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

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.

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 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

“For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year,” said IRS Commissioner Doug Shulman.

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.  A 5% state sales tax would earn you a maximum of deduction of $2475.

IRS also alerted taxpayers that the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction.

Planning what to do in case of a disaster is an important part of being prepared. The Internal Revenue Service encourages taxpayers to safeguard their records. Some simple steps can help taxpayers and businesses protect financial and tax records in case of disasters.

Listed below are tips for individuals and businesses on preparing for a disaster.

1. Record keeping Take advantage of paperless record keeping for financial and tax records. Many people receive bank statements and documents by e-mail. This method is an outstanding way to secure financial records. Important tax records such as W-2s, tax returns and other paper documents can be scanned onto an electronic format. You can copy them onto a ‘key’ or ‘jump drive’ periodically and then keep the electronic records in a safe place.
2. Document Valuables and Business Equipment The IRS has disaster loss workbooks for individuals and businesses that can help you compile a room-by-room list of your belongings or business equipment. This will help you recall and prove the market value of items for insurance and casualty loss claims.
3. Check on Fiduciary Bonds Employers who use payroll service providers should ask the provider if they have a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.
4. Continuity of Operations Planning for Businesses How quickly your company can get back to business after a disaster often depends on emergency planning done today. Start planning now to improve the likelihood that your company will survive and recover. Review your emergency plans annually. Just as your business changes over time, so do your preparedness needs. When you hire new employees or when there are changes in how your company functions, you should update your plans and inform your people.
5. Update Emergency Plans Emergency plans should be reviewed annually. Individual taxpayers should make sure they are saving documents everybody should keep including such things as W-2s, home closing statements and insurance records. Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches.
6. Count on the IRS In the event of a disaster, the IRS stands ready to help. The IRS has valuable information you can request if your records are destroyed. If you have been impacted by a federally declared disaster, you may receive copies or transcripts of previously filed tax returns free of charge by submitting Form 4506, Request for Copy of Tax Form, or Form 4506-T, Request for Transcript of Tax Return, clearly identified as a disaster related request.

For more information type “Preparing for a Disaster” in the search box on the IRS.gov homepage.

Links:

• Disaster Assistance and Emergency Relief for Individuals and Businesses
• IRS Publication 584, Casualty, Disaster and Theft Loss Workbook (PDF)
• IRS Publication 584-B, Business Casualty, Disaster and Theft Loss Workbook (PDF)

http://www.irs.gov/newsroom/article/0,,id=204708,00.html

There are now four sections of questions covering:

• Administration and eligibility
• Form preparation
• Reporting and documentation
• Taxability and recapture

Much of the material here was updated on 3/19/09.

Important Highlight:

FP-17
Q. Does a COBRA premium assistance credit reduce an employer’s payroll tax liabilities when determining whether $100,000 in liabilities has accumulated for deposit purposes?

A. The credit is treated like a payment of payroll taxes and is applied as a deposit made on the first day of the quarter. It does not reduce an employer’s tax liabilities for purposes of determining the employer’s deposit schedule generally or applying the $100,000 deposit rule specifically. However, since the credit is applied as a deposit, a required deposit can be reduced by the amount of the credit. For example, if an employer accumulates $110,000 of liabilities and has a $20,000 subsidy credit, the employer must still deposit the next day under the $100,000 rule, but is only required to deposit $90,000. (03/19/09)

If AIG execs won’t return their $450 million in bonuses, lawmakers threatened Tuesday to pass a special new law taxing the payouts at anywhere from 60% to 100%.

“To those of you getting these bonuses: be forewarned, you will not be getting to keep them.”

Schumer called it “Alice in Wonderland business practices” to give bonuses to executives at a firm that lost nearly $100 billion last year and had to be rescued with $170 billion in taxpayer money.

Currently The IRS takes 35% of bonuses over $1 million.

Please see the article for full details…

Under the American Recovery and Reinvestment Act of 2009, certain individuals who are eligible for COBRA continuation health coverage, or similar coverage under State law, may receive a subsidy for 65 percent of the premium. These individuals are required to pay only 35 percent of the premium. The employer may recover the subsidy provided to assistance-eligible individuals by taking the subsidy amount as a credit on its quarterly employment tax return. The employer may provide the subsidy — and take the credit on its employment tax return — only after it has received the 35 percent premium payment from the individual.

Q: What individuals are eligible for the COBRA subsidy?

A: An assistance-eligible individual can be any COBRA qualified beneficiary associated with the related covered employee, such as a dependent child of an employee, who is covered immediately prior to the qualifying event. The qualifying event for purposes of eligibility for the subsidy is involuntary termination of the covered employee’s employment that occurs during the period beginning Sept. 1, 2008, and ending Dec. 31, 2009. The individual must also be eligible for COBRA coverage, or similar state coverage, during this period.

Q: Can an employer decide only to claim the credit at the end of the quarter rather than reducing its tax deposits during the quarter?

A: Yes. The employer can decide either to offset its payroll tax deposits or claim the subsidy as an overpayment at the end of the quarter.

Q: Can an employer reduce its payroll deposits during the quarter by the amount of the COBRA subsidy it provides during the quarter without incurring a Failure to Deposit penalty?

A: The amount of the COBRA subsidy the employer provides during the quarter (based on the 35 percent premium payments received from assistance eligible individuals during the quarter) will be treated as having been deposited on the first day of the quarter and applied against the employer’s deposit requirements.

Q: Will Schedule B continue to reflect the total payroll tax liabilities for the quarter, or will the liabilities reported be reduced by the COBRA subsidy credits?

A: Schedule B is used to report an employer’s payroll tax liability for each payroll period, not the amount of the employer’s payroll tax deposits. Therefore, when the employer reduces a deposit by the amount of the COBRA subsidy, this has no affect on the liabilities the employer reports on Form 941, Schedule B (or the monthly totals in Part 2 of Form 941).  The employer should still reflect on Schedule B (or in Part 2, Form 941) the total liabilities for all wages reported on Form 941.

Q: It might be difficult to make the April 30, 2009 deadline for filing the new Form 941. Who should we contact if we want to request an extension of time to file?

A: No extensions are available for filing of employment tax returns.

WASHINGTON — The Internal Revenue Service today released new detailed information that will help employers claim credit for the COBRA medical premiums they pay for their former employees.

The IRS unveiled new information on this Web site, IRS.gov, that includes an extensive set of questions and answers for employers. In addition, the Web site contains a revised version of the quarterly payroll tax return that employers will use to claim credit for the COBRA medical premiums they pay for their former employees.

Form 941, Employer’s Quarterly Federal Tax Return, will also be sent to about 2 million employers in mid-March. The form is used to claim the new COBRA premium assistance payments credit, beginning with the first quarter of 2009.

“This is the first step in our effort to provide employers with information on this important health benefit for people who have lost their jobs,” said IRS Commissioner Doug Shulman. “We will continue our work in the weeks ahead to help employers implement this crucial change for the nation’s unemployed.”

Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage. Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return.

Employers must maintain supporting documentation for the credit claimed. This includes:

• Documentation of receipt of the employee’s 35 percent share of the premium.
• In the case of insured plans: A copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier.
• Declaration of the former employee’s involuntary termination.

More information about COBRA payments and the new law is available on www.dol.gov.