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1 week ago · by · 0 comments

IRS Proposes to Expand the Electronic Filing Requirement

On May 31, 2018, the Internal Revenue Service (IRS) published a proposed rule that would expand the electronic filing requirement for a number of tax forms. Current IRS rules impose a 250-return threshold for mandatory electronic filing, which applies separately to each type of information return. However, the proposed rule would require:

  • All information returns, regardless of type, to be taken into account to determine whether a reporting entity meets the 250-return threshold; and
  • Any reporting entity subject to the electronic reporting requirement to file corrected information returns electronically, regardless of the number of corrected information returns being filed.

This proposed rule would impose mandatory electronic filing for significantly more reporting entities. According to the IRS, most forms are currently filed electronically. However, employers that don’t currently file electronically with the IRS should evaluate the number of information returns that they file to determine how this new standard could affect them.

Overview of Mandatory Electronic Filing

Existing IRS rules require reporting entities that file 250 or more information returns to file electronically. However, this 250-return threshold applies separately to each type of return. This means that each type of return is counted separately and not aggregated when determining whether the 250-return threshold applies.
These rules generally cover the following tax forms (among others):

  • Form W-2 (Wage and Tax Statement);
  • Forms in the 1094 series (including Forms 1094-B and 1094-C, the required transmittal forms under Section 6055 and Section 6056);
  • Forms 1095-B and 1095-C (the required individual or employee statements under Section 6055 and Section 6056); and
  • Forms in the 1099 series.

When the electronic filing rules were originally established, electronic filing was in the early stages of development and was not as commonly used as it is today. However, according to the IRS, significant advances in technology have made electronic filing more prevalent and accessible, in many cases making it less costly and easier for reporting entities than paper filing. The IRS asserted that most information returns are already filed electronically (approximately 98.5 percent in the 2016 tax year). As a result, the IRS no longer believes that determining the 250-return threshold on a form-by-form basis without aggregation is necessary to relieve taxpayer burden and cost.

Proposed Expansion of the Electronic Filing Requirement

Due to these advances in technology, the proposed rule would require reporting entities to count all information returns, regardless of type, to determine whether they meet the 250-return threshold and, therefore, must file the information returns electronically. Specifically, under the proposed rule, a reporting entity that is required to file a total for 250 or more information returns of any type covered by this rule during a calendar year will be required to file those information returns electronically.

Example: Company W is required to file 200 Forms 1099–INT (Interest Income) and 200 Forms 1099–DIV (Dividends and Distributions), for a total of 400 returns. Because Company W is required to file 250 or more returns covered by this rule for the calendar year, Company W must file all Forms 1099–INT and Forms 1099–DIV electronically.

Corrected information returns are not taken into account in determining whether the 250-return threshold is met under the proposed rule. However, the proposed rule would also require corrected information returns to be filed electronically if the original information returns were required to be filed electronically.
According to the IRS, this rule change would help facilitate efficient and effective tax administration.

However, the rule change would require significantly more reporting entities to file information returns electronically with the IRS. Often, this involves working with a third-party service provider that offers information return preparation and electronic filing.

Notably, though, the proposed rule does not change the existing regulations allowing reporting entities that are required to file returns electronically to request a waiver of the electronic filing requirement. As a result, electronic reporting waivers will still be available for reporting entities that properly request them. Electronic reporting waivers are intended to relieve the burden on reporting entities that lack the necessary data-processing capabilities or access to return preparers and third-party service providers at a reasonable cost.

Effective Date

The proposed rule is proposed to be effective once final regulations are issued and become applicable. However, to give reporting entities sufficient time to comply with the new rule, the proposed rule will not apply to information returns required to be filed before Jan. 1, 2019. Therefore, the proposed rule, if finalized, would generally be effective for:

  • Information returns required to be filed after Dec. 31, 2018; and
  • Corrected information returns filed after Dec. 31, 2018.

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2 weeks ago · by · 0 comments

Self-driving Tech Could Put Motor Carriers Back in the Driver’s Seat

Self-driving vehicles may feel like something that will only be available in the distant future, but autonomous technology is already having an impact on the transportation industry. Many motor carriers are promoting new equipment to attract tech-savvy drivers, and advanced safety sensors are helping decrease accidents on the road.

Over 30 automakers and technology companies are working to make trucks fully autonomous, and many states have already passed self-driving legislation that allows for testing on public roads. But, even though this technology offers motor carriers a way to increase efficiency and improve safety, there are a number of topics your business needs to consider before adopting self-driving trucks.

The Different Levels of Automation

Most of the technology used in autonomous vehicles is an evolution of common safety features that use vehicle-mounted cameras and sensors, such as automatic brakes, lane departure systems and blind spot alerts. However, self-driving technology takes this concept a step further by having these systems work together to perform some or all driving functions.

Because there are multiple self-driving systems in development that offer different levels of autonomy, most companies use a system developed by SAE International to classify levels of autonomous vehicles. Levels 0-2 mainly define limited control systems that are commonly available in consumer and commercial vehicles:

  • Level 0: No automation – The driver performs all driving tasks, but automated system issue warnings may be present.
  • Level 1: Driver assistance – The vehicle and driver may share control in limited circumstances, such as adaptive cruise control and parking assistance. However, the driver must be ready to retake control at all times.
  • Level 2: Partial automation – The vehicle has combined automatic functions (such as controlling acceleration and steering simultaneously), but the driver must be constantly engaged and aware of the surrounding environment.

Levels 3-5 define vehicles that are commonly referred to as autonomous or self-driving:

  • Level 3: Conditional automation – A driver must still be present, but doesn’t have to monitor the environment. However, they must be ready to take control at all times and with no notice.
  • Level 4: High automation – The vehicle can perform all driving functions under certain conditions, and switching control back to the driver may be optional.
  • Level 5: Full automation – The vehicle can perform all driving functions at all times.

How Can Self-driving Trucks Help Carriers?

Self-driving trucks could help motor carriers address a number of common issues:

  • Safety – Properly functioning self-driving systems operate without the chance of human error and can react to changing traffic patterns faster than a regular driver.
  • Driver shortage – Regulations likely won’t allow vehicles to operate without a driver in the near future. However, the technology will attract applicants who don’t want to spend long stretches of time in full control of a commercial truck.
  • Increased efficiency – Autonomous technology can give carriers real-time information on location, maintenance status and traffic patterns in order to increase efficiency and better manage fleets.
  • Cost reductions – Motor carriers can reduce costs by sending autonomous trucks on more fuel-efficient routes or by platooning the vehicles together to reduce air drag.

What Risks Does This Technology Present?

Although autonomous technology is advancing rapidly, there are still a number of risks and obstacles to overcome before the vehicles can be widely adopted:

  • Public perception – Advanced sensors generally make self-driving trucks safe, but recent high-profile collisions and fatalities during tests have lowered the public’s opinion of the technology.
  • Long-term employment – Autonomous technology will help to attract new drivers in the near future, but some experts believe that fully independent vehicles may someday eliminate millions of jobs.
  • Liability – The liability of an accident involving human-driven vehicles is fairly easy to judge. However, self-driving trucks bring a nonhuman factor into the equation that makes it difficult to determine if an operator, technology developer, manufacturer or other party is at fault for an accident.
  • Compliance – Individual states, cities and jurisdictions currently manage laws regarding the testing and use of self-driving trucks, making interstate commerce more complicated. However, the FMCSA recently requested feedback on the regulations that would have to be updated, modified or eliminated to safely allow for the use of autonomous vehicles. Key questions discussed by the agency include the following:
    • How will motor carriers ensure automatic systems are functioning properly?
    • What changes, if any, should be made to distracted driving regulations?
    • How will enforcement officials determine a vehicle’s SAE classification level, and would easily identifiable classification signage negatively affect other drivers?
    • How should a driver’s hours of service be recorded when using an automated driving system?

Considering Your Options

As self-driving vehicles continue to develop, your business should carefully consider how both the advantages and risks of this new technology will impact its operations. Contact us at 831-661-5697 today for help analyzing your unique risk exposures.

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2 weeks ago · by · 0 comments

Supreme Court Ruling Allows Employers to Require Arbitration and Bar Class-action Lawsuits

On May 21, 2018, the U.S. Supreme Court ruled that employers can use arbitration clauses in employment contracts to bar employees from filing class-action lawsuits related to wage and overtime claims. In a 5-4 split decision, the court determined that employment agreements can require arbitration, waiving the employee’s right to participate in a class-action lawsuit, to settle these disputes.

This ruling is a departure from the position taken by the Obama administration and the National Labor Relations Board (NLRB). Instead, the decision favors employers and follows President Donald Trump’s position on federal employment law that employers are entitled to waive their employees’ right to file class-action lawsuits under the Federal Arbitration Act (FAA).

As a result of this ruling, employers are now free to include clauses in employment contracts requiring the use of arbitration to resolve wage and overtime claims, and barring class-action lawsuits related to these matters. The ruling can protect employers from costly litigation, but critics argue that it could allow employers to escape liability for labor law violations.

Arbitration is a private method of dispute resolution that is used as an alternative to court action, where an impartial third party makes a binding decision on the matter, rather than a judge or a jury. Historically, arbitration has been used in a wide variety of disputes as a cost-saving measure to avoid the burden and expense of litigation.

Mandatory arbitration clauses have become increasingly common in many types of contracts and agreements, especially among large corporations and in consumer transactions. However, courts have had to impose certain limits on the use of these types of clauses, particularly in situations where one party has more bargaining power than the other.

Federal labor law is conflicting on the issue of mandatory arbitration in employment agreements. The National Labor Relations Act (NLRA) guarantees employees’ right to collective action, while the FAA encourages the use of arbitration agreements and generally requires courts to enforce these provisions as written.

The court ruled that arbitration clauses in employment contracts that waive the employees’ right to participate in class actions are lawful and enforceable.

Historically, courts and the NLRB agreed that arbitration agreements are enforceable. In 2012, however, the NLRB took the position that arbitration clauses in employment agreements that include class-action waivers violate the NLRA. As a result, the NLRB pursued and invalidated arbitration agreements and policies used by many employers. The Obama administration sided with the NLRB, arguing that the NLRA essentially invalidates the FAA in the context of labor disputes.

The Supreme Court’s Ruling

The case before the Supreme Court—Epic Systems Corp. v. Lewis—combined three separate lawsuits involving employees who entered into employment agreements requiring arbitration, but still sought to participate in class-action lawsuits over state and federal employment law claims. The lower federal courts were split in their rulings, and the Supreme Court was asked to resolve this conflict.

Although the FAA generally requires courts to enforce arbitration agreements as written, the employees argued that this obligation is eliminated if an arbitration agreement violates some other federal law, and that their employment agreements violated the NLRA by requiring individualized proceedings. Their employers, however, argued that the FAA protects agreements requiring arbitration from judicial interference, and that the NLRA does not change this requirement.

The majority on the Supreme Court sided with the employers, following their long practice of limiting class actions and favoring arbitration over litigation. The court ruled that arbitration clauses in employment agreements that waive the employees’ right to participate in class actions are lawful and enforceable.

Impact on Employers

The Supreme Court’s ruling only impacts non-unionized employees, and does not affect employees represented by labor unions. As a result of the ruling, employers are now free to include clauses in employment contracts requiring the use of arbitration to resolve wage and overtime claims, and barring class-action lawsuits related to these matters.

Following the Supreme Court’s ruling, the NLRB indicated that it intended to follow the decision. According to the NLRB, it currently has 55 pending cases with allegations that employers violated the NLRA by maintaining or enforcing individual arbitration agreements or policies containing class- and collective-action waivers. The NLRB now intends to quickly resolve those cases in accordance with the Supreme Court’s decision.

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