CAR Newsletter - February 2023

Volume 33 | No. 8 | Fiscal year 2023 | Feb. 7, 2023

PAYROLL

• IRS Form W-4 Exemption Renewal
• State Form W-4 Exemption Renewal
• Annual Withholding Tax Exemption Certification for Military Spouse
• Employees Remote or Teleworking - Primary Location Outside of Oklahoma
• Reporting Requirements for Repayments of Prior Year Wage Amounts
• Reduction of Annual Leave Hours for Overpayments
• Outstanding Wages Beneficiary Designation Option
• OMES Form PWC, Payroll Warrant Cancellation
• Compensation to Current and Former Employees, Including Settlements

HIGHER EDUCATION ENTITIES

• PFT Processing for Cancellations and Adjustments

1099 REPORTING

• 1099 Corrections

PROCUREMENT

• 2023 Fiscal Year End Timelines Announced
• Statewide eProcurement Solution Project Update
• PeopleSoft Functionality Change
• Prior Fiscal Year(s)' Funded Requisitions and Purchase Orders

TRAINING

• OKC Chapter - American Payroll Association
• Form I-9 and E-Verify Webinars

Agencies are reminded to review and ensure employees have a valid federal income tax withholding exemption election on file for 2023. The current exemption expires on Feb. 15, 2023, and employees must enter a new tax election to continue exemptions for 2023. If you receive an exempt W-4 after Feb. 15, 2023, do not process a tax refund to the employee or submit one to OMES for processing. The W-4 will take effect on the next pay cycle; it is not retroactive to the beginning of the year.

The Workday@OK report Expiring Exempt Tax Elections can be run to identify employees in the agency who claim exempt. When running the report, use today as the Exempt Election As of Date, enter ‘000 State of Oklahoma’ as the Company and choose ‘Federal’ for the Tax Authority. Please notify your employees to update their tax elections.

Some states require employees to renew their exemption annually. Oklahoma currently does not. For agencies with employees in other states, the Workday@OK report Expiring Exempt Tax Elections can be run to identify employees in the agency who claim exempt in those specific states.

Agency personnel must be familiar with the W-4 requirements for states in which they have employees. When running the report, use today as the Exempt Election As of Date, enter ‘000 State of Oklahoma’ as the Company and choose the applicable state as the Tax Authority. Please notify your employees to update their tax elections.

For employees claiming exemption from Oklahoma’s income tax withholding under the Military Spouses Residency Relief Act, a new valid OTC Form OW-9-MSE (Annual Withholding Tax Exemption Certification for Military Spouses) is required to continue the exemption for 2023. This form must be completed annually. If a new exemption form has not been submitted for 2023, the employee’s withholding status must go back to the last valid Form W-4 on file. When an employee submits the Form OW-9-MSE, they must also submit a completed Form OK-W-4.

If you receive an exempt Form OK-W-4 with Form OW-9-MSE after processing a payroll, do not process a tax refund to the employee or submit one to OMES for processing. The new exemption form will take effect on the next pay cycle; it is not retroactive to the beginning of the year.

As a reminder, a nonresident spouse of a nonresident service member may be exempt from Oklahoma income tax on income from services performed in Oklahoma. OTC Form OW-9-MSE must be completed and returned to the employer with the required documentation, along with Form OK-W-4. The instructions contain a list of requirements the employer must meet before the withholding exemption will be allowed. The forms must be completed each year the exemption is to be claimed. When entered in Workday@OK, the process will prompt the employee to submit the required documentation.

The Workday@OK report Expiring Exempt Tax Elections can be run to identify employees in the agency claiming the military spousal exemption. When running the report, check the ‘Include Military Spouse Exempt Elections’ box.

For agencies with employees in other states, the report can be run to identify employees claiming the military spousal exemption in those specific states by selecting the state and checking the ‘Include Military Spouse Exempt Elections’ box. Agency personnel must be familiar with the military spousal exemption requirements for states in which they have employees.

Agencies continue to increase the number of state employees who work remotely and need to be cognizant of withholding and reporting requirements for these employees. When employees work remotely outside of Oklahoma, the state, as the employer, is required to withhold and submit income taxes to that state and report unemployment and other wages/taxes, as applicable. If an agency has employees working outside of Oklahoma, the work location will need to be updated to the state where the employee is physically working. The employee tax elections will need to be timely updated to reflect the new tax jurisdiction for income tax and unemployment withholding/reporting purposes.

Please help communicate these requirements to agency HR, recruiting and on-boarding personnel as many tasks are performed or initiated by them. Although OMES central payroll processes the actual  payments and reports to the other states, agency personnel must be familiar with the requirements for any state in which employees are hired. Please contact OMES Central Accounting and Reporting at payrollreporting@omes.ok.gov with any questions concerning employees working out of state.

Repayments from employees made in the current year (2023) that are for overpayments of wages in a prior year (2022 or earlier) must be repaid at the gross overpayment amount in accordance with Internal Revenue Service regulations. A W-2C must be completed and sent to OMES. Only Social Security and Medicare wages and taxes are corrected on the W-2C.

DO NOT correct federal or state taxable wages or income taxes. The employee received and had use of the funds during the year of overpayment and as such, the amounts are taxable for federal and state purposes. The employee may be able to consider such repayments on their current year (2023) income tax return. Please advise the employee to speak to a tax accountant.

Additional instructions for Form W-2C are available on the IRS website. For assistance, contact Jean Hayes at 405-522-6300, jean.hayes@omes.ok.gov.

When an employee chooses to reimburse an overpayment of salary or wages using annual leave, the amount of annual leave reduced should equal the gross amount of the overpayment.

If an employee reimburses an overpayment using terminal leave, an OMES Form 94P must be submitted to correct the retirement amounts reported on the check which included the overpayment. Terminal leave is not included in retirement wage calculations; therefore, a payroll correction is required. For assistance, contact Jean Hayes at 405-522-6300, jean.hayes@omes.ok.gov.

40 O.S. § 165.3a allows employers to provide employees the option of designating a beneficiary for wages and benefits payable upon an employee’s death. There is no requirement for an employer to allow employees to select beneficiaries, but agencies may want to consider adopting such a policy. Providing the option to employees relieves stress and anxiety on the family members and provides agencies with clear guidance on who is to receive final wage payments.

This statute does not include any longevity payment that may be due as of the date of death of an employee. 74 O.S. § 840-2.18, subsection H.2, authorizes any longevity payment to be paid to the decedent’s surviving spouse, or if there is no surviving spouse, to the decedent’s estate.

For more information or sample forms and instructions, please email payrollreporting@omes.ok.gov.

The OMES Form PWC should only be used when an employee is not entitled, in part or whole, to the funds. All PWC forms OMES receives will initiate the process to retrieve the funds, if direct deposit, and cancel the warrant in the payroll system. It is imperative that agencies identify payroll errors and process the form immediately upon discovery.

Paper warrant cancellations: Email Form PWC to payrolltransprocess@omes.ok.gov. Scan the original warrant (marked void) and attach to the email. However, OMES will process the cancellation without the scanned copy if the email certifies the agency has the warrant and can provide it when circumstances allow. If physically sending the paper warrant and form, the original warrant must be marked “Void” and attached to the completed Form PWC and sent to OMES Central Accounting and Reporting. These requests cannot be processed by fax.

Direct deposit cancellations: Email Form PWC to payrollreporting@omes.ok.gov. The document must be password-protected and the password should be included in a separate email or sent via another secure method. To ensure direct deposit funds are returned, the PWC request must be received by noon three business days prior to the effective pay date. Any request for cancellation of direct deposits after that cutoff will be subject to recall or reversal procedures that are subject to denial by the employee’s bank. An employee must be notified in writing of a reversing entry and its reason no later than the effective date of the reversing entry. Please notify the employee no later than the day the OMES Form PWC is submitted for processing.

Your agency can modify the statement below and use it to inform your employee(s) of the pending reversal.

“A payroll item will be posted in error to your bank account on MM/DD/YY. A reversal has been issued and will post to your account to pull these funds back to the state. Please keep the full amount of this deposit in your account. If the state cannot retrieve the full amount of the deposit, action will be taken in accordance with applicable procedures to retrieve the funds from you.”

Once the funds have been returned to the state, OMES will process a cancellation in the payroll system, which returns the funds to the agency. If the funds cannot be recovered from the bank, the agency is responsible for recovering the funds from the employee. Please refer to 74 O.S. § 840-2.19 D for proper procedures for recovering overpayments, if needed. The agency should submit OMES Form 94P for processing if the employee reimburses the funds through a miscellaneous payroll deduction or cash.

PWC forms received for direct deposit items that are more than five business days past the effective date will not be processed pursuant to NACHA rules. If agencies encounter erroneous entries more than five business days past the effective date, please contact OMES or OST for consultation on options for recovering the funds.

All compensation to employees and former employees, no matter what form, constitutes wages unless specifically excluded by the Internal Revenue Code. This includes stipends, allowances, employee lawsuits and settlements, gifts, prizes, awards and fringe benefits, to name a few. Before compensation is given to employees or former employees, agencies must determine the correct method of payment (payroll vs. accounts payable) and reporting required (W-2, 1099 or none). In an audit, the IRS will focus on the reason for the payment.

NOTE: The Internal Revenue Service has determined that Oklahoma public school teachers receiving payments from a state agency are to be treated as employees of the state. As such, any payments to teachers need to be evaluated to determine if the payments should be considered wages. If so, the amounts must be paid through the payroll system, not accounts payable, to be reported on Form W-2 by the paying agency.

NOTE: Attorney’s fees paid on a settlement are reportable to the plaintiff if the settlement is a reportable settlement. For attorney fees paid through accounts payable, the amount must be reported to alicia.reel@omes.ok.gov. The attorney will automatically receive a 1099-MISC reporting the amount in Box 10 on a 1099 MISC if the correct account code is used on the voucher payment. The plaintiff reporting requires a manual entry and must be reported to OMES.

If a payment settles a lawsuit, the auditor will focus on the basis of the lawsuit. Agency payroll, finance, human resources and legal departments should obtain the knowledge needed to accurately process compensation to employees or former employees. Agencies are responsible for complying with IRS requirements for withholding and reporting.

If the plaintiff is a current or former employee and the settlement or judgment payment is income that constitutes wages, the payment is reportable as compensation and included on the W-2 and all applicable taxes and deductions must be withheld. For any payment that is income but doesn’t constitute wages, the payment will be subject to reporting on Form 1099-MISC to the plaintiff in Box 3, Other Income.

If an agency has a settlement agreement that requires the payment be processed through accounts payable instead of the payroll system to expedite processing and the payment is reportable as compensation, then applicable federal, state and FICA taxes must be remitted to OMES on the same day the settlement to the individual is processed. If taxes are not withheld on the payment, the agency must gross up the amount and pay both the employee and employer share of taxes. The employee’s record will be updated for year-end reporting. If additional guidance is needed, please email payrollreporting@omes.ok.gov.

As a reminder, when an MWC or EWC is submitted to cancel a payroll warrant, a corresponding PFT Reversal file must be submitted to remove the funds from the 789 class-funding and place the amount back in the originating class-funding. The amount in the PFT reversal file should be the gross-to-net amount and employer share of taxes and benefits that processed on the original warrant.

The PFT Reversal process is also used to process amounts in or out of the 789 fund based on business needs. This includes:

• Processing taxes which were not processed through the normal 500Misc/PFT process but must be submitted through the ACES system.
• Corrections necessary for overpayment refunds. 
• Correction of items improperly reported or omitted from the original PFT submitted.

Additional information on processing PFT Reversal files can be found on the OMES website.

All 1099 corrections for CY 2022 or for previous years need to be submitted to OMES and we will report the corrections to the IRS. This includes payments reported on 1099NEC, 1099MISC, 1099INT, 1099DIV, 1099B and 1099G. If you should have any 1099s that are returned by the vendor requiring changes, please submit those changes to OMES, and include the original 1099 and any documentation to support the change. If you have any questions, please contact Alicia Reel at 405-522-1099 or alicia.reel@omes.ok.gov.

NOTE: This does not apply to Higher Ed Institutions since they do their own 1099 reporting.

All 1099 corrections for CY 2022 or for previous years need to be submitted to OMES and we will report the corrections to the IRS. This includes payments reported on 1099NEC, 1099MISC, 1099INT, 1099DIV, 1099B and 1099G. If you should have any 1099s that are returned by the vendor requiring changes, please submit those changes to OMES, and include the original 1099 and any documentation to support the change. If you have any questions, please contact Alicia Reel at 405-522-1099 or alicia.reel@omes.ok.gov.

NOTE: This does not apply to Higher Ed Institutions since they do their own 1099 reporting.

Additional functionality in PeopleSoft for Strategic Sourcing and Supplier Contracts will be implemented with a roll out in late February 2023. All agencies will be required to use the new functionality, so CPOs keep an eye out for training opportunities which will be announced in the coming weeks.

Base requisition functionality will become view only effective April 1, 2023. Agencies will be able to look up requisition information but will no longer be able to enter a base requisition or make changes to existing base requisitions. All requisitions will be entered through ePro. End user ePro training is available to all agencies, and we encourage you to reach out to procurement.training@omes.ok.gov for more information.  Additionally, please review your internal agency processes to make any necessary process updates.

Central Purchasing requests your cooperation and assistance in reviewing and closing requisitions and purchase orders with prior fiscal year(s) funding. This request also includes prior fiscal year(s) purchase order lines on multi-year purchase orders. Purchase orders dated prior to Dec. 31, 2020, are to be reviewed, closed and dispatched first and should be closed by May 1, 2023. It is important to make sure you dispatch after you close the purchase order or purchase order line. PO Close Steps PO close steps were included with the CPO Announcement sent to all CPOs Jan. 24, 2023.

Topic: Payroll and Accounting
Date: Feb. 17, 2023
Time: Noon to 1 p.m. via Zoom

Visit their website for more information.

Multiple webinar choices and dates:

Form I-9: An overview of the Form I-9 requirements, including step-by-step instructions on how to complete each section, acceptable documents, retention and storage.

E-Verify overview: An overview of the E-Verify program including how the program works, key features, how to enroll, employer responsibilities, program highlights and a demonstration of the program.

E-Verify in 30: A quick overview of the E-Verify program including what it is, how to enroll and key features.

E-Verify for existing users: A detailed overview of the E-Verify program specifically for existing users. Topics include Form I-9, user roles, creating a case, case alerts, how to handle a TNC and common user mistakes.

For more information on the webinars, please visit the USCIS website.