SEE ALSO >>> Nonprofit Services, The Belfint Nonprofit Ledger
DOL issues guidance on independent contractors
New U.S. Department of Labor (DOL) guidance addresses the standard for determining whether an employee is misclassified as an independent contractor under the Fair Labor Standards Act (FLSA). The guidance incorporates the “economic realities” test and provides broader FLSA coverage than the common law control test, which focuses on the employer’s control over the worker.
Under the six-factor test, the ultimate inquiry is whether a worker is economically dependent on the employer or in business for him- or herself. The guidance explicitly states that “most workers are employees under the FLSA.” The IRS subsequently released Fact Sheet 2015-21 on determining employee status for purposes of federal employment taxes. The IRS test places more emphasis on the employer’s control.
Proposed DOL overtime rules could hike employee costs
The DOL has proposed regulations “defining and delimiting” the exemptions for executive, administrative, professional, outside sales and computer employees (“white-collar” exemptions) from the FLSA’s minimum wage and overtime requirements. If approved, the regulations would change the determination of which workers are entitled to overtime pay and make it more difficult for organizations to classify employees as exempt.
Most notably, the rules would increase the salary threshold for exempt workers from $455 per week or $23,660 annually to $970 per week or $50,440 per year. Thus, any employee who earns less than these amounts would automatically be nonexempt. As of this writing, the proposed regs have yet to be finalized.
IRS to release electronic Forms 990
The IRS has announced that “substantial progress” has been made in developing a technology solution that will allow the agency to provide data from electronically filed Forms 990 in a machine-readable format. According to the agency, its solution will ensure that sensitive or personally identifiable information continues to be protected from public distribution. It expects the new practice to be in place in early 2016.
Nonprofits more prone to accounting errors
Researchers at the University of Notre Dame have found that public charities have accounting errors in their audited financial statements at a 60% higher rate than do publicly traded corporations. Charities also report errors almost twice as often as similar-size corporations. Mistakes are usually errors of omission: for example, failing to recognize a liability on financial statements.
The error rate is strongly associated with internal control deficiencies and the size of the audit firm. But the researchers discovered no significant association between error rate and organization size/type or administrative activities expenses. They theorize that the low administrative costs many not-for-profits cite to attract donors might contribute to the high rate of accounting errors.