Previous OT pay

nohr4u1yr

When our company started 4 years ago the payroll department based OT pay on a bi-weekly basis instead of weekly. This went on for about 6 months.

When they found out they were incorrect in their calculations they went back and cut checks to those that were owed money.

Several of these employees were no longer working for the company and checks were mailed to their last known address. Several checks came back due to them moving.

Our CFO asked me today if there is a time frame that we need to keep this money set aside for these employees.

Any guidance will be appreciated.

Thank you!

Shadowfax

I'm not familiar with any specific reg regarding this, except that a wage and hour claim can go back two years, or in the case of an intentional violation, 3 years - so I'd keep at least the checks you attempted to make the correction with for the three years. Unless we're talking a huge amount of money, I wouldn't be too concerned about actually keeping the cash restricted. Your intention is what will be important should it ever come up, and your ability to prove your imediate correction unpon discovering the vio.

HRinFL

I agree with Shadowfax. Additionally, we have used a service that specializes in finding people to attempt to locate ex-ees that are owed money for one reason or another. These services are fairly reasonable and have a pretty good track record. If they cannot find them, they probably do not want to be found. They can give you documentation that shows what avenues they used to try and locate the person. This will also show that you made a good faith effort to get these people the money they are owed.

nohr4u1yr

Thank you both for replying. It affected about 10 ex-employees and is not a large amount of money. Since we all know that OT is Taboo! But we will keep the returned checks in their files.

I hope you have a great day!

Shelley

marc

Just a "by the way" comment. You should check your State's escheat laws. Most have a requirement that this sort of obligation be given to the State after the passage of time. Usually around 3 years. I believe it is illegal for you to just void the checks and keep the money.

nohr4u1yr

We have not "voided" any checks - some came back to us stating "addressee unknown" and others were never returned or cashed.

marc

I understand. My point is that the amounts due will need to be forwarded to the state if you cannot locate the ex-EEs. You will also have the W-2 issue to deal with at the end of the year.

Shadowfax

Marc - you sure raise an interesting point. Now I will admit I know next to nothing about escheats, but it seems to me that since the $$ hasn't actually been paid, there is nothing to escheat. Now if it had been direct deposited in the ees account, and the ee never takes it out, it would certainly escheat, but unless we were talking aobut a lot of money, I don't think I would even go there. And why would you report withholding - employee hasn't even been paid and you want to add to his tax burden? It just seems like a lot more trouble than it is worth - unless you are right and you simply have to do it. Maybe the IRS can help you find the ee?

PolarKat

We've recently used the IRS to track down former employees that we no longer had current addresses for, that still had money in our 401k Plan.

Info and instructions on how to use their program can be found at [url]http://www.irs.gov[/url]. Type in "missing participants" in the search window. Then follow the instructions.

It works well. After the recipients get over the shock of being contacted by the IRS, they are grateful we tracked them down.

nohr4u1yr

Oh come on...the IRS are such fun-loving people...why would anyone be thrown into shock if they contact them?

Thank you for that information!!!

marc

As to the withholding and p/r taxes, they would have been paid when the p/r was run. After all, these were paychecks that came back. Presumable withholding, fica and medi were taken out and transferred in normal course to the feds. The EEs earned the money, taxes were paid and a w-2 must be filed.

pork1

I agree with MARC, in our state there is a provision for sending the monies in the name of the loss individual, I have looked but could not find my notes. I believe you could probably make e-mail contact with your Secretary of State or AG and they should be able to tell you specificlly what to do with the checks/cash that no longer belongs to your company. I do remember that we were not aloud to void the check and put the money back into our operating funds. I know we got an address and sent the check to the State agency designated. Additionally, your Accounting Department head should be able to tell you where and what they do with Accounts like this.

Good luck

PORK

nohr4u1yr

"Additionally, your Accounting Department head should be able to tell you where and what they do with Accounts like this".


The CFO is the person that asked me about how to handle this situation...

I printed off everyone's response and she is going to do some reseach with the DOL.

Thank you! I hope you all have a great day!!


Shelley

Don D

Marc and his super-accounting eye are correct. It matters not that the money returned to you represented overtime due to the discovery of a mistake the company made. All of that is fluff. The money was due and payable and is due the individual, his estate, or the state if he cannot be found, just as if it were a $13,000 payroll check for an individual. It cannot legally go back into the coffers of the company. It just depends on whether or not you want to follow the letter of the law or not. If you keep it, it will probably never be discovered. But, it will always have been wrong.

marc

Yes, it will always have been wrong, but more than that, when the EEs finally file the tax returns for the year in question, their information will not match up with the taxes paid to the IRS and the fun will begin.

That's why the website given earlier is such a big help. If the IRS cannot find them, none of the rest of it will bother the company much - then all they need do is wrestle with their conscience.