Vision Payroll

October 21, 2011

Question of the Week: What Are the 2012 Highly Compensated Employee Limits?

What Are the 2012 Highly Compensated Employee Limits?
What Are the 2012 Highly Compensated Employee Limits?
This week’s question comes from Carla, a company president.

Carla asks:

We’re doing some compensation planning for next year. What are the 2012 Highly Compensated Employee Limits?

Answer: The IRS has just released updated information for 2012.

IRS Releases 2012 Highly Compensated Employee Limits in IR-2011-103

In IR-2011-103, the Internal Revenue Service (IRS) announced that for 2012 the Highly Compensated Employee Limitation under §414(q)(1)(B) of the Internal Revenue Code of 1986 will increase to $115,000. 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 Had Been $110,000

For 2012 plan year testing, an HCE is anyone who was a “5-percent owner” at any time during 2011 or 2012 or anyone who received in excess of $110,000 in compensation during 2011 and, if elected by the employer, is in the top twenty percent of employees based upon compensation. The HCE limit was also $110,000 for 2010 and 2011 plan year testing. The new $115,000 limit for 2012 is to be used for 2013 plan year testing.

Look-back Provision Impacts HCE Testing Period

Since the law includes a look-back provision, employees who earned more than $110,000 in 2010 are generally considered HCEs for 2011 plan year testing, employees who will earn more than $110,000 in 2011 are generally considered HCEs for 2012 plan year testing, and employees who will earn more than $115,000 in 2012 are generally considered HCEs for 2013 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 2012 to be used in 2012 plan year testing or get further information at Important Facts and Figures.

August 8, 2011

New Hampshire Unemployment Wage Base to Increase for 2012

Filed under: News — Tags: , , , , , , — Vision @ 7:34 pm
New Hampshire Unemployment Wage Base to Increase for 2012
New Hampshire Unemployment Wage Base to Increase for 2012
The New Hampshire Department of Employment Security has announced an increase in the taxable wage base for 2012. The wage base will increase from $12,000 for 2011 to $14,000 for 2012.

Third Consecutive Year the Wage Base Has Increased

This is the third consecutive year the wage base will increase. In 2010, it increased from $8,000 to $10,000 and in 2011 it increased from $10,000 to $12,000.

Find Out the Wage Base for All States by Visiting the Vision Payroll Unemployment Taxable Wage Base Page

Contact Vision Payroll if you have any questions on the New Hampshire unemployment taxable wage base or visit our Unemployment Taxable Wage Base page.

August 1, 2011

Vermont Wage Base to Increase for 2012

Filed under: News — Tags: , , , , , — Vision @ 7:16 pm
VT Govenor Peter Shumlin
VT Govenor Peter Shumlin
Pursuant to legislation passed in 2010, the taxable wage base in Vermont will increase for 2012. The wage base will increase from $13,000 for 2011 to $16,000 for 2012.

Third Consecutive Annual Increase

This is the third consecutive year that the wage base will increase. In 2010, it increased from $8,000 to $10,000 and in 2011 it increased from $10,000 to $13,000.

Find Out the Wage Base for All States by Visiting the Vision Payroll Unemployment Taxable Wage Base Page

Contact Vision Payroll if you have any questions on the Vermont unemployment taxable wage base or visit our Unemployment Taxable Wage Base page.

July 2, 2011

Massachusetts Releases Employer-Provided Health Care Benefits Update

Navjeet K. Bal, Commissioner, Massachusetts DOR
Navjeet K. Bal, Commissioner, Massachusetts DOR
The Massachusetts Department of Revenue (DOR) has released Technical Information Release (TIR) 11-5, Employer-Provided Health Care Benefits Update. This TIR updates TIR 07-16, Personal Income Tax Treatment of Employer-Provided Health Insurance Coverage for an Employee’s Child, to reflect a Massachusetts statutory change to the personal income tax enacted in response to the federal Patient Protection and Affordable Care Act. The general effect of the Massachusetts change is to conform to the federal income exclusion rules for health care benefits that are in effect for each year, notwithstanding the general Massachusetts tie-in to federal income and exclusion rules as of January 1, 2005. The Massachusetts change is effective for tax years beginning on or after January 1, 2010.

Massachusetts Law Generally Conforms To 2005 IRC

In general, Massachusetts individual taxpayers must follow the Internal Revenue Code (IRC) in effect as of January 1, 2005. As a result of a recent law change in Massachusetts, taxpayers now follow the federal law for IRC §105 and §106 for exclusions from gross income for employer-provided health care benefits. This change is retroactive to January 1, 2010.

Amended Form W-2 May Be Required

Employers who imputed income for amounts that are now excluded from income may need to file Form W-2C, Corrected Wage and Tax Statement. Such a filing would be required if any 2010 or 2011 Forms W-2 have been provided to employees with such imputed income included. If a 2011 Form W-2 has not already been provided to affected employees, employers can simply adjust the 2011 Form W-2 when prepared. Employees who have already filed a 2010 Form 1, Massachusetts Resident Income Tax would need to file an amended return to reflect the Form W-2C. Employees who have yet to file can simply incorporate the Form W-2C figures into their return when they file.

Contact Vision Payroll for Assistance with Form W-2C

Contact Vision Payroll today if you have affected employees and need to file Form W-2C.

January 25, 2011

2010 Form W-2 Tips, Part 16, Boxes 15 through 20, State and Local Income Tax Information

Filed under: News — Tags: , , , , , , , , — Vision @ 4:34 pm

This is the last in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. 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.

Two States May Be Reported on Each Individual Form

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 Wage Reporting Should Follow Rules of That State

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.

Final Installment in Series on 2010 Form W-2

Although this ends this series on the 2010 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 2011 year-end reporting season. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 24, 2011

2010 Form W-2 Tips, Part 15, Box 14 Other

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. 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.

Use Box 14 to Provide Additional Inforamtion

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

USERRA Reporting for Makeup Amounts Is Done in Box 14

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.

Label Amounts in Box 14

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

Boxes 15 Through 20, State and Local income Tax Information Is the Next Topic

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 2010 Form W-2.

January 23, 2011

2010 Form W-2 Tips, Part 14, Box 13 Checkboxes

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. 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.

First Checkbox Is for Statutory Employees

Three checkboxes 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.

Second Checkbox Is for Retirement Plan Participation

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.

Third Checkbox Is for Third-Party Sick Pay

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.

Deceased Employee Checkbox Has Been Eliminated

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

Box 14, Other Is the Next Topic

The next topic in this continuing series will be Box 14, other. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 22, 2011

2010 Form W-2 Tips, Part 13, Box 12 Codes

Filed under: News — Tags: , , , , , , , — Vision @ 10:48 am

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. 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.

Box Identifiers a, b, c, and d Are not 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
Code CCHIRE exempt wages and tips

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

Box 13, Checkboxes Is the Next Topic

The next topic in this continuing series will be Box 13, checkboxes. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 18, 2011

2010 Form W-2 Tips, Part 12, Box 11 Nonqualified Plans

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. 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 Distributions from 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 May Show Earnings and Deferrals That Became Taxable

Box 11 should show deferrals and earnings that became taxable for social security and Medicare purposes in 2010 because the deferrals and earnings were no longer subject to a substantial risk of forfeiture, but only if the amounts were for services before 2010 and no distributions were made in 2010. These amounts must also be reported in box 3, up to the $106,800 wage limit, and box 5.

Box 11 Not to Be Used for Deferrals Included in Box 3 and/or 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 2010.

Use Form SSA-131 to Report When Payments and Deferrals Are Made in the Same Year

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, but only if the employee was age 62 or older by the end of 2010. Generally the employer should report the amount from box 1 of Form W-2, plus any amounts deferred during 2010, 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 Jessica retired during 2010. She earned $50,000 in wages, but deferred $35,000 of that amount in a nonqualified deferred compensation plan. Since she retired, she also received $75,000 in payments from the plan. Since there are both distributions and deferrals in 2010, 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

Box 12, Codes Is the Next Topic

The next topic in this continuing series will be Box 12, codes. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 17, 2011

2010 Form W-2 Tips, Part 11, Box 10 Dependent Care Benefits

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. 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.

2010 Annual Exclusion Limit Is $5,000

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 box 1 and box 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 box 1 and box 5 and box 3, subject to the wage limitation.

Box 11, Nonqualified Plans Is the Next Topic

The next topic in this continuing series will be Box 11, nonqualified plans. Contact Vision Payroll with any questions on the 2010 Form W-2.

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