April 20, 2010
Most Businesses Required to Pay by EFT Beginning in 2011
The U.S. Department of the Treasury (DOT) has announced that businesses currently permitted to use paper Federal Tax Deposit (FTD) coupons will have to make those deposits electronically beginning in 2011 with few exceptions [DOT News Release TG-644, 4/19/10].
The major exception to the above rule will be for businesses with $2,500 or less in quarterly tax liabilities that pay their tax liability when they file their return.
A DOT spokesperson said that the DOT will soon be issuing a proposed rule on this topic which will include a public comment period before the regulation become final.
Currently, nearly 98% of all business tax dollars are paid electronically through the DOT's free Electronic Federal Tax Payment System (EFTS; see Payroll Guide ¶ 4289 ). IRS research has shown that businesses using EFTPS are 31 times less likely to make an error.
The new initiative is one of several in the DOT's plan to go green, a move that is expected to save more than $400 million and 12 million pounds of paper in the first five years alone. Another initiative will eliminate the option to purchase paper savings bonds through payroll deductions for federal employees on Sept. 30, 2010, and for the private sector by Jan. 1, 2011. This policy covers only paper savings bonds purchased through payroll sales. Individuals will still be able to purchase paper savings bonds at financial institutions for themselves and as gifts. © 2010 Thomson Reuters/RIA. All rights reserved.
April 7, 2010
April 6, 2010
As many of you are aware the Hiring Incentives to Restore Employment (HIRE) Act was signed into law last month. The IRS recently had a call to help summarize the new legislation and some of the effects it has on the Payroll industry. Following is a recap of that meeting.
Date of Enactment : March 18th 2010.
Section 101 of the Provision – Payroll Tax Exemption
- Between 3/19/2010 and 12/31/2010, all wages for a qualified employee will be exempt from the 6.2% Employer share of Social Security tax. A qualified employee is defined as follows:
- Hired between Feb 3rd 2010 and Dec 31st 2010.
- Must be previously unemployed or employed less than 40 hours in the prior 60 days.
- Can’t be related to the employer.
- An employer can elect out of the exemption and elect to pay the tax.
- Employees must sign an affidavit under the penalties and perjury law.
- Affidavit model form will be online for employers to use – it will be retained by employers and not submitted to the IRS.
Section 102 of the Provision – Retention
- If a qualified employee is retained for 52 weeks then the company is eligible for an additional tax credit. This is designed to promote retention of the hired employees. To qualify for the additional credit the company must meet the following:
- Employee must be retained for 52 weeks.
- In the last 26 weeks of the 52 week retention period, the employee must earn at least 80% of the amount of wages they earned in the first 26 weeks of the 52 week period..
- The additional credit is the Employer portion of the Social Security tax paid on the qualified employee’s wages with a max of $1000.00.
- The credit can be taken on the employer’s 2011 Income Tax Return
- The IRS is allowing employers to reduce deposits by the amount of the exemption starting in 2nd Qtr.
- There will be changes to the 941 starting with 2nd Qtr 2010. The IRS is currently working on releasing this return
- A draft version is attached for your review. Please note Lines 6a through 6e, which address the Exempt employees
- These new lines will work as follows: If an EE is hired in late March and paid in April then they will be reported on line 6a. If an EE is hired in late March and paid in late March then they will be reported only in 6b.
- The IRS will also be modifying the 941 instructions to help ensure the lines are populated correctly.
- There will be changes to the 943 and 944 returns as well.
- A new 94x schema will be released by the IRS. This means there will be modifications to the 941 efile.
- Impact on the Schedule B – The liability will be reduced by the exemption of the SS-R.
- 1st Qtr – There will be no effect on the Schedule B
- 2nd Qtr – The liabilities will be reduced by 2nd Qtr credit amount but not the 1st Qtr amounts. The 1st Qtr amounts will be treated like a payment.
Work is underway to determine the best way to incorporate these new statutory requirements into our products. We will post additional information soon. If you have any questions, please feel free to call us at (877) 963-8729.
At a projected cost of $940 billion over 10 years, the law is intended to provide healthcare to over 30 million currently uninsured Americans.
Under the plan:
* Insurance for families of four making up to $88,000 (or 400% of the federal poverty level) will be subsidized
* Medicaid is being expanded to cover those making up to 133% of the federal poverty level. For a family of four, that would be approximately $29,000.
* Families earning over $250,000 will see an increase in the amount of money they pay to Medicare from their paychecks.
* Insurance companies that provide high-end health plans (those valued at over $8,500 for an individual or $23,000 for families) will see a significant tax increase.
* You will be required to have health insurance or be fined either $750 or 2% of your income. A compromise package, passed at the same time as the Senate bill, would change those numbers to $695 or 2.5% of you income.
* Companies with more than 50 employees will be required to provide coverage or pay $750 per employee that relies on government subsidies for their insurance. The compromise package ups this to $2000 per employee.
* Any woman wishing to use federally subsidized coverage for an abortion--except in the case of rap, incest or danger to the mother's life--will have to pay out of pocket or seek private insurance.
* Parents will be permitted to keep their children on their health care plans until age 26 (BCBS of NC already does this).
What happens next (timeline):
WITHIN THE FIRST YEAR OF ENACTMENT
Insurance companies will be barred from dropping people from coverage when they get sick. Lifetime coverage limits will be eliminated and annual limits are to be restricted.
Insurers will be barred from excluding children for coverage because of pre-existing conditions.
Young adults will be able to stay on their parents' health plans until the age of 26. Many health plans currently drop dependents from coverage when they turn 19 or finish college.
Uninsured adults with a pre-existing conditions will be able to obtain health coverage through a new program that will expire once new insurance exchanges begin operating in 2014.
A temporary reinsurance program is created to help companies maintain health coverage for early retirees between the ages of 55 and 64. This also expires in 2014.
Medicare drug beneficiaries who fall into the "doughnut hole" coverage gap will get a $250 rebate. The bill eventually closes that gap which currently begins after $2,700 is spent on drugs. Coverage starts again after $6,154 is spent.
A tax credit becomes available for some small businesses to help provide coverage for workers.
A 10 percent tax on indoor tanning services that use ultraviolet lamps goes into effect on July 1.
WHAT HAPPENS IN 2011
Medicare provides 10 percent bonus payments to primary care physicians and general surgeons.
Medicare beneficiaries will be able to get a free annual wellness visit and personalized prevention plan service. New health plans will be required to cover preventive services with little or no cost to patients.
A new program under the Medicaid plan for the poor goes into effect in October that allows states to offer home and community based care for the disabled that might otherwise require institutional care.
Payments to insurers offering Medicare Advantage services are frozen at 2010 levels. These payments are to be gradually reduced to bring them more in line with traditional Medicare.
Employers are required to disclose the value of health benefits on employees' W-2 tax forms.
An annual fee is imposed on pharmaceutical companies according to market share. The fee does not apply to companies with sales of $5 million or less.
WHAT HAPPENS IN 2012
Physician payment reforms are implemented in Medicare to enhance primary care services and encourage doctors to form "accountable care organizations" to improve quality and efficiency of care.
An incentive program is established in Medicare for acute care hospitals to improve quality outcomes.
The Centers for Medicare and Medicaid Services, which oversees the government programs, begin tracking hospital readmission rates and puts in place financial incentives to reduce preventable readmissions.
WHAT HAPPENS IN 2013
A national pilot program is established for Medicare on payment bundling to encourage doctors, hospitals and other care providers to better coordinate patient care.
The threshold for claiming medical expenses on itemized tax returns is raised to 10 percent from 7.5 percent of income. The threshold remains at 7.5 percent for the elderly through 2016.
The Medicare payroll tax is raised to 2.35 percent from 1.45 percent for individuals earning more than $200,000 and married couples with incomes over $250,000. The tax is imposed on some investment income for that income group.
A 2.9 percent excise tax in imposed on the sale of medical devices. Anything generally purchased at the retail level by the public is excluded from the tax.
WHAT HAPPENS IN 2014
State health insurance exchanges for small businesses and individuals open.
Most people will be required to obtain health insurance coverage or pay a fine if they don't. Healthcare tax credits become available to help people with incomes up to 400 percent of poverty purchase coverage on the exchange.
Health plans no longer can exclude people from coverage due to pre-existing conditions.
Employers with 50 or more workers who do not offer coverage face a fine of $2,000 for each employee if any worker receives subsidized insurance on the exchange. The first 30 employees aren't counted for the fine.
Health insurance companies begin paying a fee based on their market share.
WHAT HAPPENS IN 2015
Medicare creates a physician payment program aimed at rewarding quality of care rather than volume of services.
WHAT HAPPENS IN 2018
An excise tax on high cost employer-provided plans is imposed. The first $27,500 of a family plan and $10,200 for individual coverage is exempt from the tax. Higher levels are set for plans covering retirees and people in high risk professions. (Reporting by Donna Smith; Editing by David Alexander and Eric Beech)