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There is a provision in the President’s fiscal year 2011 budget (Oct. 1, 2010 to Sept. 30, 2011) that would require quarterly W-2 reporting, rather than annual. The budget document says that increasing the timeliness of wage reporting would enhance tax administration, improve program integrity for a range of programs, and facilitate implementation of automatic workplace pensions. For details see this sub-section of the President’s fiscal 2011 budget. Found this handy calculator if you’re wondering if your business qualifies for the new small business tax credit on health insurance. Courtesy of National Federation of Independent Businesses. You save 10% – We contribute 10% to charity! For all of 2010!And not only are you supporting local charities, you are supporting your local payroll company and its employees – and keeping profits in your community to help your own business!We’ve been paying employees in northern Illinois since 2002. We want to pay back our community for their support. Join us now in supporting your favorite local charity through this program and save over 10% for your own business!
Valid only for new clients of Complete Payroll. Must sign up for service before June 30, 2010 and process your first payroll by July 15, 2010 Don’t have a “favorite” charity or don’t know who to support? Let us recommend one for you. Complete Payroll, Inc. suggests one of the following: Crystal Lake Food Pantry – “No one should go hungry” Turning Point of McHenry County – To confront violence against women & children in McHenry County, IL Call us today to get started! 815-788-2932. Or email us for more information. To get a quote, fill in our online quote form.WASHINGTON — The Internal Revenue Service today released a new form that will help employers claim the special payroll tax exemption that applies to many newly-hired workers during 2010, created by the Hiring Incentives to Restore Employment (HIRE) Act signed by President Obama on March 18. New Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, is now posted on IRS.gov, along with answers to frequently-asked questions about the payroll tax exemption and the related new hire retention credit. The new law requires that employers get a statement from each eligible new hire, certifying under penalties of perjury, that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for anyone during the 60-day period. Employers can use Form W-11 to meet this requirement. A key tax change affecting business was made in the recently enacted Hiring Incentives to Restore Employment (HIRE) Act. To help stimulate the hiring of workers by the private sector, the new law exempts any private-sector employer that hires a worker who had been unemployed for at least 60 days from having to pay the employer’s 6.2% share of the Social Security payroll tax on that employee for the remainder of 2010. A company could save a maximum of $6,621 if it hired an unemployed worker and paid that worker at least $106,800—the maximum amount of wages subject to Social Security taxes—by the end of the year. As an additional incentive, for any qualifying worker hired under this initiative that the employer keeps on payroll for a continuous 52 weeks, the employer is eligible for an additional non-refundable tax credit of up to $1,000 after the 52-week threshold is reached, to be taken on their 2011 tax return. In order to be eligible, the employee’s pay in the second 26-week period must be at least 80% of the pay in the first 26-week period. Workers hired after the date of introduction of the legislation (Feb. 3, 2010) are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after March 18 receive the exemption for payroll taxes. Some additional features of the new hiring incentive include:
Employers will have to get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work, or alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. IRS says it is currently developing a form employees can use to make the required statement, and will within the next few weeks be issuing revised employment tax forms for the second quarter of 2010, as well as more detailed guidance on the new provisions. On December 19, 2009, the 65% COBRA premium subsidy that was due to The law previously applied to workers who were terminated between Sept. 1, 2008 and Dec. 31, 2009 and were eligible for COBRA continuation coverage and elected COBRA coverage. Normally, the workers would have been responsible for 100% of the cost of the insurance premiums. A COBRA premium subsidy of 65% of the cost of the COBRA coverage has been provided to the employee which reduces the cost of the insurance to 35% of the normal cost. Under the new, law employees terminated in Jan. or Feb. 2010 can now also qualify for the COBRA premium subsidy. Another very important change was the length of time the employee is eligible for the subsidy. Previously the premium subsidy would have expired nine months after the subsidy began. This was extended to a total of 15 months by the recent legislation. The law and the recent changes are important for employers to be aware of. Not only are there certain notification requirements that must be given to the employee, but the way the 65% subsidy is paid by the government can be complex. Essentially, the employer continues to pay 100% of the insurance premium. The employee reimburses the employer 35% of the cost, and the remaining 65% is recouped by the employer in the form of payroll tax credits on the employer’s Form 941 and related payroll tax deposits. Steve Trojan, CPA is owner of Complete Payroll, Inc., a Crystal Lake IL based payroll processing firm, and SMT & Associates, Inc., (www.smt-associates.com) a tax and accounting firm specializing in small business. Complete Payroll, Inc. announces a year-end special for new clients. The program called Payback 2010 is designed to offer savings to new clients, and offer a contribution by Complete Payroll to local charities. For new clients signing up for payroll service before December 31, 2009, Complete Payroll is offering a 20% discount. In addition, we will make a monthly donation of 10% of payroll fees to a local charity of your choice. For more information, visit our website. As year-end approaches, taxpayers generally are faced with a number of choices that can save taxes this year, next year or both years. Employees too are faced with these choices. However, employees have some special considerations to take into account that retirees and other nonworking individuals don’t face. To help our clients who are employees take advantage of these special tax saving opportunities, we have put together a list of items to consider. Please review the list and contact us if you need additional information on one or more of the items. Health flexible spending accounts. Many employees take advantage of the annual opportunity to save taxes by placing funds in their employer’s health flexible spending account (health FSA). You save taxes because you use pre-tax dollars to pay for medical expenses that might not be deductible. They would not be deductible if you don’t itemize. Even if you do itemize, some medical expenses would not be deductible because of the 7.5% adjusted gross income floor beneath medical expense deductions. Also, a health FSA can be used to get tax-free reimbursement for over-the-counter medications and other items even though they would not be deductible as medical expenses if you paid for them outside of a health FSA. If you have set aside funds in your employer’s health FSA, check your balance so that you have sufficient time to incur additional reimbursable expenditures to prevent loss of any unused amount under the use-it-lose-it feature of these plans. Don’t forget you can get tax-free reimbursements for aspirin, antacids and other over-the-counter items. Your plan should have a listing of qualifying items and any documentation from a medical provider that may be needed to get a reimbursement for any such items. To avoid the lose-it-use it rule, you must incur qualifying expenditures by the last day of the plan year (Dec. 31, 2009 in the case of a calendar year plan) unless the plan allows an optional grace period. Any grace period cannot extend beyond the 15th day of the third month following the close of the plan year (e.g., March 15 for a calendar year plan). An exception to the use-it-or lose-it rule allows FSAs to make distributions of all or part of unused health FSA benefits to military reservists who are called to active duty for a period exceeding 179 days (or an indefinite period ). Examining your year-to-date expenditures now will also help you to determine how much to set aside for next year. Don’t forget to reflect any changed circumstances in making your calculation. Dependent care FSAs. Some employers also allow employees to set aside funds in dependent care FSAs. They allow employees to use pre-tax dollars to pay for dependent care. In particular cases, participating in a dependent care FSA can yield greater tax savings than foregoing participation and claiming a dependent care credit. Taxpayers who are eligible to participate in a dependent care FSA and are (a) in a high tax bracket and/or (b) have only one dependent and more than $3,000 of employment-related expenses, should use the FSA to pay for child care expenses. For these taxpayers, the FSA almost always provides greater federal tax savings than does the credit. Additionally, participating in a dependent care FSA can also save on FICA taxes. However, like health FSAs, dependent care FSAs are subject to the use-it-or lose it rule. Thus, now is a good time to review expenditures to date and to project amounts to be set aside for next year. Adoption assistance FSAs. Under an adoption assistance FSA, adoption reimbursement accounts are established for participating employees. Typically, these accounts are funded with employee pre-tax contributions uniformly withheld from each paycheck throughout the year. The balances in these accounts are used to reimburse qualified adoption expenses incurred during the year, subject to a reimbursement maximum. Like their health and dependent care FSA siblings, these accounts are subject to the use-it-or-lose-it rule. However, predicting the amount and timing of adoption expenses may be far more difficult than projecting medical and dependent care assistance expenses. As a result, the use-it-or-lose-it rule could pose a greater risk of loss with this type of FSA. This should be borne in mind in choosing the extent to which to participate in an adoption FSA. Adjustments to state withholding. If you expect to owe state and local income taxes when you file your return next year, ask your employer to increase withholding of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2009. Adjustments to federal withholding. If you face a penalty for underpayment of federal estimated tax, you may be able to eliminate or reduce it by increasing your withholding. In this connection, it should be stressed that the Making Work Pay Credit, which was enacted earlier this year, automatically lowered tax withholding rates for employees. However, you should especially review your withholding to ensure that enough tax is withheld if you hold multiple jobs, you and your spouse both work, or you can be claimed as dependent by another person. 401(k) contributions. Review and make appropriate adjustments to your contributions to you employer’s 401(k) retirement plan for the remainder of this year. Figure your contribution rate for next year as well. One of the steps we recommend to clients who use independent contractors, and who therefore face a heightened risk of a costly IRS payroll tax or benefits audit, is a quick review of some of the key things the IRS tells its agents to look at in determining whether a worker is really an employee. Caution: In an effort to close the tax gap, which is the difference between the amount of money that should be reported and collected and the amount of money that the IRS is actually receiving, the IRS is targeting worker classification practices. IRS officials had indicated that worker classification cases will be a major area of emphasis in 2008, and auditors are expected to take a tougher stance if a business has too much control over workers to justify independent contractor status. The IRS will use leads from workers who, beginning with the filing of their 2007 individual returns, can attach a special form (Form 8919 - Uncollected Social Security and Medicare Tax on Wages) to their Form 1040 if the workers think they have been misclassified. The IRS will also use information from data-sharing agreements that it has entered into with 29 state workforce agencies to share the results of employment tax examinations in an effort to deter misclassification of workers. The primary inquiries fall into three categories. Who has financial control of the job? Who can exercise control over how the worker performs the specific task? And how do the parties themselves view the relationship? When reviewing the checklist, keep in mind that the IRS will make its decision based on the whole picture, not just a single factor. Workers are more likely to be classified as independent contractors if they:
Workers are more likely to be classified as employees if they:
Less important is:
If you suspect you may have an issue, we would be happy to help you evaluate your hiring practices and suggest effective solutions, if necessary. Employers may qualify for a tax credit known as the work opportunity tax credit that is worth as much as $2,400 for each eligible employee ($4,800 for certain veterans and $9,000 for employees who are “long-term family assistance recipients”). The credit is generally limited to eligible employees who begin work for the employer before Sept. 1, 2011. The credit is available on an elective basis for employers hiring individuals from one or more of ten targeted groups. The amount of the credit available to an employer is determined by the amount of qualified wages paid by the employer. Generally, qualified wages consist of wages attributable to service rendered by a member of a targeted group during the one-year period beginning with the day the individual begins work for the employer (two years in the case of an individual in the long-term family assistance recipient category). An employer is eligible for the credit only for qualified wages paid to members of a targeted group. These groups are: (1) qualified members of families receiving assistance under the Temporary Assistance for Needy Families (TANF) program, (2) qualified veterans, (3) qualified ex-felons, (4) designated community residents, (5) vocational rehabilitation referrals, (6) qualified summer youth employees, (7) qualified members of families receiving Food Stamp assistance, (8) qualified Supplemental Security Income recipients, (9) long-term family assistance recipients, and (10) certain unemployed veterans or disconnected youth who begin work for the employer during 2009 or 2010. For each employee, there is also a minimum requirement that the employee has completed at least 120 hours of service for the employer. Also, the credit isn’t available for certain employees who are related to the employer or work more than 50% of the time outside of a trade or business of the employer (e.g., working as a maid in the employer’s home). Additionally, the credit generally isn’t available for employees who have previously worked for the employer. For employees other than summer youth employees, the credit amount is determined under the following rules. The employer can take into account up to $6,000 ($10,000 for each employee who is a “long-term family assistance recipient”; $12,000 for certain veterans) of first year wages per employee. If the employee has completed at least 120 hours but less than 400 hours of service for the employer, the wages taken into account are multiplied by 25%. If the employee has completed 400 or more hours, all of the wages taken into account are multiplied by 40%. Thus, under the above rules, the maximum credit available is $2,400 ($6,000 × 40%) per employee ($4,800 for certain veterans; $4,000 for a “long-term family assistance recipient,” for whom a 50% credit for up to $10,000 of second-year wages is also available). The “first year” referred to above is the year-long period which begins with the employee’s first day of work. For summer youth employees, the rules in the preceding paragraph apply, except that the employer can only take into account up to $3,000 of wages, and the wages must be paid for services performed during any 90-day period between May 1 and Sept. 15. Thus, for summer youth employees, the maximum credit available is $1,200 ($3,000 × 40%) per employee. You should be aware that (1) no deduction is allowed for the portion of wages equal to the amount of the work opportunity credit determined for the tax year, (2) wages taken into account for the work opportunity credit can’t be taken into account for (and reduce the limit on the amount of wages that can be taken into account for) the empowerment zone employment credit or the renewal community employment credit and (3) the credit is subject to the overall limitations on the amount of business credits that can be taken in any tax year, but a 1-year carryback and 20-year carryforward of unused business credits is allowed. Because of these three rules, there may be circumstances in which the employer might, under an available election, elect not to have the work opportunity credit apply. There are some additional rules that, in limited circumstances, prohibit the credit or require an allocation of the credit. We suggest contacting your tax advisor for the application of these rules in your specific circumstances. |
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expire December 31, 2009 for newly terminated employees was extended. The extension adds another six months to the maximum period that the COBRA subsidy can run, and also extends the up-to-15 month COBRA premium subsidy to workers who lose their jobs during the first two months of 2010. Under the prior law, the subsidy wasn’t available for those who lost their jobs after 2009.
