Payroll News

Here at PayMaster, we are celebrating early with the release of the year end update and tax tables.

For all of 2011, employees will only have to pay 4.2% for OASDI where employers will still have to match the full 6.2%.  This has caused changes to the federal tax deposit report, GL report, 941 worksheet. The 941 form will be updated as well before the end of the first quarter.

Also included in the latest update are the new federal tax tables that extend the ‘Bush tax cuts’ but remove the ‘Making Work Pay’ credit. Employees will see a slight increase in federal withholding but the 2% credit should increase their net pay a bit. Tipped employees should have fewer unpaid FICA taxes as well.

Grab the update now or call support for assistance.

Filed under: Federal News, PayMaster Software, Payroll News - - -
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Year end Blue Pages and the W2 printing module is available.

Get them right here .  Blue Pages and Auto Update.

Filed under: Federal News - - -
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On July 2-9 there will be limited support available as Ted will be taking a long overdue vacation. This time period coincides with the July 4th weekend so downtime should be limited.

Rest assured that support will be handled through the VA office during that time period. and Ted will be available for the more unique situations.

Friday July 2nd and Monday July 5th the office will be closed.
Tuesday July 6th—Friday July 9th support will be handled by the VA office.

You will still be able to call us toll-free
(800) 327-4243 to reach either office.

Quick Link to Auto-update.

Filed under: PayMaster Software - - -
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The President’s 2011 Budget proposes to restructure the Federal wage reporting process by reverting to quarterly wage reporting. Currently, wages are reported to the Federal Government once a year. 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. The Administration will work with the States so that the overall reporting burden on employers is not increased.

Note this is only a proposal but this sounds like the burden would be passed on to the payroll professional once again.

Filed under: Federal News, Payroll News - - - Tags: IRS, W2
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http://www.irs.gov/businesses/small/article/0,,id=220746,00.html

QR8: How does application of the payroll tax exemption to wages paid to restaurant employees affect the 45B credit?
A-QR8: Certain food and beverage establishments can claim a credit under section 45B of the Internal Revenue Code for social security and Medicare taxes paid or incurred by the employer on certain employee tips, referred to as the “45B credit.”

An employer could be eligible for both the payroll tax exemption and the 45B credit on certain tips if the employer has tipped employees who are also qualified employees under the HIRE Act.  The payroll exemption is taken on the employer’s Form 941 and the 45B credit is taken on the employer’s income tax return.

The payroll tax exemption applies to all wages paid to a qualified employee unless the employer elects out of the payroll tax exemption with respect to the employee. An employer that applies the payroll tax exemption with respect to a qualified employee will be entitled to a smaller 45B credit because the employer will pay only Medicare tax (and not social security tax) on the employee’s wages, including reported tips.

This obviously complicates the Form 8846. PayMaster will have to credit just the Medicare portion on employees who have the HIRE ACT exception taken.

Thankfully the IRS will not revise Form 941 for the third and fourth quarters of 2010. Employers will be directed by the form and the instructions to leave lines 12c and 12d blank on the returns that they file for the third and fourth quarters.

Filed under: Federal News, Payroll News - - - Tags: FICA, HIRE, IRS
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Medicare Tax Computation on High Wage Earners

The new legislation includes a provision that, effective for tax years beginning after 2012, increases the Medicare tax rate by 0.9% for taxpayers receiving wages with respect to employment in excess of $200,000 ($250,000 for married couples filing jointly, and $125,000 for married couples filing separately). The tax is in addition to the regular Medicare tax rate of 1.45% on wages received by employees with respect to employment. Thus the Medicare tax rate will be  2.35% (1.45% + 0.9%) on wages in excess of $200,000. This change doesn’t affect the HI tax imposed on employers.

Filed under: Federal News, Payroll News - - - Tags: Medicare
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http://www.irs.gov/newsroom/article/0,,id=221036,00.html

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.

Filed under: Federal News, Payroll News - - - Tags: HIRE, IRS, W-11
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The IRS is issuing guidance as quickly possible on the many reporting issues created by the HIRE Act.

A final version of Form 941 for 2Q should be released by the IRS next week April 6th.

A new form W-11 will be released as well. This ‘Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit’ will be required for all employees eligible for this credit.

The Form W-2 will now include a new box 12 code of CC to report exempt wages and tips for qualified employees under the HIRE Act. The Form W-3 will also be altered to show the total of all the box 12 code CC entries.

For more information from the IRS, visit HIRE Act: Questions and Answers for Employers

Filed under: Federal News, Payroll News - - - Tags: 941, HIRE, IRS, W2
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Due to the available OASDI credit the HIRE act created, there will be multiple revisions to the 941 form this year. The credit is not available to take in the 1Q so the 1Q 941 is the same as the 2009 form except for the year. 2Q will have a new form that will have lines to take the credit for part of the first quarter and the complete second quarter. 3Q and possibly 4Q will have lines to take this credit just for their respective quarters.

The 1Q 941 form for 2010 is available now. Once the IRS releases the new  2Q-4Q forms, and official guidance, the forms will be made available through auto-update.

Filed under: Federal News, PayMaster Software, Payroll News - - - Tags: 941, Auto Update, OASDI, PayMaster Software
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Payroll Tax Incentives in New Jobs Bill

Quick overview of two key tax changes affecting businesses 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 the 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 the employer’s 2011 income tax return. In order to be eligible for the credit, the employee’s pay in the second 26-week period must be at least 80% of the pay in the first 26-week period.

The above incentives apply to workers hired after the date of introduction of the legislation (Feb. 3, 2010), but only wages paid after March 18 are eligible for the Social Security tax exemption. Some additional features of the new hiring incentives include:

• The tax benefit of the new incentive is immediate. It puts money into a business’ cash flow immediately, since the tax is simply not collected in the first place.
• The tax benefit generally applies only to private-sector employment, including nonprofit organizations and railroad employers — public sector jobs are generally not eligible for either benefit. However, employment by a public higher education institution qualifies.
• There is no minimum weekly number of hours that the new employee must work for the employer to be eligible, and there is no limit on the dollar amount of Social Security taxes that qualify for the employer exemption.
• For workers that would otherwise be eligible for the Work Opportunity Tax Credit (i.e., another type of employment tax credit), the employer must select one benefit or the other for 2010. There is no double dipping.
• An employer can’t claim the new tax breaks for hiring family members.
• A worker who replaces another employee who performed the same job for the employer isn’t eligible for the benefit, unless the prior employee left the job voluntarily or for cause.
• For the hiring to qualify for the above incentives, the new hire must sign an affidavit, under penalties of perjury, stating that he or she hasn’t been employed for more than 40 hours during the 60-day period ending on the date the employment begins.
• The incentive isn’t biased towards either low-wage or high-wage workers. Under the measure, a business will save 6.2% on both a $40,000 worker and a $90,000 worker.
• The Social Security tax exemption earned for the period from March 19, 2010 to March 31, 2010 may not be claimed on the first quarter employment tax return. The tax benefit that employers would have received in the first quarter of 2010 will be claimed on the second quarter employment tax return instead.
• The credit for retaining qualifying new hires is the lesser of $1,000 or 6.2% of the wages paid by the taxpayer to the retained worker during the 52-consecutive-week period. Thus, the credit for a retained worker will be $1,000 if, disregarding rounding, the retained worker’s wages during the 52-consecutive-week period exceed $16,129.03. However, the credit isn’t available for pay not treated as wages under the Internal Revenue Code (e.g., remuneration paid to domestic workers).

Filed under: Federal News, Payroll News - - - Tags: 941, HIRE, OASDI
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