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Follow the rules when hiring guest workers

If you travel around the Black Hills during the summer, you’re likely to hear a lot of different languages spoken in the hallways, kitchens and dining rooms at the area’s hotels, restaurants and attractions. Workers come to the Black Hills from the Philippines, Central America, Africa, Europe and elsewhere.

A number of area businesses hire summer seasonal help through federal guest worker programs such as the H-2B and the J1 Visa. Under the programs, the workers are allowed a limited tenure in the United States. For employers strapped to fill their ranks with qualified staff, the programs are a blessing. The foreign workers are hard-working and willing to do the unglamorous jobs like making beds and washing dishes; traits sometimes lacking among home-grown prospects.

However, some Black Hills employers have gotten into trouble over the programs. There are very specific rules about pay, tax withholding and other payroll issues. Ketel-Thorstenson helps its clients navigate these issues, said Jani Zweber, Accounting Services Manager at KT.

Some employers provide housing to their foreign workers, deducting the rent from the workers’ paychecks. “You have to be careful that the rent deduction doesn’t take them below minimum wage,” she said. Also, foreign workers hare subject to the same overtime rules that govern all workers in the United States. Some local employers have gotten into trouble over that, she said.

When KT provides payroll services for clients that hire guest workers, the accounting firm makes sure that employers understand that there are differences between J1 Visa workers and H2B workers, she added. The J1 workers are subject to federal income tax withholding only. H2B workers are subject to federal income tax, social security and Medicare withholding. They are also subject to state and federal unemployment insurance taxes. If you do it wrong, you will need to file corrected payroll reports and either pay the taxes that should have been withheld or refund taxes that should not have been withheld.

One final note, Zweber added. Next year when you send out W-2 forms, you will be paying extra postage for W-2s mailed overseas.

Ketel Thorstenson, LLP

Ketel Thorstenson, LLP

Ketel Thorstenson, LLP, has over 60 CPA’s on staff and has been serving clients across the region since 1936. With offices in Rapid City, Spearfish, and Custer SD, the firm offers a variety of services including tax planning and return preparation, audit services, QuickBooks, bookkeeping, payroll, business valuation and estate planning.
Ketel Thorstenson, LLP

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