Overtime pay issues under scrutiny in Washington
Q: A co-worker told me that the White House wants to pass a bill outlawing overtime for workers making more than $21,000 per year. Is this true?
K.W., via e-mail
A: This currently is a hot topic in Washington, where the US Department of Labor proposes to update longstanding work-classification rules that let employers exempt certain workers from overtime pay.
Overtime would still be mandatory for people earning $22,100 or less (not the $21,000 you mention). But Deborah Greenfield, of the AFL-CIO, says that if you earn between $22,100 and $65,000, you may be denied overtime if your job duties meet the revised tests, which her labor group says are easier to meet than the current tests. Ms. Greenfield says there also is a "highly compensated" provision in the proposal: If you earn $65,000 or above, regardless of your job duties, you won't be eligible for overtime.
Estimates over how many people this change could affect vary widely: 644,000 according to the White House; 8 million, according to the Economic Policy Institute. The matter is still before Congress with the Senate voting earlier this month to bar the Labor Department from implementing the changes.
Q: I have a small business that is incorporated. It is not a public corporation. Does the new 15 percent dividend-tax rate apply to a small closely held corporation, or is it only for public-corporation dividends?
T.O., via e-mail
A: The Internal Revenue Service will let you grab the 15 percent rate as long as it is a "qualified dividend" that does not come from "qualified small-business stock."
What's a dividend? The IRS describes it as a corporate distribution with respect to its stock to the extent it is paid out of accumulated earning and profits. What's a qualified dividend? One paid during the tax year by a domestic corporation or certain select foreign corporations.
Of course, there are always exceptions to IRS rules. One of them involves "preferred dividends" paid on preferred stock, which may be ineligible for the reduced-dividend rate. The IRS just revised its instructions manual on dividends, and it could help. Look for 1099-DIV, which you can download from www.irs.gov.