Enrolled Senate Bill No. 934

ESB 934
STATE OF MICHIGAN
97TH LEGISLATURE
REGULAR SESSION OF 2014
Introduced by Senator Richardville

ENROLLED SENATE BILL No.934

AN ACT to fix minimum wages for employees within this state; to prohibit wage discrimination; to provide for a wage deviation board; to provide for the administration and enforcement of this act; to prescribe penalties for the violation of this act; and to repeal acts and parts of acts.

The People of the State of Michigan enact:
Sec. 1. This act shall be known and may be cited as the “workforce opportunity wage act”.

Sec. 2. As used in this act:
(a) “Commissioner” means the director of the department of licensing and regulatory affairs.
(b) “Employ” means to engage, suffer, or permit to work.
(c) “Employee” means an individual not less than 16 years of age employed by an employer on the premises of the employer or at a fixed site designated by the employer, and includes a minor employed subject to section 15(1) of the youth employment standards act, 1978 PA 90, MCL 409.115.
(d) “Employer” means a person, firm, or corporation, including the state and its political subdivisions, agencies, and instrumentalities, and a person acting in the interest of the employer, who employs 2 or more employees at any 1 time within a calendar year. An employer is subject to this act during the remainder of that calendar year.

Sec. 3. An employer shall not pay any employee at a rate that is less than prescribed in this act.

Sec. 4. (1) Subject to the exceptions specified in this act, the minimum hourly wage rate is:
(a) Before September 1, 2014, $7.40.
(b) Beginning September 1, 2014, $8.15.
(c) Beginning January 1, 2016, $8.50.
(d) Beginning January 1, 2017, $8.90.
(e) Beginning January 1, 2018, $9.25.

(2) Every January beginning in January 2019, the state treasurer shall adjust the minimum wage by an amount determined by the state treasurer at the end of the preceding calendar year to reflect the average annual percentage change in the consumer price index for the most recent 5-year period for which data are available. As used in this subsection, “consumer price index” means the most comprehensive index of consumer prices available for the midwest region from the bureau of labor statistics of the United States department of labor. The wage and hours division of the department of licensing and regulatory affairs shall post the adjusted minimum wage on its website by February 1 of the year it is calculated, and the adjusted rate is effective beginning April 1 of that year. An annual increase under this subsection shall not exceed 3.5%.

(3) An increase in the minimum hourly wage rate as prescribed in subsection (2) does not take effect if the unemployment rate determined by the bureau of labor statistics, United States department of labor, for this state is 8.5% or greater for the year preceding the year of the prescribed increase. Sec. 4a. (1) Except as otherwise provided in this act, an employee shall receive compensation at not less than 1-1/2times the regular rate at which the employee is employed for employment in a workweek in excess of 40 hours.

(2) This state or a political subdivision, agency, or instrumentality of this state does not violate subsection (1) with respect to the employment of an employee in fire protection activities or an employee in law enforcement activities, including security personnel in correctional institutions, if any of the following apply:
(a) In a work period of 28 consecutive days, the employee receives for tours of duty, which in the aggregate exceed
216 hours, compensation for those hours in excess of 216 at a rate not less than 1-1/2 times the regular rate at which the employee is employed. The employee’s regular rate shall be not less than the statutory minimum hourly rate.

(b) For an employee to whom a work period of at least 7 but less than 28 days applies, in the employee’s work period the employee receives for tours of duty, which in the aggregate exceed a number of hours which bears the same ratio
to the number of consecutive days in the employee’s work period as 216 bears to 28 days, compensation for those excess hours at a rate not less than 1-1/2 times the regular rate at which the employee is employed. The employee’s regular rate shall be not less than the statutory minimum hourly rate.

(c) If an employee engaged in fire protection activities would receive overtime payments under this act solely as a result of that employee’s trading of time with another employee pursuant to a voluntary trading time arrangement, overtime, if any, shall be paid to employees who participate in the trading of time as if the time trade had not occurred.
As used in this subdivision, “trading time arrangement” means a practice under which employees of a fire department voluntarily substitute for one another to allow an employee to attend to personal matters, if the practice is neither for the convenience of the employer nor because of the employer’s operations.

(3) This state or a political subdivision, agency, or instrumentality of this state engaged in the operation of a hospital or an
establishment that is an institution primarily engaged in the care of the sick, the aged, or the mentally ill or developmentally disabled who reside on the premises does not violate subsection (1) if both of the following conditions are met:
(a) Pursuant to a written agreement or written employment policy arrived at between the employer and the employee before performance of the work, a work period of 14 consecutive days is accepted instead of the workweek of 7 consecutive days for purposes of overtime computation.

(b) For the employee’s employment in excess of 8 hours in a workday and in excess of 80 hours in the 14-day period, the employee receives compensation at a rate of 1-1/2 times the regular rate, which shall be not less than the statutory minimum hourly rate at which the employee is employed.

(4) Subsections (1), (2), and (3) do not apply to any of the following:
(a) An employee employed in a bona fide executive, administrative, or professional capacity, including an employee employed in the capacity of academic administrative personnel or teacher in an elementary or secondary school.
However, an employee of a retail or service establishment is not excluded from the definition of employee employed in a bona fide executive or administrative capacity because of the number of hours in the employee’s workweek that the employee devotes to activities not directly or closely related to the performance of executive or administrative activities, if less than 40% of the employee’s hours in the workweek are devoted to those activities.

(b) An individual who holds a public elective office.

(c) A political appointee of a person holding public elective office or a political appointee of a public body, if the political appointee described in this subdivision is not covered by a civil service system.

(d) An employee employed by an establishment that is an amusement or recreational establishment, if the establishment does not operate for more than 7 months in a calendar year.
(e) An employee employed in agriculture, including farming in all its branches, which among other things includes: cultivating and tilling soil; dairying; producing, cultivating, growing, and harvesting agricultural or horticultural commodities; raising livestock, bees, fur-bearing animals, or poultry; and a practice, including forestry or lumbering operations, performed by a farmer or on a farm as an incident to or in conjunction with farming operations, including preparation for market, delivery to storage, or delivery to market or to a carrier for transportation to market or processing or preserving perishable farm products.

(f) An employee who is not subject to the minimum hourly wage provisions of this act.

(5) The director of the department of licensing and regulatory affairs shall promulgate rules under the administrative procedures
act of 1969, 1969 PA 306, MCL 24.201 to 24.328, to define the terms used in subsection (4).

(6) For purposes of administration and enforcement, an amount owing to an employee that is withheld in violation of this section
is unpaid minimum wages under this act.

(7) The legislature shall annually appropriate from the general fund to each political subdivision affected by subsection (2) an
amount equal to the difference in direct labor costs before and after the effective date of this act arising from any change in existing law that results from the enactment of subsection (2) and incurred by the political subdivision.

(8) In lieu of monetary overtime compensation, an employee subject to this act may receive compensatory time off at a rate that
is not less than 1-1/2 hours for each hour of employment for which overtime compensation is required under this act, subject to all of the following:

(a) The employer must allow employees a total of at least 10 days of leave per year without loss of pay and must provide the compensatory time to the employee under either of the following:
(i) Applicable provisions of a collective bargaining agreement, memorandum of understanding, or any other written agreement between the employer and representative of the employee.

(ii) If employees are not represented by a collective bargaining agent or other representative designated by the employee, a plan adopted by the employer and provided in writing to its employees that provides employees with a voluntary option to receive compensatory time off for overtime work when there is an express, voluntary written request to the employer by an individual employee for compensatory time off in lieu of overtime pay before the performance of any overtime assignment.

(b) The employee has not earned compensatory time in excess of the applicable limit prescribed by subdivision (d).

(c) The employee is not required as a condition of employment to accept or request compensatory time. An employer shall not directly or indirectly intimidate, threaten, or coerce or attempt to intimidate, threaten, or coerce an employee for the purpose of interfering with the employee’s rights under this section to request or not request compensatory time off in lieu of payment of overtime compensation for overtime hours, or requiring an employee to use compensatory time. In assigning overtime hours, an employer shall not discriminate among employees based upon an employee’s choice to request or not request compensatory time off in lieu of overtime compensation. An employer who violates this subsection is subject to a civil fine of not more than $1,000.00.

(d) An employee may not accrue more than a total of 240 hours of compensatory time. An employer shall do both of the following:
(I) Maintain in an employee’s pay record a statement of compensatory time earned by that employee in the pay period that the pay record identifies.

(ii) Provide an employee with a record of compensatory time earned by or paid to the employee in a statement of earnings for the period in which the compensatory time is earned or paid.

(e) Upon the request of an employee who has earned compensatory time, the employer shall, within 30 days following the request, provide monetary compensation for that compensatory time at a rate not less than the regular rate earned by the employee at the time the employee performed the overtime work.

(f) An employee who has earned compensatory time authorized under this subsection shall, upon the voluntary or involuntary termination of employment or upon expiration of this subsection, be paid unused compensatory time at a rate of compensation not less than the regular rate earned by the employee at the time the employee performed the overtime work. A terminated employee’s receipt of or eligibility to receive monetary compensation for earned compensatory time shall not be used by either of the following:

(i) The employer to oppose an employee’s application for unemployment compensation under the Michigan employment security act, 1936 (Ex Sess) PA 1, MCL 421.1 to 421.75.

(ii) The state to deny unemployment compensation or diminish an employee’s entitlement to unemployment compensation benefits under the Michigan employment security act, 1936 (Ex Sess) PA 1, MCL 421.1 to 421.75.

(g) An employee shall be permitted to use any compensatory time accrued under this subsection for any reason unless use of the compensatory time for the period requested will unduly disrupt the operations of the employer.

(h) Unless prohibited by a collective bargaining agreement, an employer may terminate a compensatory time plan upon not less than 60 days’ notice to employees.

(1)As used in this subsection:
(i) “Compensatory time” and “compensatory time off” mean hours during which an employee is not working and for which the employee is compensated in accordance with this subsection in lieu of monetary overtime compensation.

(ii) “Overtime assignment” means an assignment of hours for which overtime compensation is required under this act.

(iii) “Overtime compensation” means the compensation required under this section.

Sec. 4b. (1) An employer may pay a new employee who is less than 20 years of age a training hourly wage of $4.25 for the first 90 days of that employee’s employment. The hourly wage authorized under this subsection is in lieu of the minimum hourly wage otherwise prescribed by this act.

(2) Except as provided in subsection (1), the minimum hourly wage for an employee who is less than 18 years of age is 85% of the general minimum hourly wage established in section 4.

(4) A person who violates subsection (3) is subject to a civil fine of not more than $1,000.00.

Sec. 4c. On petition of a party in interest or on his or her own initiative, the commissioner shall establish a suitable scale of rates for apprentices, learners, and persons with physical or mental disabilities who are clearly unable to meet normal production standards. The rates established under this section may be less than the regular minimum wage rate for workers who are experienced and who are not disabled.

Sec. 4d. (1) Before September 1, 2014, the minimum hourly wage rate is $2.65 per hour and, beginning September 1, 2014, the minimum hourly wage rate is 38% of the minimum hourly wage rate established in section 4 if all of the following occur:
(a) The employee receives gratuities in the course of his or her employment.

(b) If the gratuities described in subdivision (a) plus the minimum hourly wage rate under this subsection do not equal or exceed the minimum hourly wage otherwise established under section 4, the employer pays any shortfall to the employee.

(c) The gratuities are proven gratuities as indicated by the employee’s declaration for purposes of the federal insurance contributions act, 26 USC 3101 to 3128.

(d) The employee was informed by the employer of the provisions of this section.

(2) As used in this section, “gratuities” means tips or voluntary monetary contributions received by an employee from a guest, patron, or customer for services rendered to that guest, patron, or customer and that the employee reports to the employer for purposes of the federal insurance contributions act, 26 USC 3101 to 3128.

Sec. 5. (1) The governor shall appoint, with the advice and consent of the senate, a wage deviation board composed of 3 representatives of the employers, 3 representatives of the employees, and 3 persons representing the public. One of the 3 persons representing the public shall be designated as chairperson. Members shall serve for terms of 3 years, except that of the members first appointed, 1 from each group shall be appointed for 1 year, 1 for 2 years, and 1 for 3 years. The commissioner shall be secretary of the wage deviation board.

(2) A majority of the members of the board constitute a quorum, and the recommendation or report of the board requires a vote of not less than a majority of its members. The business which the wage deviation board may perform shall be conducted at a public meeting of the board held in compliance with the open meetings act, 1976 PA 267,
MCL15.261 to 15.275. Public notice of the time, date, and place of the meeting shall be given in the manner required by that act.

(3) A writing prepared, owned, used, in the possession of, or retained by the wage deviation board in the performance of an official function shall be made available to the public in compliance with the freedom of information act, 1976
PA442, MCL 15.231 to 15.246.

(4) The per diem compensation of the board and the schedule for reimbursement of expenses shall be established annually by the legislature.

(5) The wage deviation board may request data of any employer, subject to the provisions of this act, as to the wages paid and hours worked by the employer’s employees and may hold hearings as necessary in the process of obtaining this information.

(6) The wage deviation board shall submit its report to the commissioner, who shall file it in his or her office as a public record together with the regulations established by the board.

(7) At any time after a deviated wage rate has been in effect for 6 months or more, the wage deviation board may reconsider the rate.

Sec. 6. The commissioner may promulgate rules necessary for administration of this act under the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328.

Sec. 7. An employer who is subject to this act or any regulation or order issued under this act shall furnish each employee with a statement of the hours worked by the employee and of the wages paid to the employee, listing deductions made each pay period. The employer shall furnish the commissioner, upon demand, a sworn statement of the wage information. These records shall be open to inspection by the commissioner, his or her deputy, or any authorized agent of the department at any reasonable time. An employer subject to this act or any regulation or order issued under this act shall keep a copy of this act and regulations and orders promulgated under this act posted in a conspicuous place in the workplace that is accessible to employees. The commissioner shall furnish copies of this act and the regulations and orders to employers without charge.

Sec. 8. The commissioner shall administer and enforce this act and, at the request of the wage deviation board, may investigate and ascertain the wages of employees of an employer subject to this act. The commissioner and the commissioner’s employees shall not reveal facts or information obtained in the course of official duties, except as when required by law, to report upon or take official action or testify in proceedings regarding the affairs of an employer subject to this act.

Sec. 9.
(1) If an employer violates this act, the employee affected by the violation, at any time within 3 years, may do any of the following:
(a) Bring a civil action for the recovery of the difference between the amount paid and the amount that, but for the violation, would have been paid the employee under this act and an equal additional amount as liquidated damages together with costs and reasonable attorney fees as are allowed by the court.

(b) File a claim with the commissioner who shall investigate the claim.

(2) If the commissioner determines there is reasonable cause to believe that the employer has violated this act and the commissioner is subsequently unable to obtain voluntary compliance by the employer within a reasonable period of time, the commissioner shall bring a civil action under subsection (1)(a). The commissioner may investigate and file a civil action under subsection (1)(a) on behalf of all employees of that employer who are similarly situated at the same work site and who have not brought a civil action under subsection (1)(a). A contract or agreement between the employer and the employee or any acceptance of a lesser wage by the employee is not a bar to the action.

(3) In addition to bearing liability for civil remedies described in this section, an employer who fails to pay the minimum hourly wage in violation of this act, or who violates a provision of section 4a governing an employee’s compensatory time, is subject to a civil fine of not more than $1,000.00.

Sec. 10.
(1) This act does not apply to an employer that is subject to the minimum wage provisions of the fair labor standards act of 1938, 29 USC 201 to 219, unless those federal minimum wage provisions would result in a lower minimum hourly wage than provided in this act. Each of the following exceptions applies to an employer who is subject
to this act only by application of this subsection:
(a) Section 4a does not apply.

(b) This act does not apply to an employee who is exempt from the minimum wage requirements of the fair labor standards act of 1938, 29 USC 201 to 219.

(2) Notwithstanding subsection (1), an employee shall be paid in accordance with the minimum wage and overtime compensation requirements of sections 4 and 4a if the employee meets either of the following conditions:
(a) He or she is employed in domestic service employment to provide companionship services as defined in 29 CFR 552.6 for individuals who, because of age or infirmity, are unable to care for themselves and is not a live-in domestic service employee as described in 29 CFR 552.102.

(b) He or she is employed to provide child care, but is not a live-in domestic service employee as described in 29 CFR 552.102. However, the requirements of sections 4 and 4a do not apply if the employee meets all of the following conditions:
(i) He or she is under the age of 18.
(ii) He or she provides services on a casual basis as defined in 29 CFR 552.5.
(iii) He or she provides services that do not regularly exceed 20 hours per week, in the aggregate.

(3) This act does not apply to persons employed in summer camps for not more than 4 months or to employees who are covered under section 14 of the fair labor standards act of 1938, 29 USC 214.

(4) This act does not apply to agricultural fruit growers, pickle growers and tomato growers, or other agricultural employers who traditionally contract for harvesting on a piecework basis, as to those employees used for harvesting, until the board has acquired sufficient data to determine an adequate basis to establish a scale of piecework and determines a scale equivalent to the prevailing minimum wage for that employment. The piece rate scale shall be equivalent to the minimum hourly wage in that, if the payment by unit of production is applied to a worker of average ability and diligence in harvesting a particular commodity, he or she receives an amount not less than the hourly minimum wage.

(5) Notwithstanding any other provision of this act, subsection (1)(a) and (b) and subsection (2) do not deprive an employee or any class of employees of any right that existed on September 30, 2006 to receive overtime compensation or to be paid the minimum wage.
Sec. 11. An employer that discharges or in any other manner discriminates against an employee because the employee has served or is about to serve on the wage deviation board or has testified or is about to testify before the board, or because the employer believes that the employee may serve on the board or may testify before the board or in any investigation under this act, and any person who violates any provision of this act or of any regulation or order issued under this act, is guilty of a misdemeanor.

Sec. 12. Any employer that consistently discharges employees within 10 weeks of their employment and replaces the discharged employees without work stoppage is presumed to have discharged them to evade payment of the wage rates established in this act and is guilty of a misdemeanor.

Sec. 13.
(1) An employer having employees subject to this act shall not discriminate between employees within an establishment on the basis of sex by paying wages to employees in the establishment at a rate less than the rate at which the employer pays wages to employees of the opposite sex for equal work on jobs, the performance of which requires equal skill, effort, and responsibility and that is performed under similar working conditions, except if the payment is made under 1 or more of the following:
(a) A seniority system.
(b) A merit system.
(c) A system that measures earnings by quantity or quality of production.
(d) A differential based on a factor other than sex.

(2) An employer that is paying a wage differential in violation of this section shall not reduce the wage rate of an employee to comply with this section.

(3) For purposes of administration and enforcement, any amount owing to an employee that has been withheld in violation of this section is considered unpaid minimum wages under this act.
Sec. 14. An employer operating a massage establishment as defined in section 2 of former 1974 PA 251 that violates
this act is guilty of a misdemeanor punishable by imprisonment for not more than 1 year or a fine of not more than $1,000.00, or both.

Enacting section 1. The minimum wage law of 1964, 1964 PA 154, MCL 408.381 to 408.398, is repealed.
This act is ordered to take immediate effect.
Secretary of the Senate
Clerk of the House of Representatives
Approved
Governor

 

Raise Your Rent to Save Taxes

If you own a business and lease property to your company, you should consider raising your rent.  Depreciation deductions and other personal write-offs that were incentives for owners to charge low rents have been limited by tax reform.  And because rental activities are subject to passive activity rules your company’s deductions may mean greater tax savings than your personal deductions.  You can use two strategies to offset the higher taxes you might incur from increased rental income.  You can lower your salary so that there is no net increase in your taxable income, or you can make investments that result in passive losses that will offset your higher rental income.  Keep in mind that any unusually high rent that you charge your business can be challenged by the IRS.  It’s best to base the rent on the fair market value of the property.

Personal Money Management: Ten Major Mistakes to Avoid

  1.  Paying more taxes than you have to.  Keep good records so you get all deductions you’re entitled to.  Shift income to a year when you’ll be in a lower tax bracket.  Shift deductions to a year when you’ll be in a higher tax bracket.
  2. Not preparing for the unexpected.  Set aside at least two months income to protect yourself and your family from serious cash flow problems in the event of an emergency.
  3. Not putting your money to work.  Take all excess funds out of no-interest checking and savings accounts.  Put the money to work in liquid but higher yielding places such as mutual funds.
  4. Not setting financial goals.  If you don’t have goals, you can’t make a plan to achieve them.  Write down where you want to be and when. Then start making a plan.
  5. Making investments based on tips.  No matter how well-intended, a tip is the worst reason to make an investment.  Investment decisions made under pressure are also unwise.
  6. Failing to have your will updated.  Your situation changes along with that of your heirs.  Your will should always reflect your present circumstances.
  7. Not establishing credit in the name of each spouse.  No one likes to think about death or divorce, but not having credit can be much more than a minor inconvenience.
  8. Borrowing money when it’s not necessary.  Not all interest is fully deductible.  Interest deductions have been sharply curtailed.  Don’t assume tax benefits when you consider borrowing.
  9. Not keeping organized financial records.  Poor recordkeeping can cost you significant tax savings, cause you to make bad financial decisions, and leave your family with unnecessary problems if you become ill or die.
  10. Failing to put a yearly tax plan to work as early as possible.  Year-end tax planning can be costly.  The sooner you put your tax plan to work, the greater your savings.

Better Ways to Control Accounts Receivable

With an uncertain economy on the horizon and unpredictable interest rates ahead, improving a company’s cash position should be a major priority for any business.  In most cases, the answer to this challenge is better control of accounts receivable.

Tuning up your collection system

Too often, companies allow their receivables to age to a point where the business is strapped for cash.  It’s not uncommon for four or five months to pass before management takes action to collect past due accounts, usually because the company doesn’t have a clear collection policy.

Effective receivable control is based on a regular review of the company’s receivables.  Ninety days from the date a receivable becomes past due is the point at which your company should decide whether it wants to continue to do business with a late-paying customer.

If a customer is important, a mutually satisfactory schedule for payment of past due balances should be set up together with an understanding that covers payment for future purchases.  It’s important to resolve both of these issues at the same time to avoid future problems while the customer is paying off past due amounts.

If you can’t work out a satisfactory schedule for payment of the past due balance within a reasonable amount of time, or if it becomes apparent that the customer is in real financial trouble, it’s time to bite the bullet and turn the matter over to a collection agency.

An ounce of prevention…

Although there’s no guarantee that better control over accounts receivable will result in the timely payment of all receivables, there are several other steps that a company can take to reduce the age of its accounts receivable.

  • Credit checking.  It’s surprising how many businesses will accept orders from new customers without doing a thorough credit check.  It’s the obvious way to head off future problems.  And it’s just as important to make occasional credit checks for large existing customers to make sure that their credit ratings aren’t slipping.
  • Applications for credit.  A credit application is another basic technique to reduce collection problems.  At the least, a company should know the names of its customers, owners, banks, and major suppliers.  Not only is this information useful for immediate credit decisions, but it can be essential if a collection problem arises in the future.
  • Customer communications.  There’s no better way to assure improved collections than to make certain that a new customer understands that your company must be paid in a timely manner.  If a customer doesn’t get a clear message to that effect, you can give the impression that prompt payment isn’t really important to your company.

It’s just as critical to keep in touch with new customers to find out if they are satisfied with your product.  Make every effort to do this before payment is due, to avoid future excuses for delayed payments because of problems you didn’t know about.

Invoice discounts and late payment charges

Offering customers a discount for prompt payment usually won’t speed up your collection.  In fact, it can often backfire because customers take the discount but don’t fulfill the terms.  It’s much better to bill a net amount and clearly indicate terms of payment on the invoice.

Some companies charge a penalty for past due payments, but unless a customer is made aware of this in advance, the customer is not legally obligated to pay late charges.  It’s best to stick with conventional invoicing and tighten up your internal controls over receivables.

When the Unexpected Happens, Will You Have Enough Cash?

Most people realize that they should put aside enough cash to protect themselves against an emergency or a sudden loss of income.  If the unexpected happens and an adequate cash reserve is not readily available, you may be forced to sell investments or real estate for less than they might be worth at another time under less pressing circumstances.

That’s why it’s wise to plan your emergency cash needs carefully.  Here’s how to go about it.

How Much Cash is Enough

Step 1:  Estimate your living expenses.  It’s fairly simple to estimate your annual living expenses, but be careful not to forget anything.  Rent or mortgage payments, food, clothing, car maintenance, utilities, and monthly debt payments are seldom overlooked, but people tend to forget insurance premiums (car, life, medical, homeowner’s, etc.)  and payments which are made quarterly or semi-annually.

To determine how long your cash reserves should last, a good rule-of-thumb is to set aside enough cash to pay your expenses for six months if your household has only one wage-earner.  If your household has two wage-earners, a three month cash reserve is adequate in most cases.

Modify these time periods by considering how long it might take you to find new employment if you lost your present job, and how long it would take your disability insurance to take effect if you couldn’t work because of illness or injury.

When you calculate how much cash you’ll need, don’t count on certain kinds of income to provide that cash.  For example, you might be tempted to include anticipated dividends from equity investments as part of your cash reserves. That’s a mistake because income from stocks is not guaranteed.

Step 2:  Establish your inner comfort level.  Everyone is different and you should consider whether you’ll really feel secure that your cash reserve is adequate.  If you’re uncomfortable about only having enough money to meet expenses, then put aside a specific amount beyond and above those expenses.

Keep in mind that your needs will vary depending on your circumstances.  For example:

  • If there’s a new baby in your family, you should increase your emergency cash level.
  • If you are young, single, and without debt, you may not need to maintain a high level of cash – particularly if you have skills that make you easily employable.
  • If you are about to retire, chances are that you’ll feel insecure in what will be an entirely new way of life.  A cash reserve that’s well above regular expenses may be called for, at least until you feel comfortable about living as a retiree.
  • If you’ve started a new business, don’t count on it to produce immediate personal income.  Instead, increase your emergency cash until you’re certain that the business will generate a steady income.  In some cases, this can take a few years.

 

Put Your Cash in the Right Place
Security and liquidity are the major criteria for where to keep your cash reserves.  Put your money where it will be readily available to you when you need it.  The two most common choices are:

  • A savings account.  You’ll earn a low interest rate, but if you’re very conservative you’ll know your money is completely safe.
  • A money market fund.  Bank money market funds are federally insured, but other money market funds earn a higher interest rate and are usually quite safe.  Look for funds that have check-writing or telephone withdrawal privileges.

 

Wherever you put your emergency cash, make sure it earns compound interest.  It’s possible that you may never have to use your cash reserves and over a period of time, the power of compound interest can build a tidy nest egg for you.

FBAR: Report of Foreign Bank and Financial Accounts

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). See the ‘Who Must File an FBAR’ section below for additional criteria.

FBAR must be filed on or before June 30th.  Need to file?? We can help!  Call our office at 734-464-3660 to make your appointment today!

Who Must File an FBAR

United States persons are required to file an FBAR if:

  1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Exceptions to the Reporting Requirement

Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:

  • Certain foreign financial accounts jointly owned by spouses;
  • United States persons included in a consolidated FBAR;
  • Correspondent/nostro accounts;
  • Foreign financial accounts owned by a governmental entity;
  • Foreign financial accounts owned by an international financial institution;
  • IRA owners and beneficiaries;
  • Participants in and beneficiaries of tax-qualified retirement plans;
  • Certain individuals with signature authority over, but no financial interest in, a foreign financial account;
  • Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust); and
  • Foreign financial accounts maintained on a United States military banking facility.

Review the FBAR instructions for more information on the reporting requirement and on the exceptions to the reporting requirement.

Reporting and Filing Information

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. The reporting obligation is met by answering questions on a tax return about foreign accounts (for example, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.

The FBAR is a calendar year report and must be filed on or before June 30 of the year following the calendar year being reported. Effective July 1, 2013, the FBAR must be filed electronically through FinCEN’s BSA E-Filing System. The FBAR is not filed with a federal tax return. A filing extension, granted by the IRS to file an income tax return, does not extend the time to file an FBAR. There is no provision to request an extension of time to file an FBAR.

A person required to file an FBAR who fails to properly file a complete and correct FBAR may be subject to a civil penalty not to exceed $10,000 per violation for nonwillful violations that are not due to reasonable cause. For willful violations, the penalty may be the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation.  For guidance when circumstances such as natural disasters prevent the timely filing of an FBAR, see FinCEN guidance, FIN-2013-G002 (June 24, 2013).

U.S. Taxpayers Holding Foreign Financial Assets May Also Need to File Form 8938

Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. The new Form 8938 filing requirement is in addition to the FBAR filing requirement. A chart providing a comparison of Form 8938 and FBAR requirements may be accessed on the IRS Foreign Account Tax Compliance Act web page.

Offshore Voluntary Disclosure Program

On Jan 9, 2012, the IRS reopened the Offshore Voluntary Disclosure Program following continued interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program offers people with unreported taxable income from offshore financial accounts or other foreign assets another opportunity to resolve their tax and information reporting obligations, including the FBAR. Although the program does not have a closing date, the IRS may end the program at a later time.

For non-resident U.S. taxpayers presenting a low compliance risk, the IRS implemented new streamlined filing compliance procedures effective September 1, 2012. The procedures are designed for non-resident U.S. citizens, including but not limited to dual citizens, residing outside the U.S. since January 1, 2009, and who have not filed U.S. income tax and information returns. The procedures require the filing of delinquent income tax and information returns for the past three years and the filing of delinquent FBARs for the past six years. For qualifying filers, reviews of submissions are expedited and the IRS will not assert penalties or pursue follow-up actions. When filing delinquent FBARs on the BSA E-File System, participants can annotate that the filing is in relation to either the Streamlined Filing Compliance Procedures or the OVDP. For more information go to Instructions for New Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers.

Educational Resources

The following educational products have been developed for your use in learning more about why, when and where to file the FBAR:

5 Things To Know About Michigan’s Minimum Wage Raise

LANSING, Mich. (AP) – Michigan Gov. Rick Snyder signed legislation Tuesday to raise the state’s minimum wage to $9.25 an hour by 2018, as Republicans controlling the state government moved to head off a November ballot measure that could have raised pay even more. Here are five things to know about the effect on Michigan workers and the ballot drive:

GRADUAL RAISE

The Republican governor approved a 25 percent wage raise from the current hourly minimum of $7.40, but Michigan workers won’t see the increase all at once. The first bump comes in September, when the minimum wage moves up to $8.15. From there, it increases to $8.50 on Jan. 1, 2016; to $8.90 on Jan. 1, 2017; and to $9.25 on Jan. 1, 2018.

Lawmakers said the gradual increase is better for employers who might need time to adjust to paying employees more.

Some other states that have raised their minimum wages this year are using a similar gradual method, but none will rise as slowly as Michigan’s wage. Maryland is increasing from $7.25 to $10.10 by July 2018, and Minnesota will go from $6.15 to $9.50 for large employers and from $5.25 to $7.75 for small employers by August 2016, according to the National Conference of State Legislatures.

If current inflation trends continue, $9.25 will only be worth about $8.50 by 2018, said Charles Ballard, an economics professor at Michigan State University. A minimum-wage earner would need to make about $8.00 an hour in 2018 to be making relatively the same as $7.40 today, he said, citing U.S. Bureau of Labor Statistics data.

BALLOT DRIVE

Michigan is the first state with a Republican-led legislature to raise its minimum wage this year. That’s because Republican leaders in Michigan were working to pre-empt a ballot initiative they said was a worse alternative: raising the minimum wage to $10.10 an hour by 2017. Senate Majority Leader Randy Richardville, R-Monroe, said he introduced the bill to repeal and replace the law that the ballot initiative aims to amend.

But it is unclear if the new law will prevent the $10.10 measure from appearing on the November ballot. Raise Michigan, the group of labor and community organizers behind the ballot drive, submitted 319,784 petition signatures in support of the ballot initiative by the filing deadline Wednesday.
Raise Michigan attorney Mark Brewer, former chair of the Michigan Democratic Party, said according to the state Constitution, the Michigan Secretary of State’s office must now review the signatures and follow the usual ballot process because it is a “valid” drive approved by the state Board of Canvassers. He wouldn’t say whether Raise Michigan plans to sue the state.
“We will do whatever’s necessary to protect the peoples’ right in this state to pursue an initiative,” he said.

WHO’S AFFECTED

There were 96,000 Michigan workers earning at or below the minimum wage in 2013, according to the state Department of Technology, Management and Budget. That’s 3.8 percent of Michigan’s roughly 2.5 million hourly workers. Nationally, about 4.3 percent of hourly workers make minimum wage.

The minimum wage raise could also help hourly workers who make above minimum wage, since employers are likely to adjust their pay scales to reflect a new minimum.
The $9.25 wage would not lift a family of three above the federal poverty level, said Yannet Lathrop, policy analyst for the Michigan League for Public Policy, an advocacy group for the poor. MLPP said households headed by women will especially benefit from the raise, since women make up about 53 percent of the state’s low-wage workforce compared to 48 percent of the overall workforce.

RISING WITH INFLATION

Democrats and minimum wage advocates secured a victory by tying the minimum wage to inflation in the new law. The wage will increase annually with inflation by up to 3.5 percent starting in 2019, unless state unemployment is 8.5 percent or more in the previous year.

The measure, which Democrats have sought for years, will limit the need for future legislative battles over raising the wage.

TIPPED WORKERS

The law increases the hourly minimum for workers who get tips to 38 percent of the general minimum wage, from $2.65 currently, to $3.52.

A major catalyst for Republican efforts to block the ballot drive was that it would eliminate the tipped wage scale and apply the $10.10 minimum to all workers.

The Michigan Restaurant Association, National Federation of Independent Business and other groups said any wage hike would cut into business profits, which could cause closures and layoffs. But they said eliminating the separate payment scale for tipped workers would have been especially “devastating.”

Snyder said the new law is “economically sound.”

Make Plans Now for Next Year’s Tax Return

Make Plans Now for Next Year’s Tax Return

Most people stop thinking about taxes after they file their tax return. But there’s no better time to start tax planning than right now. And it’s never too early to set up a smart recordkeeping system. Here are six IRS tips to help you start to plan for this year’s taxes:

1. Take action when life changes occur.  Some life events, like a change in marital status, the birth of a child or buying a home, can change the amount of taxes you owe. When such events occur during the year, you may need to change the amount of tax taken out of your pay. To do that, you must file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. Use the IRS Withholding Calculator on IRS.gov to help you fill out the form. If you receive advance payments of the premium tax credit it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace.

2. Keep records safe.  Put your 2013 tax return and supporting records in a safe place. That way if you ever need to refer to your return, you’ll know where to find it. For example, you may need a copy of your return if you apply for a home loan or financial aid. You can also use it as a guide when you do next year’s tax return.

3. Stay organized.  Make sure your family puts tax records in the same place during the year. This will avoid a search for misplaced records come tax time next year.

4. Shop for a tax preparer.  If you want to hire a tax preparer to help you with tax planning, start your search now. Choose a tax preparer wisely. You are responsible for the accuracy of your tax return no matter who prepares it. Find tips for choosing a preparer at IRS.gov.

5. Think about itemizing.  If you usually claim a standard deduction on your tax return, you may be able to lower your taxes if you itemize deductions instead. A donation to charity could mean some tax savings. See the instructions for Schedule A, Itemized Deductions, for a list of deductions.

6. Keep up with changes.  Subscribe to IRS Tax Tips to get emails about tax law changes, how to save money and much more. You can also get Tips on IRS.gov or IRS2Go, the IRS’s mobile app. The IRS issues tips each weekday in the tax filing season and three days a week in summer.

Unpaid Debt Can Affect Your Refund

Unpaid Debt Can Affect Your Refund

If you owe a debt that’s past-due, it can reduce your federal tax refund. The Treasury Department’s Offset Program can use all or part of your refund to pay outstanding federal or state debt.

Here are five facts to know about tax refunds and ‘offsets.’

1. The Bureau of Fiscal Service runs the Treasury Offset Program.

2. Debts such as past due child support, student loan, state income tax or unemployment compensation may reduce your refund. BFS may use part or all of your tax refund to pay the debt.

3. You’ll receive a notice if BFS offsets your refund to pay your debt. The notice will list the original refund and offset amounts. It will also include the agency that received the offset payment and their contact information.

4. If you believe you don’t owe the debt or you want to dispute it, contact the agency that received the offset. You should not contact the IRS or BFS.

5. If you filed a joint tax return, you may be entitled to part or all of the refund offset. This rule applies if your spouse is solely responsible for the debt. To request your part of the refund, file Form 8379, Injured Spouse Allocation.

Tips for Taxpayers Who Missed the Tax Deadline

Tips for Taxpayers Who Missed the Tax Deadline

If you missed the April 15 tax filing deadline, don’t panic. Here’s some advice from the IRS.

  • File as soon as you can.  If you owe taxes, you should file and pay as soon as you can. This will help minimize the interest and penalty charges. There is no penalty for filing a late return if you are due a refund.
  • IRS E-file is still available.  IRS e-file is available through Oct. 15. E-file is the easiest, safest and most accurate way to file your taxes. With e-file you receive confirmation that the IRS received your tax return. If you e-file and choose direct deposit of your refund, you’ll normally get it within 21 days.
  • Pay as much as you can.  If you owe tax but can’t pay it all at once, try to pay as much as you can when you file your tax return. Pay the remaining balance as soon as possible to stop further penalties and interest.
  • Make a payment agreement online.  If you need more time to pay your taxes, you can apply for a payment plan with the IRS. The easiest way to apply is to use the IRS Online Payment Agreement tool. You can also mail Form 9465, Installment Agreement Request. The tool and form are both available on IRS.gov.
  • A refund may be waiting.  If you’re due a refund, you should file as soon as possible to get it. Even if you are not required to file, you may still get a refund. This could apply if you had taxes withheld from your wages or you qualify for certain tax credits. If you don’t file your return within three years, you could forfeit your right to the refund.