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As Hurricane Harvey's floodwaters recede and businesses start to assess and repair damage, employers affected by the storm also must ensure that employees receive paychecks and that tax returns and payments are timely submitted.
Disasters may serve as important reminders for businesses to establish and review contingency plans for guiding payroll operations during emergencies, including those involving storms, floods, tornadoes, fires, and power distuptions.
With the hurricane season lasting from June 1 to Nov. 30, employers should be aware of the potential for more destruction this year. Hurricane Irma, for example, a strong storm in the Atlantic Ocean, appears on target to threaten the southeast U.S., though its exact path was unclear Sept. 5.
Payroll departments play a critical role in keeping business operations running and in recovering from emergencies or disasters. Martin Armstrong, vice president of payroll shared services for Charter Communications Inc., said Aug. 30 that a business continuity plan is “something that needs to be part of daily operations.”
At Charter Communications, for example, emergency preparedness is integrated into everyday functions.
“Everybody has a laptop, which they take home,” said Armstrong, who is a member of the Bloomberg BNA Payroll Library Advisory Board. “Everyone also keeps a copy of the business continuity plan in the trunk of their car, which has a list of contacts and directions for follow-up.”
The company's payroll service has designated backup sites to be used in an emergency, Armstrong said. The service checks the connectivity of those locations twice a year to ensure that they are available.
“Our attitude is that it's not a matter of if, but when,” Armstrong said. “In the 21st century, not having a business-continuity plan is not an option.”
An effective plan identifies critical processes most likely to be disrupted under a variety of disaster scenarios and outlines procedures that address the potential difficulties in the immediate aftermath and longer-term recovery operations, Deborah Ellis Timberlake, CPP, said in a 2014 Bloomberg BNA strategic white paper, “ Disaster Recovery and Business Continuity .”
The procedures should consider channels for emergency communication, methods for backing-up data, alternative sites for work and information storage, and alternative payroll procedures, Timberlake said. The plan should also identify each department affected by payroll and relevant vendors and service providers.
After a continuity plan is established, it should be shared with all staff members so that they understand their roles in a disaster, Timberlake said. The plan should also be tested regularly to ensure that it considers recent organizational and technological changes.
Ensuring that affected clients and personnel stay informed in an emergency is critical to a successful disaster plan, said John Gibson, senior vice president of service for Paychex Inc.
“As soon as the hurricane was named, we started calling all of our clients,” Gibson said Aug. 30, referring to Hurricane Harvey. “We sent emails, made calls, and put pop-up displays online. We've called our clients before, during, and after the storm to make sure they have what they need.”
To ensure clients could continue to pay employees, the company “streamlined processes for electronic payments and made sure that paper checks would be available,” Gibson said.
A number of the company's own employees in the Houston area were affected. Clients whose assigned representatives would be unavailable because of the storm were notified and connected to replacement representatives “to ensure continuity of service in Houston,” Gibson said.
Jennifer Halvorson, a payroll accounting manager for Orion Marine Group in Houston, recommended that employers implement a cloud-based data system for processing payroll after a disaster. A cloud-based system stores programs and data over the internet rather than on a computer's hard drive, making the information accessible away from business headquarters, she said Sept. 1.
Storing payroll data in a cloud-based system meant that although floodwaters prevented members of Halvorson's team from reaching their offices, she was able to remotely process payroll using her laptop computer.
“All of our employees got paid, including those in our south Texas location, as they went in and emailed me pictures of timecards and I was able to enter the time that their timekeepers usually enter,” Halvorson told Bloomberg BNA in an email.
Mike O’Toole, senior director of publications, education, and government relations for the American Payroll Association, said that although continuity plans require “comprehensive planning and testing well in advance,” there still are options available for employers that did not have plans in place and were having trouble retrieving accurate time and attendance information because of Hurricane Harvey.
“They can duplicate their last payroll run, or they can run a ‘vanilla' version that doesn’t include extras like overtime pay, and pay the employee the additional wages owed at a later date,” O'Toole told Bloomberg BNA in an email Sept. 1.
The Federal Emergency Management Agency declared parts of Texas a disaster areas Aug. 25, which allowed the Internal Revenue Service to grant employers more time to file information returns, pay taxes, and perform other time-sensitive tasks. Employers with records in the disaster areas were granted extensions and other tax relief.
Employers have until Jan. 31, 2018, to file some business tax returns due from Aug. 23, 2017, to Jan. 31, 2018, including quarterly payroll and excise tax returns normally due Oct. 31, 2017. Penalties on payroll and excise tax deposits due from Aug. 23, 2017, to Sept. 7, 2017, are to be waived as long as the deposits are made by Sept. 7, 2017, the IRS said Aug. 28 ( IR-2017-135 ).
However, the postponement of time to file and pay does not apply to employment and excise tax deposits, the IRS said.
The IRS also plans to allow storm-affected employees to take hardship distributions or borrow funds from retirement plans, and will waive a six-month ban on 401(k) and 403(b) contributions that typically applies after a hardship distribution, the agency said Aug. 30 ( IR-2017-138 ).
Employers may offer disaster-relief payment programs to provide tax-free reimbursement to employees significantly affected by a federally declared disaster, under Internal Revenue Code Section 139 and Revenue Ruling 2003-12. The payments may be used to offset storm-related medical, temporary housing, and transportation expenses that are not covered by insurance plans. The payments also may be used to pay for repairs to homes or the replacement of its contents.
Employer copies of IRS account transcripts or previously filed federal tax returns are available for free. Employers should file Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, and write “Hurricane Harvey” in red at the top of the form.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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