Vision Payroll

October 29, 2010

Question of the Week: What Are the 2011 Highly Compensated Employee Limits?

What Are the 2011 Highly Compensated Employee Limits?
What Are the 2011 Highly Compensated Employee Limits?
This week’s question comes from Cristina, a company president. We’re doing some planning for next year. What are the 2011 Highly Compensated Employee Limits?

IRS Releases 2011 Highly Compensated Employee Limits in IR-2010-108

In IR-2010-108, the Internal Revenue Service (IRS) announced that for 2011 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”.

Highly Compensated Employee Compensation Limit Remains at $110,000

For 2011, an HCE is anyone who was a “5-percent owner” at any time during 2010 or 2011 or anyone who received in excess of $110,000 in compensation during 2010 and, if elected by the employer, is in the top twenty percent of employees based upon compensation. The HCE limit was $110,000 for 2008 and 2009.

Look-back Provision Impacts HCE Testing Period

Since the law includes a look-back provision, employees who earned more than $110,000 in 2009 are generally considered HCEs for 2010 plan year testing, employees who will earn more than $110,000 in 2010 are generally considered HCEs for 2011 plan year testing, and employees who will earn more than $110,000 in 2011 are generally considered HCEs for 2012 plan year testing.

Contact Vision Payroll for More Information on HCEs

Contact Vision Payroll if you have questions on changes to the HCE definition for 2010 and 2011 or get further information at Important Facts and Figures.

February 1, 2010

2009 Form W-2 Tips, Part 16, Boxes 15 through 20, State and Local Income Tax Information

Filed under: News — Tags: , , , , , , , , — Vision @ 9:35 am

This is the last in a continuing series on the 2009 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 1, 2010. 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 2009 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 2010 year-end reporting season. Contact Vision Payroll with any questions on the 2009 Form W-2.

January 31, 2010

2009 Form W-2 Tips, Part 15, Box 14 Other

This is one in a continuing series on the 2009 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 1, 2010. 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 2009 Form W-2.

January 30, 2010

2009 Form W-2 Tips, Part 14, Box 13 Checkboxes

This is one in a continuing series on the 2009 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 1, 2010. 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 2009 Form W-2.

January 24, 2010

2009 Form W-2 Tips, Part 13, Box 12 Codes

Filed under: News — Tags: , , , , , , , — Vision @ 9:53 pm

This is one in a continuing series on the 2009 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 1, 2010. 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, 12b, 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 AUncollected social security or RRTA tax on tips
Code BUncollected Medicare tax on tips
Code CTaxable cost of group-term life insurance over $50,000
Code DElective deferrals under §401(k) cash or deferred arrangement (plan)
Code EElective deferrals under §403(b) salary reduction agreement
Code FElective deferrals under §408(k)(6) salary reduction SEP
Code GElective deferrals and employer contributions (including nonelective deferrals) to any governmental or nongovernmental §457(b) deferred compensation plan
Code HElective deferrals under §501(c)(18)(D) tax-exempt organization plan
Code JNontaxable sick pay
Code K20% excise tax on excess golden parachute payments
Code LSubstantiated employee business expense reimbursements
Code MUncollected social security or RRTA tax on taxable cost of group-term life insurance over $50,000 (for former employees)
Code NUncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (for former employees)
Code PExcludable moving expense reimbursements paid directly to employee
Code QNontaxable combat pay
Code REmployer contributions to an Archer MSA
Code SEmployee salary reduction contributions under a §408(p) SIMPLE
Code TAdoption benefits
Code VIncome from the exercise of nonstatutory stock option(s)
Code WEmployer contributions to a Health Savings Account (HSA)
Code YDeferrals under a §409A nonqualified deferred compensation plan
Code ZIncome under §409A on a nonqualified deferred compensation plan
Code AADesignated Roth contributions under a §401(k) plan
Code BBDesignated 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 2009 Form W-2.

January 23, 2010

2009 Form W-2 Tips, Part 12, Box 11 Nonqualified Plans

This is one in a continuing series on the 2009 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 1, 2010. 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 2009 because the deferrals and earnings were no longer subject to a substantial risk of forfeiture, but only if the amounts were for services before 2009 and no distributions were made in 2009. These amounts must also be reported in box 3, up to the $106,800 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 2009.

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 2009, less any payments from the nonqualified plan.

Amounts for Form W-2
Wages$50,000
Distributions from nonqualified plan75,000
Sub-total125,000
Less amount deferred35,000
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

Assume Cameron retired during 2009. 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. Since there are both distributions and deferrals in 2009, no amount is reported in box 11. 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.

Amounts for Form SSA-131
Form W-2, box 1 amount$  90,000
Plus 2009 deferral    35,000
Sub-total   125,000
Less distributions from nonqualified plan    75,000
Form SSA-131, item 6 amount$  50,000

The next topic in this continuing series will be Box 12, codes. Contact Vision Payroll with any questions on the 2009 Form W-2.

January 19, 2010

New Hampshire Adds Emergency Power Surcharge to Employer Tax Rates

According to the New Hampshire Department of Employment Security, because of the amount of unemployment benefits that were paid out over the last couple of years there have been legislative changes made. The department invoked RSA282-A: 84 – Emergency Power for the last 3 quarters of 2009, which added a 0.5% surcharge onto all employer tax rates. For all quarters of 2010, a full 1.0% surcharge will be added to all employer tax rates. Negative rated employers (employers whose benefit charges exceeded tax paid) will have a 1.5% added to their tax rates in addition to the 1.0% surcharge for all quarters of 2010.

New Employer rates for all quarters of 2010 will be 3.7% (includes 1.0% surcharge). Contact Vision Payroll if you have any questions on the Emergency Power Surcharge.

January 17, 2010

2009 Form W-2 Tips, Part 11, Box 10 Dependent Care Benefits

This is one in a continuing series on the 2009 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 1, 2010. 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 2009 Form W-2.

January 16, 2010

2009 Form W-2 Tips, Part 10, Box 9 Advance EIC Payment

Filed under: News — Tags: , , , , , , — Vision @ 5:01 pm

This is one in a continuing series on the 2009 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 1, 2010. 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 2009, the maximum advance EIC was $1,826. 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 2009 Form W-2.

January 12, 2010

2009 Form W-2 Tips, Part 9, Box 8 Allocated Tips

This is one in a continuing series on the 2009 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than February 1, 2010. 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 8, allocated tips.

Box 8 shows the amount of allocated tips. Large food and beverage establishments use Form 8027, Employee’s Annual Information Return of Tip Income and Allocated Tips to determine the amount of tips to report in Box 8. A large food and beverage establishment meets all three of the following criteria:

  1. Food or beverage is provided for consumption on the premises.
  2. Tipping is a customary practice.
  3. More than 10 employees who work more than 80 hours were normally employed on a typical business day during the preceding calendar year.

The amount in this box is not to be reported in Boxes 1, 3, 5, or 7.

The next topic in this continuing series will be Box 9, advance EIC payment. Contact Vision Payroll with any questions on the 2009 Form W-2.

Older Posts »

Contact Us Vision Payroll
Client Remote Access