Additional FUTA Tax Assessment

Federal law, via IRS Code Sec. 3302 provides for a reduction in the amount of FUTA credit employers may take when a state has outstanding federal loans for two or more years. For the 2013 tax year, there are14 states with outstanding federal loans (by credit reduction, they mean increased taxes).

If your business operates in Delaware, Arkansas, California, Connecticut, Georgia, Kentucky, Missouri, New York, North Carolina, Ohio, Rhode Island, Wisconsin, or Indiana, you will pay higher FUTA payments per employee for the 2013 tax year, resulting in a net increase in your FUTA taxes due. Therefore, similar to last year, you will notice an additional tax due, albeit modest, in January 2014, for the 2013 payrolls.

As a part of the services that Ashgrove Payroll provides to our cleints, we will deduct the additional FUTA amounts due from thier account and file form 940 on their behalf. As the tax year progresses and additional information becomes available, further communications on this topic may be provided.

Has your state tax deposit frequency changed?

State Withholding Tax Deposit frequencies are necessary in order to file and pay our clients taxes on time. Because we don’t received information from the state or federal tax agencies directly, it is the client’s responsibility to provide Ashgrove Payroll with this information.

What is a state withholding tax deposit frequency?

When money is withheld from your employee’s check(s) for state taxes, that money is called state withholding tax. A deposit frequency is the rate in which you we required to remit withholding tax to the appropriate agency.

How is my deposit frequency determined?

How often you file and pay withholding tax depends on the size of your payroll. The larger your payroll, the larger the withholding and therefore the more frequently you will report and pay the tax.

How do I find out what my state deposit frequency is?

Every employer that is required to withhold tax from their employee’s check(s) must register with the appropriate state agency. At that time you will be assigned a deposit frequency. The agency also performs periodic reviews of your account and may change your deposit frequency. When this occurs, the agency will notify you directly of the change. Ashgrove Payroll does NOT receive a notification from the state.

I have been a client for years, why are you asking for this information now?

Ashgrove Payroll has always required that you provide the most current information, including deposit frequencies, to ensure your taxes are paid and filed accurately.

I have received a deposit frequency change notification. What do I do now?

Fax all deposit frequency notifications received from the state directly to Ashgrove Payroll at 866-432-6140

What if I did not receive a notification of change?

Due to the importance of having the correct frequency for your company, we recommend that employers contact their state agencies annually to determine if their frequency has changed for the upcoming year.

Ashgrove Payroll offer $100 referral bonus

IRS annouces HSA Limits for 2014

The IRS has announced the 2014 maximum contribution levels for  Health Savings Accounts (HSAs), and out-of-pocket spending limits for High Deductible Health Plans (HDHPs) that must be used in conjunction with HSAs.

  1. The maximum annual HSA contribution for an eligible individual with self-only coverage is $3,3000.
  2. For family coverage, the maximum annual HSA contribution is $6,550.
  3. The catch-up contribution for an individual age 55 or older is $1,000 in 2009 and all years going forward.

Excluding unpaid interns from your payroll service

Should student interns be a part of your payroll? Some employers think it’s not necessary, reasoning that interns are still in school, live with their parents, receive valuable experience and may even drive their own new cars to work. These employers believe using unpaid interns is a smart financial move that allows their companies to save money on wages. However, this line of thinking has become much riskier in the wake of a recent court decision and the filing of new lawsuits.

A spate of legal actions have been taken by former interns who are accusing employers of violating the federal Fair Labor Standards Act and state laws by not paying them. Some law firms have put up websites offering services to former unpaid interns who want to try and recover back wages. “If you have held an unpaid internship during the past six years, even if you received school credit for the internship, we would like to talk to you,” the law firm representing the plaintiffs in a recent law suit.

Employment attorneys and HR professionals expect there will be a lot more of these cases in the future — and they won’t be limited to the entertainment and publishing sectors. Consequently, businesses that use unpaid interns, or interns who are paid less than the minimum wage, need to familiarize themselves with the relevant state and federal labor laws so they are in compliance.

All unpaid internships are not illegal but an organization must meet strict requirements in order to have a legal internship and pay nothing or less than minimum wage. If you continue to use unpaid interns, ensure you meet the six-point test from the U.S. Department of Labor:

1. The work performed (the DOL refers to it as training) is an extension of a trade studied by the student. Even though the intern works on, or from, the business or organization worksite, the work must be “similar to training which would be given in an educational environment.”

2. The training is for the benefit of the student intern.

3. The intern does not replace regular employees, but instead works under close observation of employees.

4. The employer derives no immediate advantage from the student intern’s activities. In fact, “on occasion [the employer's] operations may actually be impeded.”

5. The intern is not necessarily entitled to a job at the conclusion of the internship. The employer holds out no promise of future employment.

6. The employer and the intern both understand that the intern is not entitled to wages for the time spent in the internship.

So before you exclude interns from your payroll service, consult with your HR department, your attorney, or a qualified payroll service provider.

Payroll Update: Social Security Tax Rate Change

On December 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011 (H.R. 3765). The Act includes a two-month extension of the reduced employee Social Security tax rate, maintaining the employee portion of the social security tax rate at 4.2% through February 29, 2012.

According to the Act, the employee tax rate for social security will revert to 6.2% on March 1, 2012, unless the federal government acts to further extend the law or change the rate. Due to this change, Ashgrove Payroll will be making the necessary modifications to support the employee portion of the Social Security tax 6.2% rate.

 

You will not have to do anything because our payroll service will automatically revert to the new (6.2%) rate. It might be a good idea however, to let your employees know that after March 1st, they will notice an additional 2% tax deduction on their gross wages.

 

If the federal government passes a new law that extends the date or changes the tax rate, Ashgrove Payroll will implement the changes to comply with the new law.


Employee benefits almost as important as their salary

According to the 2011 Mercer Workplace Survey, health benefits play an increasingly pivotal role in the employer-employee relationship. 91% of employees participating in the survey agreed that getting health benefits through work is just as important as getting a salary. Almost as many (76%) say that benefits make them feel appreciated by their company.

An increased emphasis on benefits, especially when managed by a payroll service provider, can be a differentiating strategy, leading employees toward more personal accountability and greater overall satisfaction.

Payroll services can help avoid costly 1099 mistakes

Classifying a worker as independent contractors provides many small businesses with needed flexibility. Unfortunately not all workers can be classified in such a way and according to IRS payroll laws, they need to be reclassified as a W-2 employee, not a 1099 subcontractor. Yet even as the economy grows more reliant on temporary or flexible 1099 labor, regulators are becoming increasingly vigilant about getting employers to classify these mislabeled workers.

I was working with a payroll services client in Raleigh last week and learned that six months ago their business triggered an IRS audit because of a misclassified carpenter subcontractor. The penalties were significant.

When these reclassifications are enforced, small businesses have to start withholding federal income, Social Security, Medicare, and unemployment taxes. Adding to the cash flow strain is the possible payment of fees and penalties for previous misclassifications. Additionally, such firms would have to start paying for the same employee benefits and workers’ compensation that they currently do for full-time employees.

As I’ve said before, federal and state governments are facing budget deficits, and tax regulators see a huge pool of potential back taxes, fees, and penalties to be gleaned from the detection of employee-classification errors. The IRS estimates that 15% of all employers have misclassified a total of 3.4 million employees as independent contractors, resulting in an estimated annual revenue loss of $3.4 billion dollars.

If you’re unsure of the specific rules that regulate 1099 subcontractor or independent contractor classifications, seek help with a payroll service such as Ashgrove Payroll. As the state departments of revenue continue to share more and more information with the IRS, the odds of being detected continue to increase.

Employers must report health plan costs in 2012

The IRS released new guidance on the requirement that employers provide information to employees on the cost of employer-provided group health plan coverage (Notice 2012-9). The guidance comes in the form of 39 questions and answers. The IRS made this requirement optional for all employers for 2011, to give employers and payroll service providers more time to update payroll systems.

Employer-sponsored coverage includes coverage under any group health plan that an employer makes available to the employee and that is excludible from the employee’s gross income, but it excludes long-term-care coverage, any coverage under a separate dental or vision policy, or similar coverage (e.g. disability insurance, supplemental liability insurance, etc.). It also excludes amounts contributed to an MSA , HSA, or salary reduction contributions to a health flexible spending account.

The total reportable cost  includes both the portion of the cost paid by the employer and the portion paid by the employee, regardless of whether the employee paid through pretax or after-tax contributions.

Employee Discontent Widening

Employees continue to feel stuck in their jobs and want to find new employment elsewhere, according to a new poll of more than 1,000 employees in North America by the Manpower Group.

84% of the workers polled said they plan to look for a new position in 2012, which is the same level of discontent in the workplace in 2010. In 2009, 60% of employees said they planned on looking for something new.

Only 5 percent said they intend to remain in their current position.

 

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