As you know the current federal unemployment rate (FUTA) is 6.0% on the first $7,000 paid to each employee. Employers can take a 5.4% credit, bringing the effective FUTA rate to 0.6% provided the state is not in loan to the federal government and/or the employer is current on paying their share of the unemployment tax to the state. If either of these situations is present, the 5.4 % credit will be reduced.
Since 1976 employers were also paying 0.2% surtax for Federal Unemployment Tax (FUTA) to the federal government each year on the first $7,000 of wages paid to each employee until the surtax expired on June 30, 2011. The surtax was then removed lowering the amount of tax payable from 0.8% to the current 0.6% effective July 1, 2011. The good news is that the federal government has not raised the $7,000 taxable wage base like many states have had to do in order to recover funding for the large amounts paid out in unemployment wages over the past few years. In fact a state that has not repaid money it borrowed from the federal government to pay unemployment benefits within two years is known as a “FUTA credit reduction” state. As of December 31, 2012, there are currently 19 states still in credit reduction status. As an employer, having employees working in one or more of these 19 states you will be obligated to pay an additional amount to the state in order to help the state accelerate and repay its debt to the federal government. The credit reduction is 0.3% for each year the state has not repaid their loan.
This unexpected surtax can mean employers are obligated to pay larger sums of unemployment tax quarterly and annually. Listed are the states currently in credit reduction: Arkansas, Arizona, California, Connecticut, Delaware, Florida, Georgia, Indiana, Kentucky, Missouri, North Carolina, New Jersey, Nevada, New York, Ohio, Rhode Island, Vermont, Wisconsin, and the Virgin Islands.October 3rd, 2016
December will be here before you know it. How prepared are you to finish out the year? Remembering items like auto fringes, bonus payrolls, address changes and third party sick pay are things to start working on now.
In preparation for closing out the year with your payroll data, we have prepared a general checklist to assist you in the planning:
- Review upcoming Holidays- Do they conflict with any pay date scheduled or bank closings?
- Meet with staff to discuss increased work hours to meet your business holiday needs
- Notify all employees to review their W-4 status. All employees claiming Exempt for this year must complete a new W-4 for 2012 on or before February 15th.
- Audit proof your business! Make sure that you have I-9s on ALL employees, even ownership using the most current I-9 form which can be printed from www.irs.gov website. Valid identification should be presented to you by each employee where an employer can safely sign the bottom of the I-9 as recognition of employee proper identification.
- Review vacation days with staff over the next few months in order to optimize down time for your business.
- Coordinate early business closures with your staff. Also advise your payroll Customer Service Representative of any changes to input day or paydate. Please keep in mind that if bank holidays are on or near your paydate, you will need to submit payroll a day earlier than normal.
- Meet with your accountant to update your business income and expenses year to date. Chances are some year-end planning strategies may need to occur. Make sure you have receipts for expenses paid followed up by bank statements showing activity in your business checking account. Keep your documents used to prepare your tax returns for at least three years. Protect them in case of an audit. Since the IRS has had lower tax revenues it has stepped up enforcement efforts. Thorough record keeping will help you prepare in the event of an audit along with proper employee documentation and payroll records.
- After you have reviewed your employee documentation make sure all employee addresses are up to date with ACCURATE social security numbers. Your payroll vendor can provide an Active and Inactive employee roster that will show addresses, etc. for your review. Get your postage amounts ready for mailing employee W2s by January 31st. Make sure you have a plan for employees requesting a duplicate W2 and any associated employee charges for the reprint.
- Review your Third Party Sick pay totals for any employee(s) receiving short or long term disability benefits during the year. Make sure these amounts have been reported to payroll and that your insurance provider is currently sending quarterly reports along with an annual reconciliation. Quarterly reports should be sent to payroll upon receipt. Most annual reconciliation reports will be provided in January.
For those employers who rely on Payroll Service bureaus to assist with payroll, you are in good hands. Within the last four years, payroll services have been put to task to keep you in compliance with economic stimulus measures like Make Work Pay, 2009 Consolidated Omnibus Budget Reconciliation Act health insurance subsidy, The 2010 Hiring Incentives to Restore Employment Act, and recently, healthcare reform under the Patient Protection Affordable Care Act (PPACA). These do not include drastic hikes in unemployment rate changes, enforcement of wage and hour laws and a great deal of state wide changes like conforming to the Health Care Act (or not), and tax treatment for same sex couples.
Next on our list of helping clients work through the maze of compliance issues is our 2014 Healthcare Checklist. Your company should prepare now (2013) for these requirements.
- If you are an employer with 50 or more Full Time Equivalent Employees (FTE) you must calculate how many FTE’s you have by adding the monthly hours worked by part-time or seasonal employees and divide that by 120. Add this number to your count of FTE’s (working 130 hours or more in each month). You will now have your sum total of FTE’s. There will also be lookback periods assigned to this calculation from the prior year as well.
- Be informed within your state, as every state must have an operational exchange by January 1, 2014. If your state refuses to set up an exchange it will default to the federal exchange.
- If your business currently has a health plan for employees, know your “essential health benefits”. Your plan must include essentials such as Emergency and ambulatory services, hospitalization, maternity and newborn care, mental health and substance use services including behavioral health treatment, rehabilitative and habilitative services, laboratory services, preventative (wellness) services, pediatric services including oral and vision care and a prescription drug plan.
- Be prepared for higher costs associated with market reforms and reporting requirements.
DID YOU KNOW?
EZ IRA – Who said saving for retirement isn’t easy?
We hear a lot about how well Americans are saving – or not – for their retirement. In that spirit, Legg Mason Global Asset Management has unveiled a payroll deduction IRA program intended to provide a way to build that savings rate.
Introducing EZ IRA from Deluxe Payroll, the easiest retirement solution ever, now offered in partnership with Legg Mason Global Asset Management. Using simple, automatic payroll deductions, EZIRA makes it hassle-free for every business – no matter how big or small – to offer a retirement benefit that attracts and retains valued employees.
- No employer contributions required
- One, small annual maintenance fee – no per-employee charges
- No Department of Labor oversight or testing required
- No 5500 form filing requirements or fiduciary liability
- No participation requirements
- Available to any size business
- Dedicated retirement savings managed by Legg Mason
- Convenient, easy set-up
- Automatic payroll deductions
- Multiple investment options: open architecture, multi-fund family and private money management
- Access to financial advisors
- Prior rollover plans accepted
How it Works
1. Simply enroll your business in the Deluxe Payroll EZ IRA program, Deluxe Payroll does all the set up.
2. Each eligible employee must complete the EZ IRA application and agreement. Employees can select how much they wish to deduct from their payroll, and whether they wish to set up a traditional or Roth IRA (based on eligibility and personal choice).
3. Each payroll period, Deluxe Payroll will automatically withhold each employee’s authorized payroll deduction and transmits the funds into the employee’s IRA.
4. Each employee is responsible for managing how his or her funds are invested/allocated, and paying the small, annual maintenance and administrative fees.
Should you have any questions or interest in learning more about this exciting product, please call Deluxe Payroll at 1-800-729-5910 and ask for Mark Marszal or Erica Boritas.
TAX NEWS AND NOTES
The dreaded tax return time has now added just one more step before your federal tax filing can be complete. Under the Affordable Care Act, individuals must now have health insurance coverage and some have found it by accessing coverage through the Health Insurance Marketplace or, more commonly known as the Exchange. On the Exchange individuals can analyze insurance options, purchase qualified health plans and if eligible, receive assistance in paying premiums or out of pocket costs. Proof of coverage is now required each tax year.
The Individual Shared Responsibility Provision also requires individuals to have qualifying coverage either through the Exchange or an employer sponsored group health plan for each month of the year or make a shared responsibility payment on their federal tax return. If the taxpayer and dependents had coverage each month of the year, simply check box 61 indicating coverage on federal filing form 1040. No further action is required. Some taxpayers are exempt from the coverage requirement of the individual shared responsibility provision (SRP) and do not have to make a shared responsibility payment when filing form 1040. Coverage exemptions are available for individuals specifically described as having a religious, economic, or other justification for not having minimum essential coverage. Taxpayers who qualify for an exemption will attach Form 8965, Health Coverage Exemptions, to their federal income tax return to claim that exemption. Taxpayers or any dependents that did not maintain minimum essential coverage for each month of their tax year and did not qualify for a coverage exemption must make an individual shared responsibility payment. The 2014 SRP and the amount is the greater of:
- 1 percent of the household income that is above the tax return filing threshold for the taxpayer’s filing status or
- The family’s flat dollar amount, which is $95 per adult and $47.50 per child (under age 18) limited to a family maximum of $285
PAYROLL HELP DESK
Recently some states have adopted the Mandatory Paid Sick Leave benefit for employees working for employers. California will put this in place effective July 1, 2015 where employees will have 3 days paid sick leave (24 hours) per year which can be accrued and is available after 90 days from hire date.
Massachusetts will also begin awarding sick leave to those employees working for an employer who has greater than 11 employees consistently in their workforce. Employees will be granted 40 hours per year and can roll over up to 40 hours each year in sick pay. Employers in this state having less than 11 employees will not be mandated to provide sick pay.
The state of Connecticut has had mandatory sick pay in effect since 2012 and many cities/states have also adopted paid sick leave policies. Deluxe Payroll can also help with your sick pay accrual requirements in accordance with your state or city regulations making sure you are compliant!
Did you know that Deluxe Payroll has an easy and affordable time and attendance solution to help manage the timekeeping additional of seasonal help? As a SwipeClock reseller, we are able to offer our clients a wide variety of time collection methods with full web-based administration. Your employees can clock in using a pin code, magnetic stripe card, proximity badge, their finger/hand scan or online. Consider these options versus a paper trail of timecards. Time and attendance systems save employers money every day and help to deter time abuse! Contact a Deluxe Payroll representative today to learn more about our customized timekeeping solutions ideally suited to meet your business needs!October 3rd, 2016
Payroll Help Desk
As we celebrate the upcoming Thanksgiving holiday, we reflect back over this year and want to extend Thanks to all of our clients, friends and partners! Caring and sharing is one of our priorities in providing top notch service. Deluxe Payroll has been able to give back this year to many businesses and charitable organizations. Our employees have joined in for our year end giving campaign as well, and will receive certificates reflecting their donated amount along with our Employer Match Campaign.
“Perhaps your business will consider a charitable organization that your employees will embrace?” Deluxe Payroll can help set up the monthly or per pay amounts to make this an easy effort in giving back.
Have a wonderful Thanksgiving holiday, from your friends at Deluxe Payroll!
Tax News and Notes
The IRS just released the 2015 Form W-4, Employee’s Withholding Allowance Certificate Employees who have claimed “Exempt” from taxes on form W-4, must complete a new Form W-4 in 2015 so employers can withhold the correct federal income tax from compensation. The new regulation stipulates that individuals cannot claim exemption from withholding in 2015 if their income exceeds $1,050 and includes more than $350 in unearned income. All new hires must also complete this form at their start of employment.
Did you know?
The IRS has announced some cost of living adjustments for year 2015 on the following items:
- Flexible Spending Accounts – voluntary salary deductions are now available up to $2,550 annually.
- Adoption Assistance – For 2015, the maximum amount that can be excluded from an employee’s gross income for qualified adoption expenses under an employer’s adoption assistance program is $13, 400 ($13,190 in 2014). The maximum amount that can be excluded in connectionw with the adoption of a child with special needs is $13,400 ($13,190 in 2014).
- Standard Deducation – 2015 increase to $12,600 for married couples filing jointly or surviving spouses (up from $12,400 in 2014), $9,250 for heads of household (up from $9,100 in 2014), and $6,300 for single taxpayers and married taxpayers filing separately (up from $6,200 in 2014).
- Personal Exemption – The personal exemption amount for 2015 is $4,000 ($3,950 in 2014).
- Social Security wage base – the 2015 social security wage base will be $118,500, an increase of $1,500 from the 2014 wage base of $117,000. The FICA tax rate, which is combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2015 up to the social security wage base. The maximum social security tax employees and employers will each pay in 2015 is $7,347. This will be an increase of $93 for employees and employers.
- 401k, 403b and most 457 plans – increased from %17,500 to $18,000. The catch up contribution limit for employees aged 50 and over, are increased from $5,500 to $6,000.
- IRA contributions remains unchanged at $5,500. The catch up also remains at $1,000.
It’s almost W-2 time! While we are working hard preparing your W2 statements for January there has been a push to accelerate the W2 filing deadline in an effort to minimize fraud. Similar proposals were also in President Obama’s proposed fiscal year 2015 budget. Fraud is a major concern for many! The US Government Accountability office conducted a report in September addressing theft refund fraud. The report suggested that the IRS should investigate the possibility of accelerating filing dates to reduce this type fo fraud. To date, there has been no announcement of the new deadline for filing W2’s or 1099-MISC forms.
In association with tax refund and combating fraud through identity theft, the IRS has new procedures effective January 2015 to limit the number of refunds electronically deposited into a single financial account or prepaid debit card to three. Any subsequent refunds automatically convert to a paper refund check and will be mailed to the taxpayer. This limit is imposed to prevent criminals from easily obtaining multiple refunds. Most will not be affected by this new procedure and are encouraged to continue using direct deposit for prompt and safe refunds.
The IRS has seen an increase in business identity theft. Unfortunately, stolen business entity is used to file fraudulent individual tax returns and obtain the tax refunds of their victims. As a result the IRS is keeping track of business accounts that have been victims of stolen identity.
Dates to Remember
Thursday, November 27th, 2014 – Deluxe Payroll and Banks are closed
Thursday, December 25th, 2014 – Deluxe Payroll and Banks are closed
Thursday, January 1st, 2015 – Deluxe Payroll and Banks are closedOctober 3rd, 2016
Did You Know?
I-9 and E-Verify easily verify employment:
The fast, easy free web-based E-Verify electronic system has a partnership between the U.S. Department of Homeland Security (DHS) and the Social Security Administration (SSA) allowing an employer to verify newly hired employees. What is interesting is that it works seamlessly with form I-9. An employer must complete form I-9 when the employee begins work and can enter form I-9 information into E-Verify for a new hire no later than the third business day after the employee’s start date. Each case submitted will receive a Verification or Tentative Non-confirmation which means that form I-9 did not match the DHS or SSA databases. Job seekers can also make sure their records are accurate before an employer checks their employment eligibility by visiting www.uscis.gov/everifyselfcheck .
Many states have already enacted legislation requiring mandatory use of E-verify. Nearly 24 million cases run in 2013 and as of August this year 22.8 million cases have been run by employers. Employers can take advantage of free webinars to learn the advantages of using E-Verify. Visit www.dhs.gov/E-Verify to learn more.
Tax News & Notes
On July 28th the 2014 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds includes projected increases within the social security system wage base. This report estimates that the social security wage base will be $119,100 in 2015. This represents an increase of $2,100 from this year’s wage base of $117,000. Employee’s wages are currently taxed at 6.2% of the first $117,000 wages.
The formal announcement for the wage base increase will be published in October. More information about the annual projected increase is available on the Social Security Administration’s website at www.ssa.gov/OACT/TR/2014/
Payroll Help Desk
Deluxe Payroll is committed to informing you about the changes in the Affordable Care Act that may affect your business. As of July 2014, federal guidance has updated information for businesses qualifying for transitional relief. But first let’s determine if your business is an “applicable large employer” (ALE) for 2015:
- ✓ An ALE is any organization with at least 50 full-time equivalent employees
- ✓ When counting employees, include all entities owned by a single controlling group. For example, an employer owning 10 franchised eateries would include all 10.
- ✓ Include all employees subject to FLSA, and exclude self- employed individuals like Sole Proprietors, LLP’s, LLC’s, 2% + Shareholders in corporations or correctly classified independent contractors.
- ✓ Calculate the number of full-time equivalents for the year (for 2014 only, a 6-month period of your choosing can be used)
- – Start with the number of full-time employees each month in the year and add any employee who averaged over 30 hours per week
- – For each month, add in full-time equivalents by taking the total number of hours worked (for employees working under 30 hours per week) divided by 120, rounding the fractions to the nearest one hundredth
- – Add the sum of FT and FTE count to get your monthly ACA total employees. You may exclude Seasonal workers who work less than 4 months
- ✓ Based on the calculated ACA count:
- – Under 50: you are not a Large Employer
- – Between 50-99: you are a Large Employer for 2015; however, you may be eligible for Transition relief to avoid “pay or play penalties” until 2016.
- – Over 100: Your business is a Large Employer for 2015, but may also be eligible for short-term transition relief.
- To see if your business is eligible for transition relief go to http://www.gpo.gov/fdsys/pkg/FR-2014-02-12/pdf/2014-03082.pdf
- Deluxe Payroll can provide monthly reporting of employee hours for ACA compliance, and can assist in determining your large employer status using the calculations above. Please contact your Deluxe Payroll representative for assistance.
National Payroll week is September 1 – 5. Every year, as payroll professionals, we celebrate this week at Deluxe Payroll because it is an honor to compute and deliver to our employers their valued employee paychecks. At present there are over 156 million wage earners in America! Did you know that 68.9% of the annual revenue of the United States Treasury is attributed to workers’ tax withholding through each paycheck. Celebrate along with us as we enjoy getting paid in America!