Vision Payroll

Nonfarm payroll employment continued to decline in June (-467,000), and the unemployment rate was little changed at 9.5%, the Bureau of Labor Statistics of the US Department of Labor reported recently. Job losses were widespread across the major industry sectors, with large declines occurring in manufacturing, professional and business services, and construction.

The number of unemployed persons (14.7 million) and the unemployment rate (9.5%) were little changed in June. Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.2 million, and the unemployment rate has risen by 4.6 percentage points.

In June, unemployment rates for the major worker groups–adult men (10.0%), adult women (7.6%), teenagers (24.0%), whites (8.7%), blacks (14.7%), and Hispanics (12.2%)–showed little change. The unemployment rate for Asians was 8.2%, not seasonally adjusted.

Among the unemployed, the number of job losers and persons who completed temporary jobs (9.6 million) was little changed in June after increasing by an average of 615,000 per month during the first 5 months of this year.

The number of long-term unemployed (those jobless for 27 weeks or more) increased by 433,000 over the month to 4.4 million. In June, 3 in 10 unemployed persons were jobless for 27 weeks or more.

This week’s question comes from Ron, a payroll department manager. We have a student who works for us who holds a J-1 Visa. He says that he should not have FICA tax withheld. Is a student holding a J-1 visa exempt from FICA tax withholding? Answer: Non-resident aliens are exempt from paying FICA tax, variously known as social security tax, Medicare tax, or OASDI. A foreign student who arrives in the United States on a J-1 visa is considered a non-resident alien during the first five calendar years of physical presence in the United States. After five years of physical presence, a student is considered a resident alien and therefore is subject to FICA tax withholding. Therefore, students with a J-1 visa are exempt from FICA tax during their first five years of physical presence and subject to FICA tax withholding thereafter. Contact Vision Payroll if you have any questions on FICA tax withholding for J-1 visa holders.

According to the US Department of Labor, in the week ending June 27, the advance figure for seasonally adjusted initial claims was 614,000, a decrease of 16,000 from the previous week’s revised figure of 630,000. The 4-week moving average was 615,250, a decrease of 2,750 from the previous week’s revised average of 618,000.

The advance seasonally adjusted insured unemployment rate was 5.0% for the week ending June 20, a decrease of 0.1 percentage points from the prior week’s revised rate of 5.1%.

The advance number for seasonally adjusted insured unemployment during the week ending June 20 was 6,702,000, a decrease of 53,000 from the preceding week’s revised level of 6,755,000. The 4-week moving average was 6,751,500, a decrease of 13,750 from the preceding week’s revised average of 6,765,250.

The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.375 million.

Employers in three states must pay higher minimum wages effective today. In Illinois, the minimum wage increases from $7.75 per hour to $8.00 per hour. In Kentucky, the minimum wage increases from $6.55 per hour to $7.25 per hour. In Nevada, the minimum wage increases from $6.85 per hour to $7.55 per hour; for employees with qualifying health benefits, the minimum wage increases from $5.85 per hour to $6.55 per hour. Contact Vision Payroll if you have any questions on minimum wages.

The Internal Revenue Service (IRS) has released Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a payroll tax credit on their Form 941 to be reimbursed for the assistance provided.

In recently issued guidance, the IRS reviewed the impact of amendments to state law. COBRA premium subsidies would apply to coverage elected during a special election period under amended state laws. This is true even if the state law allows coverage to begin later than the first coverage period beginning after February 16, 2009. If the election to begin COBRA coverage as of a later date is made, the nine-month period for premium subsidy would still begin effective with the first period of coverage after February 16, 2009. In addition, depending on state law, a delay in beginning coverage could affect the preexisting condition exclusion. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

Saturday, July 4, 2009 will be Independence Day, a federal holiday. Due to bank processing deadlines, the offices of Vision Payroll will be required to transmit ACH files by 2 pm EDT on Friday, July 3, 2009. Payroll received after this time will be processed on the next business day. For all other dates and times, standard processing deadlines will apply.

The next federal holiday will be Monday, September 7, 2009, Labor Day. Contact Vision Payroll as soon as possible to make changes to or for questions on your processing schedule.

The Internal Revenue Service (IRS) has released Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a payroll tax credit on their Form 941 to be reimbursed for the assistance provided.

In recently issued guidance, the IRS discussed individuals eligible for the extended federal (or FEHBP) COBRA election period. Such individuals must be offered coverage “effective with the first period of coverage beginning” after February 16, 2009. The employer or health plan may allow coverage to begin as of a later date. If the election to begin COBRA coverage as of a later date is made, the nine-month period for premium subsidy would still begin effective with the first period of coverage after February 16, 2009. Additionally, any period between the first period of coverage beginning after February 16, 2009 and the effective date of coverage “is not disregarded for purposes of the rules limiting preexisting condition exclusions.” Periods between the involuntary termination and the first period of coverage beginning after February 16, 2009 are disregarded for the preexisting condition exclusions. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

The Internal Revenue Service (IRS) has released Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a payroll tax credit on their Form 941 to be reimbursed for the assistance provided.

In recently issued guidance, the IRS confirmed that assistance-eligible individuals (AEIs) do not lose their eligibility for premium subsidy simply because they are eligible for TRICARE health coverage. TRICARE is the health care program serving active duty service members, National Guard and Reserve members, retirees, their families, survivors and certain former spouses worldwide. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

This week’s question comes from Debbie, a sole proprietor. I read that children under age 18 are not subject to federal employment taxes. My children are now in college and work part-time year-round. I know they are now subject to FICA taxes. Do FUTA taxes apply to children of sole proprietor who are age 18 or older? Answer: Sole proprietors who hire their own children under age 21 are not required to pay Federal Unemployment Tax Act (FUTA) tax on those children’s wages. Once the children reach age 21, the exemption no longer applies. Contact Vision Payroll if you have any questions on payroll taxes on children.

According to the US Department of Labor, in the week ending June 20, the advance figure for seasonally adjusted initial claims was 627,000, an increase of 15,000 from the previous week’s revised figure of 612,000. The 4-week moving average was 617,250, an increase of 500 from the previous week’s revised average of 616,750.

The advance seasonally adjusted insured unemployment rate was 5.0% for the week ending June 13, unchanged from the prior week’s unrevised rate of 5.0%.

The advance number for seasonally adjusted insured unemployment during the week ending June 13 was 6,738,000, an increase of 29,000 from the preceding week’s revised level of 6,709,000. The 4-week moving average was 6,759,750, a decrease of 3,250 from the preceding week’s revised average of 6,763,000.

The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.333 million.