Vision Payroll

October 18, 2009

IRS Announces 2010 Highly Compensated Employee Limitation

In IR-2009-094, the Internal Revenue Service (IRS) announced that for 2010 the Highly Compensated Employee Limitation under §414(q)(1)(B) of the Internal Revenue Code of 1986 will remain unchanged. Non-discrimination testing in some types of retirement plans limits the deferral rate of “highly compensated employees” (HCEs) based upon the deferral rate (ADP) of the “non-highly compensated employees”. For 2010, an HCE is anyone who was a “5-percent owner” at any time during 2009 or 2010 or anyone who received in excess of $110,000 in compensation during 2009 and, if elected by the employer, is in the top twenty percent of employees based upon compensation. The HCE limit was $100,000 for 2008 plan testing and $105,000 for 2009 plan testing. Since the law includes a look-back provision, employees who earned more than $105,000 in 2008 are generally considered HCEs for 2009 plan year testing, employees who will earn more than $110,000 in 2009 are generally considered HCEs for 2010 plan year testing, and employees who will earn more than $110,000 in 2010 are generally considered HCEs for 2011 plan year testing. Contact Vision Payroll if you have questions on changes to the HCE definition for 2009 and 2010 or get further information at Important Facts and Figures.

February 13, 2009

Question of the Week: Do I Need To File Form W-3?

Filed under: News — Tags: , , , , — Vision @ 11:16 am

This week’s question comes from Kelly, a business owner. I already gave my employees their W-2s. Do I still need to file Form W-3? Answer: Anyone required to provide a Form W-2 to an employee must file Form W-3, Transmittal of Wage and Tax Statements. Employers may file Form W-3 on paper if transmitting fewer than 250 Forms W-2. Transmit Copy A of Form W-2 with Form W-3 to the Social Security Administration (SSA). Employers transmitting 250 or more Forms W-2 must file them electronically. All employers are encouraged by the SSA to file electronically, even if not otherwise required, to reduce costs and increase accuracy. Vision Payroll files Forms W-3 for all clients electronically with the SSA.

February 11, 2009

Tip of the Week: File Form W-3 Correctly

Employers must file the 2008 Form W-3, Transmittal of Wage and Tax Statements, on or before March 2, 2009 if filing by paper or March 31, 2009 if filing by an approved electronic means.

Employers should check only one box in section b, Kind of Payer. The only exception is for Third-party sick pay, which should be checked along with one other box if third-party sick pay is reported on the Form W-3.

Box c should include only the total number of valid Forms W-2 filed, not including voids.

Box h should contain other EINs (employer identification numbers) used on Form 941, Form 943, Form 944, or Form CT-1 during the year. An example is a prior owner for whom the filer is a successor.

Boxes 1 through 11 should contain a simple arithmetic sum of all the Forms W-2 filed with this Form W-3 for the respective box.

Box 12 should also contain a sum of all the Forms W-2 filed with this Form W-3, but should be totaled irrespective of and without reference to any code.

Box 14 should contain the “federal income tax withheld on third-party payments of sick pay” even though the amount was already reported in box 2.

Box 15 should contain the two-character abbreviation for the state being reported, but if more than one state is reported, only an X should be entered. Likewise, boxes 16-19 should include the total for all such boxes, regardless of how many are reported.

Employers should reconcile Forms W-3 not only to the individual Forms W-2, but also to the sum of Forms 941, Forms 943, Forms 944, or Forms CT-1 filed for the year.

Vision Payroll files Forms W-3 for all clients electronically with the Social Security Administration. Contact Vision Payroll if you have any questions on Form W-3.

February 2, 2009

2008 Form W-2 Tips, Part 16, Boxes 15 through 20, State and Local Income Tax Information

Filed under: News — Tags: , , , , , , , , — Vision @ 10:34 am

This is the last in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Boxes 15 through 20, state and local income tax information.

Employers report state and local tax information in boxes 15 through 20. There is room for two states on each individual form with one state reported above the broken line and one state reported below the broken line. You should report local information in the same manner. If you must report information for more than two states or localities, use a second form. Do not complete federal information on any additional form for the same employee unless it is information that couldn’t fit on the first form or is being reported separately. For the state name, use the two-character abbreviation assigned by the United States Postal Service. The state taxing authority should have assigned the employer’s state ID number to use.

State wages reported in box 16 and local wages in box 18 must be reported according to the reporting requirements of the state or locality and may or may not equal wages reported in box 1, box 3, or box 7.

Although this ends this series on the 2008 Form W-2, Vision Payroll will continue to provide information throughout the year to assist you in the process of gathering data to help ensure an accurate and efficient 2009 year-end reporting season. Contact Vision Payroll with any questions on the 2008 Form W-2.

February 1, 2009

2008 Form W-2 Tips, Part 15, Box 14 Other

This is one in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 14, other.

Box 14 is used to provide additional information that employees may want or need for their tax records. Employers must report the lease value of a vehicle reported in box 1 either here or in a separate statement provided to the employee. The following are examples of items that employers may want to disclose in box 14:

  • State disability insurance taxes withheld
  • Union dues
  • Uniform payments
  • Health insurance premiums deducted
  • Nontaxable income
  • Educational assistance payments
  • Clergy’s parsonage allowance and utilities
  • Nonelective employer contributions to a pension plan on behalf of an employee
  • Voluntary after-tax contributions to a pension plan that are deducted from an employee’s pay (not including Roth contributions)
  • Required employee contributions to a pension plan
  • Employer matching contributions to a pension plan

Employers may also report prior-year makeup amounts for nonelective employer contributions, voluntary after-tax contributions, required employee contributions, and employer matching contributions made under the Uniformed Services Employment and Reemployment Rights Act of 1994, also known as USERRA. Such amounts should be reported separately for each year.

Amounts included in box 14 should include a separate label for each item.

The next topic in this continuing series will be Boxes 15 through 20, state and local income tax information. Contact Vision Payroll with any questions on the 2008 Form W-2.

January 31, 2009

2008 Form W-2 Tips, Part 14, Box 13 Checkboxes

This is one in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 13, checkboxes.

There are three checkboxes that must be completed in certain circumstances. First is a checkbox for statutory employees. Statutory employees are independent contractors who are legally classified as employees for certain purposes. Employers must withhold social security tax and Medicare tax from statutory employees. Employers do not withhold federal income tax from statutory employees.

The second checkbox is for retirement plan participation. Employers must check the box for active participants in certain retirement plans. Generally, employees are active participants in defined benefit plans if they are eligible to participate for that tax year. Employees are generally active participants in defined contribution plans for any tax year that either the employer or employee makes a contribution, including forfeitures added to the employee’s account.

The final checkbox is for third-party sick pay. This box is used either by payers of third-party sick pay filing on behalf of an insured or by employer’s reporting payments made by the insurer.

The checkbox for deceased employees was eliminated after the year 2000 reporting period and is no longer required.

The next topic in this continuing series will be Box 14, other. Contact Vision Payroll with any questions on the 2008 Form W-2.

January 27, 2009

2008 Form W-2 Tips, Part 13, Box 12 Codes

Filed under: News — Tags: , , , , , , , — Vision @ 10:23 pm

This is one in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 12, codes.

Enter codes and amounts in boxes 12a, 12 b, 12c, and 12d. The letters a, b, c, and d do not relate to the codes, but are strictly for identification purposes. If an employee has code C for $100 and that is the only code for that employee, the employer may enter code C in box 12a; it does not need to be entered in box 12c. If filing copy A on paper, enter only four codes on one Form W-2. Employers should use multiple forms for employees with more than four codes. There is no limit on the number of codes on any other copy of Form W-2. Enter the code and amount without dollar signs or commas.

The codes and their descriptions are as follows:

Code A

Uncollected social security or RRTA tax on tips

Code B

Uncollected Medicare tax on tips

Code C

Taxable cost of group-term life insurance over $50,000

Code D

Elective deferrals under §401(k) cash or deferred arrangement (plan)

Code E

Elective deferrals under §403(b) salary reduction agreement

Code F

Elective deferrals under §408(k)(6) salary reduction SEP

Code G

Elective deferrals and employer contributions (including nonelective deferrals) to any governmental or nongovernmental §457(b) deferred compensation plan

Code H

Elective deferrals under §501(c)(18)(D) tax-exempt organization plan

Code J

Nontaxable sick pay

Code K

20% excise tax on excess golden parachute payments

Code L

Substantiated employee business expense reimbursements

Code M

Uncollected social security or RRTA tax on taxable cost of group-term life insurance over $50,000 (for former employees)

Code N

Uncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (for former employees)

Code P

Excludable moving expense reimbursements paid directly to employee

Code Q

Nontaxable combat pay

Code R

Employer contributions to an Archer MSA

Code S

Employee salary reduction contributions under a §408(p) SIMPLE

Code T

Adoption benefits

Code V

Income from the exercise of nonstatutory stock option(s)

Code W

Employer contributions to a Health Savings Account (HSA)

Code Y

Deferrals under a §409A nonqualified deferred compensation plan

Code Z

Income under §409A on a nonqualified deferred compensation plan

Code AA

Designated Roth contributions under a §401(k) plan

Code BB

Designated Roth contributions under a §403(b) plan

Employers should combine elective deferrals and elective catch-up contributions into one sum and report under the appropriate elective deferral plan code.

The next topic in this continuing series will be Box 13, checkboxes. Contact Vision Payroll with any questions on the 2008 Form W-2.

January 26, 2009

2008 Form W-2 Tips, Part 12, Box 11 Nonqualified Plans

This is one in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 11, nonqualified plans.

Box 11 shows the amount of distributions from a nonqualified plan or a nongovernmental §457(b) plan. These distributions should also be reported in box 1. Distributions from governmental §457(b) plans are not reported in this box.

Box 11 should show deferrals and earnings that became taxable for social security and Medicare purposes in 2008 because the deferrals and earnings were no longer subject to a substantial risk of forfeiture, but only if the amounts were for services before 2008 and no distributions were made in 2008. These amounts must also be reported in box 3, up to the $102,000 wage limit, and box 5.

Box 11 should not be used for deferrals that are included in box 3, up to the wage limit, and box 5 and that are for services performed in 2008.

Box 11 should also not be used when payments are made from a nonqualified plan and deferrals are included in box 3, up to the wage limit, and box 5. Employers should use Form SSA-131, Employer Report of Special Wage Payments. Generally the employer should report the amount from box 1 of Form W-2, plus any amounts deferred during 2008, less any payments from the nonqualified plan.

Assume Cameron retired during 2008. He earned $50,000 in wages, but deferred $35,000 of that amount in a nonqualified deferred compensation plan. Since he retired, he also received $75,000 in payments from the plan.

Amounts for Form W-2

 

Wages

$  50,000

Distributions from nonqualified plan

    75,000

Sub-total

125,000

Less amount deferred

    35,000

Form W-2, box 1 amount

$  90,000

 

 

Wages

$  50,000

Form W-2, box 3 amount

$  50,000

 

 

Wages

$  50,000

Form W-2, box 5 amount

$  50,000

Since there are both distributions and deferrals in 2008, no amount is reported in box 11.

Amounts for Form SSA-131

 

Form W-2, box 1 amount

$  90,000

Plus 2008 deferral

    35,000

Sub-total

125,000

Less distributions from nonqualified plan

    75,000

Form SSA-131, item 6 amount

$  50,000

Box 11 should also not be used to report special wage payments earned in a prior year such as accrued sick pay or vacation pay. These amounts should be reported on Form SSA-131, however, so that the Social Security Administration may accurately calculate the recipient’s social security benefits.

The next topic in this continuing series will be Box 12, codes. Contact Vision Payroll with any questions on the 2008 Form W-2.

January 25, 2009

2008 Form W-2 Tips, Part 11, Box 10 Dependent Care Benefits

This is one in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 10, dependent care benefits.

Box 10 shows the amount paid or incurred by the employer under §129 of the Internal Revenue Code (IRC) for dependent care assistance provided to the employee if the assistance is furnished pursuant to a “dependent care assistance program” under that section. This box should include amounts paid or incurred for dependent care assistance in an IRC §125 (cafeteria) plan. The fair market value of any employer-sponsored or employer-provided day care facilities should also be included. Even though there is an annual exclusion limit of $5,000, the total amount paid or incurred must be reported in box 10. Amounts over $5,000 must also be reported in boxes 1 and 5 and box 3, subject to the wage limitation. Amounts that cannot be excluded for other reasons such as benefits for highly compensated employees in plans described in IRC §129(d), must also be reported in boxes 1 and 5 and box 3, subject to the wage limitation.

The next topic in this continuing series will be Box 11, nonqualified plans. Contact Vision Payroll with any questions on the 2008 Form W-2.

January 24, 2009

2008 Form W-2 Tips, Part 10, Box 9 Advance EIC Payment

Filed under: News — Tags: , , , , , , — Vision @ 2:33 pm

This is one in a continuing series on the 2008 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 2, 2009. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 9, advance EIC payment.

Box 9 shows the amount of any advance EIC (earned income credit) payment paid to the employee. Employees must meet four criteria and file Form W-5, Earned Income Credit Advance Payment Certificate in order to receive advance EIC payments. For 2008, the maximum advance EIC was $1,750. Employees entitled to additional EIC are eligible to receive it when filing Form 1040, US Individual Income Tax Return.

The next topic in this continuing series will be Box 10, dependent care benefits. Contact Vision Payroll with any questions on the 2008 Form W-2.

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