Payroll for Small Businesses: How Legislative Changes Will Affect Your Business in 2011

Transcription

1 Payroll for Small Businesses: How Legislative Changes Will Affect Your Business in 2011 Nadine Hughes, CPP VP Tax Services CompuPay Inc.

2 EFTPS Many small employers will have to start using EFTPS for payroll tax deposits as of January 1, 2011 What is EFTPS? Are you ready?

3 Education Jobs Act (EJA) On August 10, 2010, President Obama signed into law EJA which provides aid to state and local governments to help them avoid layoffs of several categories of public sector employees. How will this affect my business? Advanced Earned Income Tax (AEIC) is repealed as of January 1, 2011

4 Earned Income Tax (EIC) Under certain circumstances employee could receive an advanced portion of their annual Earned Income Tax Credit in their paycheck. Employees provided their employer with a Form W 5 to start receiving the early credits.

5 Earned Income Tax (EIC) For 2011, no advanced EIC should be given throughout the year because the only way the credit will be given is by the individual claiming the full credit at tax time when they file their personal tax return. Form 941 and Form W 2 are both being revised to remove the EIC boxes.

6 COBRA Credits American Recovery and Reinvestment Act of 2009 Reduced the employee cost of COBRA coverage to only 35% of the actual premium amount and the employer covered the remaining 65% of cost. Provided the employer an offset to this cost or expense by a subsidy reimbursement of the 65% against employment taxes.

7 COBRA Credits American Recovery and Reinvestment Act of 2009 What s new? Congress extended the program through May 31, Workers who lost their jobs between September 1, 2008, and May 31, 2010, may be eligible for the subsidy for up to 15 months. Credits are subject to random audits, be prepared!

8 HIRE Act On March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment Act. HIRE Act creates a limited Social Security and Medicare tax holiday for the employer share of these taxes on newly hired employee s wages. Created a separate business tax credit of up to $1,000 if the new hire is employed for at least 52 weeks.

9 HIRE Act On March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment Act. Effective for new hire wages on or after March 19, 2010, thru December 31, Must report details on From 941 and employee Form W 2. New Form W 11 or equivalent must be obtained prior to using any credit.

10 Health Care Reform Act OnMarch 23, 2010, the Patient Protection and Affordable Care Act (PPACA) was signed by the president. A bill amending the PPACA, Health Care and Education Reconciliation Act (HCERA), was signed on March 30, Both are being referred to as Affordable Care Act (ACA). Biggest piece of legislation in years with immediate provisions and others extended to 2018.

11 Selected ACA Provisions New definition of medical expenses. Small business tax credit.

12 Selected ACA Provisions Form W 2 reporting of cost for employerprovided health coverage. Simple cafeteria plans.

13 Selected ACA Provisions Medicare tax rate increase in Medicare tax increase in 2013 on S corporation owner earnings.

14 CLASS Act CLASS Act (Community Living Assistance Services and Support Program), effective January 1, Long Term care insurance for disability Employers will collect monthly premiums Paid to US Treasury into a trust like Social Security and Medicare

15 IRS Employment Tax Projects In February 2010, IRS announced that it would be launching the first Employment Tax National Research Project in 25 years. Why is this important to you?

16 Unreported Tip Income In May 2010, IRS announced a new program using data from employees, including unreported tip income on their personal tax returns (Form 1040 and Form 4137). IRS Code Section 3121(q) IRS Notice and Demand Letter

17 Unemployment Trends What will you be paying for state and federal unemployment taxes in the near future?

18 2008 to Present

19 June and July National Unemployment

20 GAO Report on State UI Trust Funds Long standing state financing policies will lead to insolvency. FUTA annual wage base of $7,000 since 1983! FUTA rate is actually 6.2% but reduced by 5.4% if state unemployment tax is paid timely ( 0.8%).

21 GAO Report on State UI Trust Funds State UI tax systems are based on forward funding: When out of money, they borrow from federal government. If loan is outstanding for two consecutive tax years, employers in that state lose available FUTA credit by 0.3% each year until balances are paid. You could be paying increased FUTA and state UI taxes very soon!

22 Outstanding Federal Loans as of March 22 State Outstanding Federal Loan State Outstanding Federal Loan Alabama $245,491,013 Indiana $1,774,482,141 Arizona $5,050,575 Kansas $41,401,503 Arkansas $311,195,211 Kentucky $744,300,000 California $8,114,410,189 Maryland $68,445,581 Colorado $147,908,150 Massachusetts $208,315,144 Connecticut $380,558,085 Michigan $3,704,382,33 Florida $1,414,800,000 Minnesota $577,214,333 Georgia $304,700,000 Missouri $657,223,112 Idaho $174,861,625 Nevada $307,927,364 Illinois $1,945,512,485 New Hampshire $14,790,439

23 Outstanding Federal Loans as of March 22 State Outstanding Federal Loan State Outstanding Federal Loan New Jersey $1,461,314,783 Virginia $287,710,000 New York $2,872,403,508 Virgin Islands $12,896,281 North Carolina $2,081,085,034 Wisconsin $1,292,922,194 Ohio $2,174,175,799 Pennsylvania $2,727,904,339 Rhode Island $193,170,491 South Carolina $832,145,586 South Dakota $832,145,586 Texas $1,925,723,665 Vermont $16,673,034

24 Potential FUTA Effective Rates Tax Year 2009 Michigan FUTA Rate = Tax Year 2010 Michigan FUTA Rate = Add: Indiana & South Carolina FUTA Rate = Tax Year 2011 Michigan FUTA Rate = 1.70% IN & SC FUTA Rate = Tax Year 2012 Michigan FUTA Rate = 2.00% IN & SC FUTA Rate = 1.70%

25 Potential FUTA Effective Rates State Alabama Arkansas California Connecticut Florida Georgia Idaho Illinois Kentucky Minnesota Missouri

26 Potential FUTA Effective Rates State Nevada New Jersey New York North Carolina Ohio Pennsylvania Rhode Island South Carolina Texas Virgin Islands Virginia

27 Potential FUTA Effective Rates State Wisconsin Arizona Colorado Delaware Kansas Maryland Massachusetts New Hampshire Tennessee Vermont

28 GAO Recommendations Raise the annual FUTA wage base. State UI programs should reduce the number of employers paying the very lowest UI tax rates. State UI programs should adjust experience ratings.

29 GAO Recommendations State UI programs should adjust tax rates more frequently. State UI programs should set higher trust fund targets before lowing tax rates. What will be the impact to your business of these recommendations?

30 How Do You Keep Up with Changes? Visit IRS website at least once a week. IRS Small business and Self Employed Tax Center

31 How Do You Keep Up with Changes? Visit your state income tax and UI website weekly. Register for automatic alerts or updates at the site. Find a payroll service provider like CompuPay and use their website!

32 How Do You Keep Up with Changes? Join associations like NFIB and participate in free webinars like this one! If you have additions questions, you may contact Nadine by at:

33 More Information from NFIB Small Business Webinar Series: Articles about Payroll Processing: resources/finance accounting/payroll processing Payroll and Tax Filing Discounts We want your feedback. If you enjoyed today s webinar or have suggestions for the future, please fill out the short survey that you will receive via after this webinar. NFIB is on Facebook so stop by and leave a comment