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Date: July 23, 2015

Bulletin Number: 1404

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Subject

Refund of Taxes Withheld while Employees were on Paid Workers’ Compensation Leaves

Purpose

To provide agencies with information regarding OSC’s processing of refunds of taxes withheld while employees were on paid workers’ compensation leaves.

Affected Employees

All employees on an approved paid workers’ compensation leave effective on or after the beginning of the pay period of the first pay check in calendar year 2015.

Effective Date(s)

Effective the beginning of Administration and Institution Pay Periods 4L/5C, paychecks dated June 3, 2015 (Administration) and June 11, 2015 (Institution).

Refunds will be processed in separate paychecks.

Background

Workers’ compensation-related benefits are the statutory workers’ compensation benefit and any supplemental payments for on-the-job injuries that were negotiated by the State.

Under IRS regulations, workers’ compensation-related benefits are exempt from federal income, Social Security and Medicare taxes.  Workers’ compensation-related benefits are also exempt from New York State and local income taxes, if applicable.

Also, under IRS regulations, non-taxable workers’ compensation-related benefits are not eligible for salary deferral under the New York State Deferred Compensation Plan (NYSDCP).

As stated in Payroll Bulletin #1366, all workers’ compensation leaves must be entered into the payroll system, including leaves for employees who remain in pay status or receive pay while charging accruals as part of their benefit.

Beginning in Pay Period 4L/5C, OSC will begin processing refunds of taxes withheld from payments received during the period of time employees were on a paid workers’ compensation leave.

The refund of taxes processed in Pay Period 4L/5C will encompass refunds for affected employees for taxes withheld from excludable earnings paid in all paychecks in January and February of 2015.

Subsequent refunds are then expected to be processed based on the following schedule:  

 

Calculation of Excludable Earnings

Receipt of Refund

Pay Cycle

Paychecks Included in Calculation

Paycheck Date

Administration

Jan & Feb checks

6/3/2015

Institution

Jan & Feb checks

6/11/2015

Administration

March checks

6/17/2015

Institution

March checks

6/25/2015

Administration

April checks

7/1/2015

Institution

April checks

7/9/2015

Administration

May checks

7/15/2015

Institution

May checks

7/23/2015

Administration

June checks

7/29/2015

Institution

June checks

8/6/2015

Administration

7/1/2015

8/12/2015

Institution

7/9/2015

8/20/2015

Administration

7/15/2015

8/26/2015

Institution

7/23/2015

9/3/2015

Administration

7/29/2015

9/9/2015

Institution

8/6/2015

9/17/2015

Administration

8/12/2015

9/23/2015

Institution

8/20/2015

10/1/2015

Administration

8/26/2015

10/7/2015

Institution

9/3/2015

10/15/2015

Administration

9/9/2015

10/21/2015

Institution

9/17/2015

10/29/2015

Administration

9/23/2015

11/4/2015

Institution

10/1/2015

11/12/2015

Administration

10/7/2015

11/18/2015

Institution

10/15/2015

11/25/2015

Note: Workers’ compensation excludable earnings will be calculated and processed every pay cycle beginning with Administration paychecks dated 8/12/15 and continue through November. All workers’ compensation exclusions identified in December 2015 for 2015 workers’ compensation leaves will be handled through the W-2 or W-2C process. Biweekly tax refund processing will then recommence in January of 2016.

A quarterly process will also be run to account for any changes to employee job records which would require a withholding recalculation. For example, if an employee’s dates of paid workers’ compensation leave change after a refund has been processed, the quarterly process will recalculate and adjust the refunded amount as necessary.

OSC Actions- New Workers’ Compensation Tax Refund Pages

OSC has created new programming to identify periods of paid leave that is excludable from taxes and calculate the amount of taxes that need to be refunded. This information will be stored in the following new pages in PayServ:

Agency Emp WC Leaves

Path: Payroll for North America > Employee Pay Data > Agency Emp Workers Comp Leaves

When an employee is placed on a paid workers’ compensation leave, the Agency Emp WC Leaves page will be automatically created and populated by the system. The page will pull existing data from the employee’s Job Data and WC Incident and Injuries Detail pages.

An additional field titled “Schedule at Leave” is included on the Emp WC Leaves page. This field will default with the same work schedule as the employee’s work schedule field on Job Data.  If the employee worked a schedule other than the defaulted schedule during the week the employee went on a paid workers’ compensation leave, then the agency must enter the work schedule actually worked in the “Schedule at Leave” field on the Agency Emp WC Leaves page.

The payroll system will use this work schedule to prorate the excludable period and calculate the appropriate tax refunds.

An example of the Agency Emp WC Leaves page is attached.

The following two new workers’ compensation tax refund pages are created when OSC runs the program to calculate and refund taxes:

WC Earns Exclusion

Path: Payroll for North America > Employee Pay Data >Worker Comp Earnings Exclusions >WC Earns Exclusion

The WC Earns Exclusion page will be created when the program is run by OSC to calculate excludable earnings for the time period being processed. Agencies will be able to view the pay check information being evaluated and the earnings codes, dates and amounts being excluded.

An example of the WC Earns Exclusion page is attached.

WC Pre-Tax Deds

Path: Payroll for North America >Employee Pay Data >Worker Comp Earnings Exclusions >WC Pre-Tax Deds

The WC Pre-Tax Deds page will also be created when the program is run by OSC to calculate excludable earnings for the time period being processed. Agencies will be able to view the paycheck information being evaluated and the total amount of earnings excluded from taxable gross wages for Social Security/Medicare, Federal, New York State and Local taxes.

An example of the WC Pre-Tax Deds page is attached.

Note: Viewing Tax Refund Amounts

Agencies will be able to view the calculated refund amounts for Social Security/Medicare, Federal, New York State and Local taxes once all processing for the paycheck date being processed is complete. The refund amounts will appear in Paycheck Data using the new Earnings Codes below.

OSC Actions- New Tax Refund Earnings Codes

OSC has created three new Earnings Codes to be used to refund taxes withheld during the exclusion period:

WFA- Workers Compensation Federal Wages Adj
WSA- Workers Compensation State/Local Wages
WSM- Workers Compensation SS/Med Wages
 
After the Workers’ Compensation Tax Exclusion program has run, the calculated tax refunds will be loaded to the employee’s paycheck for the check date being processed using the Earnings Codes listed above.

Agency Actions

Reporting Work Schedules on the Agency Emp WC Leaves Page:

When an employee is placed on a paid workers’ compensation leave on Job Data, the system automatically creates and populates an Agency Emp WC Leaves page.

Agencies must enter the work schedule of affected employees in the “Schedule at Leave” field on the Agency Emp WC Leaves page if the schedule worked during the week the employee went on paid workers’ compensation leave is different than the employee’s work schedule located on Job Data.

The payroll system will use this work schedule to prorate the excludable period and calculate the appropriate tax refunds.

OSC has run a program to create Agency Emp WC Leaves pages for employees who were placed on a paid workers’ compensation leave on Job Data prior to the creation of the Agency Emp WC Leaves page. Agencies must review the work schedule of these employees for the week which contains the leave date and adjust the Schedule at Leave field as necessary. Any change to the Schedule at Leave field will result in a tax refund recalculation and adjustments will be made during the quarterly process.

Payroll Register and Employee’s Paycheck/Advice

Where appropriate, the following earnings codes and the associated amounts will be displayed on the payroll register. The earnings code description and the amount will be displayed on the employee’s paycheck stub. There will be an individual separate check for each earnings code.

WFA- Workers Compensation Federal Wages Adj
WSA- Workers Compensation State/Local Wages
WSM- Workers Compensation SS/Med Wages

Questions

Questions regarding this bulletin may be e-mailed to the Workers’ Compensation mailbox.