38 OCTOBER 2024 WorldWide Drilling Resource® Drilling Into Money Not Boring by Mark E. Battersby Payroll 2024 Style Payroll, typically the biggest expense of every business, has come a long way since it became part of the tax law in 1913. In general, an employer is responsible for its share of certain federal payroll taxes, including employer contributions under the Federal Insurance Contributions Act (FICA). In addition to federal payroll taxes, most businesses within the drilling industry are responsible for state payroll taxes. The most common state payroll tax is for state unemployment insurance (SUTA), of which employers cover a full 100%. Unemployment insurance is calculated on a tax base which varies state-by-state. Many in the drilling industry prefer to treat workers as independent contractors, reaping payroll tax savings, and no fringe benefits or other expenses associated with employees. In addition to the increasingly risky use of independent contractors, there is tax credit - a direct reduction of the operation’s tax bill rather than the income on which it is based - known as the Work Opportunity Tax Credit or WOTC. The WOTC is designed to encourage employers to hire workers from certain targeted groups which historically have found it challenging to find employment. The amount of the tax credit ranges from $2400 up to $9600 per employee. Generally, the credit equals 40% of the qualified first-year wages for individuals who work at least 400 hours the first year, limited only by the amount of the drilling operation’s income tax liability or Social Security tax owed. Reimbursing employees for mileage, tools, or other job-related expenses typically incurs payroll taxes. However, by establishing an accountable plan, a drilling operation can avoid paying payroll taxes on these payments, thereby excluding them from employees’ taxable income. Naturally, the plan should require employees to provide proper documentation confirming each expense is work-related. A drilling professional should consider having the business offer tax-exempt fringe benefits instead of the more traditional monetary raises. The cost of tax-exempt fringe benefits such as health benefits, education assistance, dependent care assistance, group term life insurance, and retirement planning services can be deducted similarly to wages and bonuses without a payroll tax obligation. What’s more, employees will not owe income or payroll taxes on the benefits. Obviously, understanding the basic rules for withholding payroll taxes and paying over withheld amounts on the wages of all employees is a good start. Guidance and advice from a competent, qualified advisor is virtually a necessity. Mark Mark E. Battersby may be contacted via e-mail to michele@worldwidedrillingresource.com Time for a Little Fun! September Puzzle Solution: EXPERIENCE PRODUCTION SUCCESSFUL COMMERCIAL STRATEGIES Win a prize! Send completed puzzle to: WWDR PO Box 660 Bonifay, FL 32425 fax: 850-547-0329 or e-mail: michele@ worldwidedrillingresource.com Place the same letter on each line going across to make a new word. HER_ SIT_ BAR_ _ARK _EAT _EAST _OAF _ATE _EAST _ELM _AIR _ALTER _PAL _INK _RANGE Congratulations to: John Crowell, Crowell Drilling Co., Inc. in Louise, TX Winner for September!
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