Strict Compliance with California's Pay Stub Law Is Essential

In the recent decision of Cicairos v. Summit Logistics, Inc., the California Court of Appeal discussed a lawsuit brought by five truck drivers for various Labor Code violations, including an alleged failure by the employer to provide valid pay stubs each pay period. Although the decision did not necessarily set forth any new legal rules, it certainly highlights the employer's obligation to carefully follow California's pay stub law.

All employers must provide pay stubs that include the following nine pieces of information:

1. Gross wages earned
2. Total hours worked by the employee
3. The number of piece-rate units earned by the employee (where the employee is paid on a piece-rate basis)
4. All deductions
5. Net wages earned
6. The inclusive dates of the pay period in question
7. The name of the employee and his or her social security number, except that by January 1, 2008, only the last four digits of the social security number may be shown
8. The name and address of the employer
9. All applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each rate by the employee

Moreover, according to the Cicairos court, the rules must be followed exactly. For example, each of the Cicairos plaintiffs received pay stubs that identified the employer as "Summit." However, because the full name of the employer was "Summit Logistics, Inc.," the court found that there was a violation.

Given that Labor Code violations can lead to penalties of several thousand dollars per employee, it is important to make certain that all pay stubs are properly drafted and in full compliance with the law.

Increased Mileage Rates
The Internal Revenue Service has modified the optional standard mileage rates for computing the deductible costs of operating an automobile for business, medical, or moving expense purposes and for determining the reimbursed amount of these expenses that is deemed substantiated.  The revised standard mileage rates are:

Business 58.5 cents per mile (50.5 cents January 1-June 30, 2008)
Medical and moving 27 cents per mile (19 cents January 1-June 30, 2008)

The mileage rate that applies to the deduction for charitable contributions remains at 14 cents per mile.

The revised standard mileage rates apply to deductible transportation expenses paid or incurred for business, medical or moving expense purposes on or after July 1, 2008.

Consent to Disclose Tax Return Information
Due to new regulations, we are required to obtain a written consent from our clients before disclosing tax return information to third parties. A separate written consent must be obtained for each separate use or disclosure.  We can, however, send information directly to our client, without a written consent form.

The written consent must contain the following:

• The name of the tax return preparer
• The name of the taxpayer
• The purpose for which the consent is being furnished
• The date on which such consent is signed
• A statement that the tax return information may not be disclosed or used by the tax return preparer for any purpose other than that stated in the consent
• A statement by the taxpayer that he consents to the disclosure or use of such information for the purpose described

IRA Contributions
Regardless of the type of IRA you choose, the Federal government imposes annual contribution limits. The chart below shows the maximum dollar amount individuals are allowed to deposit into their IRA each year. After 2008, the contribution limit will raise in increments of $500 depending upon the level of inflation.

Deposits into your IRA do not have to be made at the same time. (For example: In the year 2008, a 35 year old woman could deposit $416.67 into her IRA each month. At the end of the year, it would add up to the maximum $5,000.)

Due to the tax advantages of investing through an IRA, it is normally best to try and make the maximum annual contribution. The use-it-or-lose-it nature of contributions makes this all the more important (e.g., If you deposit $3,000 in 2008, you can't deposit $7,000 in 2009 [the $5,000 + the $2,000 you didn't deposit the year before]. You cannot contribute more than the total allowable amount during any fiscal year.)

A Little-Known Social Security Provision
This provision effectively allows you to "purchase" a life annuity from the Social Security administration at a substantial discount to what a commercial insurer would charge for the same monthly benefit. Delaying taking Social Security benefits until age 70 gives a retiree a monthly check as much as 77% larger than a retiree who started taking benefits at age 62. But you don't have to delay taking benefits until age 70 to take advantage of this. The Social Security Administration allows you to "withdraw your application" for benefits, reapply at a later date, and get the same larger monthly check as someone who delayed taking Social Security until that age. Of course, you'll have to pay back all the Social Security benefits you've received to date, but you won't have to pay back interest on the money and you'll be eligible for either a tax deduction or tax credit on the income taxes you paid on the Social Security benefits collected to date. If you save and invest the Social Security benefits you collect from age 62 to age 69 and then reapply at age 70 for the larger monthly benefit, you'll likely have tens of thousands of dollars in after-tax earnings beyond the amount that you repay to the Social Security Administration.

The number of retirees who file a withdrawal of application in their late 60's is limited to those with sufficient cash on hand to pay back the Social Security benefits earned to date  that could be well over $100,000 for a retiree who started benefits at age 62 and collected anywhere near the maximum Social Security benefit.

You can download a copy of Form SSA-521 “Request for Withdrawal of Application” from the SSA website. When completing the form, make sure you give a reason for withdrawing your application such as "it makes financial sense for me to increase my monthly Social Security benefit by withdrawing my application and refiling at age 70 rather than buying a life annuity from an insurance company." Then take the form to your local Social Security office. They can confirm the exact amount of the Social Security benefits you've received to date and you can write a check for that amount and attach it to the application. You should be given a receipt for the reimbursement.

There is an approval process for a Withdrawal of Application, but it's mostly geared towards preventing a Social Security recipient who is suffering from dementia or confusion from doing something that's not in their financial interest. Other than that, these requests are routinely approved. The Social Security Policy Manual details the request and approval process for a Withdrawal of Application.

Note, if you're like most Social Security recipients and have your Medicare premium deducted from your monthly benefit check, you'll need to make other arrangements to pay the premium for the several month period between filing the Withdrawal of Application and restarting your Social Security benefits.

Before undertaking this option you should thoroughly review the Social Security manual and discuss the ramifications with someone at the Social Security Administration.