employee would be paid 5.0 hrs at $22.50/hr for the overtime hours.   Some states may have laws which may 2.0x the employees hourly rate when/if hours exceed a given amount of overtime or if overtime occurs on a holiday.  Be Sure you know what your states Overtime pay laws are.

It’s important to understand that the employees who are entitled to overtime pay is NOT changing!  It’s only the amount that the already exempted employees earn that is being adjusted.   In other words, your employee meets the work related criteria to be considered exempt from overtime but they don’t meet the new pay threshold beginning on Dec 1st – this employee would now no longer be exempt simply because the pay threshold has changed.

LKM Accounting is here to help!  Feel free to give a jingle or shoot us an email.  We are happy to help small businesses understand the tax and pay laws.


Where is my refund??

Tax Refunds Not in your bank yet?

So you are panicking! Your tax accountant said it should about 10-14 days (give or take) and most individuals are getting their refunds back – but it’s day 10 and you haven’t seen yours yet.  Well, hang in there! Unless you filed your return in early February, your return filing is in the height of the return season so it may be a couple more days of processing than it was a month ago. Additionally, if you have anything special happening on your return, Earned Income Credit, increased Medical Expenses, or maybe lots of stock sales… it could take a few days longer.

You can always go out to the IRS (or maybe even your State Revenue Department Website) and check on the “Where’s my Refund” option.  Have your tax return in front of you so you can verify who you are and click submit. These sites will give you a current status of your tax refund situation. Note that most refunds right now from the U.S. Treasury are out about 21 days. Long gone are the days of paper checks which took 6-8 weeks for the refund to get to you…. Remember that?  Aren’t we glad we are not back in those days!

Here is the IRS website to check on your refund.

Remember, Tax Preparers are extremely busy right now so unless it’s been a month or more, try researching on the IRS or State Website first.  Your Tax Preparer will be very grateful you did.


1099 Requirements – What you need to know

Forms 1099 are “information returns” that businesses are required to file annually with the IRS. The forms are used to report amounts a business paid out that should be reported by the recipients as income.

Form 1099-MISC, Miscellaneous Income, is probably the most familiar to business owners. But Form 1099-MISC is just one of a group of more than fifteen different forms used to report other types of income to the IRS.

To increase compliance of Form 1099 filing, business income tax forms include questions about whether the business made payments that require issuing the form and whether the business actually did issue it. This scrutiny, coupled with steep penalties, make it important for every business to check Form 1099 filing requirements each year.

Here’s what you need to know about Form 1099.

COMMON 1099s – A variety pack

Under current tax law, every person engaged in a trade or business, including nonprofit organizations, must file Forms 1099 for certain payments made during the year in the course of the payer’s trade or business. Here are some of the most common forms and filing requirements.

Form 1099-INT
Used to report interest payments of $10 or more by financial entities; $600 or more by certain trades or businesses.
Form 1099-DIV
Used to report dividend payments of $10 or more; $600 or more for liquidations.
Form 1099-B
Used to report any proceeds from broker and barter transactions.
Form 1099-R
Used to report distributions of $10 or more from retirement or profit-sharing plans, IRAs, SEPs, annuities, or insurance contracts.
Form 1099-S
Used to report the sale or exchange of present or future ownership interests in real estate.
Form 1099-C
Used to report cancellation of debt of $600 or more.
Form 1099-MISC
Used to report miscellaneous payments generally of $600 or more; $10 or more for royalties; any amount for fishing crews.

■ 1099-MISC – The major business form

Form 1099-MISC is used to report payments for services provided to your business by unincorporated vendors when those payments total $600 or more for the year. Typical payments include rents, royalties, and compensation to independent contractors, such as consultants, web designers, accountants, lawyers, and cleaning services.

Here are five conditions for payments that must be reported using Form 1099-MISC.
1. The payment was made to a nonemployee.
2. The payment was made for services (not goods) provided to the trade or business.
3. The payment was made to an unincorporated entity (except for payments to attorneys and medical and health care payments).
4. The payment or payments generally totaled $600 or more for the year.
5. The payment was not made electronically (e.g., with a credit or debit card or with PayPal).

DEADLINES – When to file

January 31 – Give one copy of Form 1099 to the recipient of the payment by this date of the year following payment.

February 28 – Send one copy of Form 1099 (along with Form 1096) to the IRS by this date of the year following payment unless the form is filed electronically.   You will also need to check with your State Department of Revenue to see if they require filing of these forms as well.

March 31 – If Form 1099 is filed electronically, this is the deadline for providing a copy to the IRS.

NOTE: Electronic filing is required for businesses filing 250 or more information returns and optional, though encouraged, for businesses filing fewer than 250 information returns.

PENALTIES – A matter of intent

The penalties for failing to file Forms 1099 range from $50 to $250 per form, depending on how late your filing is and whether or not the failure to file was intentional. Total penalties can go as high as $1 million for businesses with gross receipts under $5 million or $3 million for those with gross receipts over $5 million.

To increase compliance of Form 1099 filing, federal income tax returns for businesses include the following questions:
1. Did your business make any payments during the year that would require it to file Form(s) 1099?
2. If “yes,” did or will the business file required Forms 1099?


1. If you receive a Form 1099 with an incorrect dollar amount, request a corrected copy from the payer before tax filing time.
2. Only trades and businesses are required to report payments made in the course of business on Form 1099. No reporting is required for personal payments. For example, a business owner who pays a dentist $1,500 for a child’s dental work does not need to report that payment on Form 1099.
3. Payments of $600 or more to attorneys in the course of business must be reported on Form 1099-MISC, whether the attorney is incorporated or not. Medical and health care payments made to corporations must also be reported.
4. Payments to vendors by credit or debit card, or by services like PayPal, should NOT be reported on Form 1099-MISC. The bank or third-party payment provider is required to report those transactions on Form 1099-K.
5. Nonprofit organizations are subject to Form 1099 filing requirements because they are considered to be “engaged in a trade or business.”
6. The fact that payments may not have to be reported on Form 1099 does not mean that the payments are exempt from income tax. All income must be reported on the income tax return of the recipient.
7. To properly complete Forms 1099 and avoid penalties, a business needs the recipient’s name, taxpayer identification number, and a mailing address. Obtain this information by sending the recipient Form W-9, Request for Taxpayer Identification Number and Certification. If the recipient fails to provide the necessary information, the business may have to withhold taxes from payments and remit these amounts to the IRS.

AN ACTION LIST – Staying compliant

1. Review accounts payable and cash disbursements to capture reportable payments.
2. Verify that the information on Form W-9 is current for each vendor.
3. Initiate a policy that no vendor will be paid unless Form W-9 is completed.

For additional information about the Form 1099 filing requirements that apply to your business, please contact our office at (608) 239-4907.

Scam Emails


If you use QuickBooks and have your email ANYWHERE on their site, be warned that there are active scams going out to get your information!
If you get any emails from what appears to be “Intuit” – BEFORE you hit reply, review the address. These phishing emails look just like a legitimate email using all of the Intuit Logos and usual fonts. However, if it doesn’t say “Intuit” in the email address – it’s NOT a legitimate email!

Login to your Intuit account directly – never use any hyperlinks on these emails.

LKM Technology Memo

As you may or may not be aware, as of October 1, 2015 businesses and Credit card companies need to switch to the new Chip Compliant Cards and Card readers in order to protect themselves from losses incurred by credit card fraud. These new cards will essentially talk with the issuing bank to ensure that the card itself is a real card issued by that bank.

The move to Smart Cards is being done to bring the U.S. into sync with the rest of the world. This move also shifts the liability of the risk of loss from the issuing banks to YOU and YOUR processing company. Depending on who is the LEAST compliant will determine who holds the burden of loss. In other words, if you accept a credit cards on your old magnetic strip reader after October 1st and that card was fraudulent, you/your business will keep that lost sale on your books – no longer will the credit card company indemnify you for that loss.

So, if you haven’t already, you will need to purchase a new Credit Card EMV reader that will bring your Credit Card terminal into compliance with the new technology. So where do you get them?? Here’s a list. If I missed a system or service you are using, please let me know and I will be happy to research that EMV reader availability for you.

QuickBooks Desktop – Intuit will have their card reader for their merchant service system available in Sept – date unknown at this point. I will let you know as soon as this becomes available.

QuickBooks Point of Sale – An EMV reader is available for use with POS 2011, 2012 & 2013. This can be purchased online at You’d want the PIN Pad with Integrated Card Swipe3
Intuit will have new readers available sometime in Sept for use with POS 2015

• If you are using Square to process payments, They have this available now for $29.00 and I’ve provided the link below

• If you are using PhoneSwipe, these readers are NOT yet available. As of this morning, no target date is scheduled but they said they will be notifying each customer within the next month to tell them how they can get a new EMV compliant reader. They are aware of the Oct 1st deadline but are still working with a proto-type device. PhoneSwipe was also not sure if they would be providing this free of charge or if there would be a cost associated with this new reader.

If you have any additional questions, don’t hesitate to contact us here at LKM Accounting at (608) 239-4907

Update:  (08/25/2015)
Square has posted a “Reserve your Reader” site.  The cost of the new Device, which is very cool if I must say, is $49 but gets you ready for the next phase of pay methods – the “Tap and Go” method.  This Contactless method uses your phone device with Apple pay and  Chase Freedom (just to name a couple) and eliminates the need for Cash and Card.  Here’s the link to reserve your new updated reader device… Remember, you need to be ready for this by October 1st!

Here’s the Link to the Square site:


Update:  (12/01/2015)

QuickBooks – What you should know:

  • Intuit is working with its partners to offer EMV-ready versions of QuickBooks Payments mobile, desktop and point of sale solutions, which work with QuickBooks GoPayment, QuickBooks for Desktop 2016, QuickBooks Online, and QuickBooks Point of Sale v12.
  • Intuit is extending the EMV liability shift by six months for its QuickBooks Payments customers to allow everyone more time to transition. If you are a QuickBooks Payments customer and unknowingly accept a counterfeit EMV card using your magnetic stripe reader, Intuit will assume your liability for the fraud until March 31, 2016.
  • Information on the new QuickBooks USB EMV Card Reader for use with Desktop 2016, QuickBooks Online, and QuickBooks Point of Sale v12, will be available soon.
    For more information on QuickBooks and EMV readers:


  • Although PhoneSwipe has the EMV capable readers, the software for these is not yet active.  They expect everything to be functional by 1st Quarter 2016.  The readers will be contactless as well as swipe.

Update (05/12/2016)

Square reader is now available – check out their site for details on purchasing your card reader at: