Vision Payroll

January 16, 2011

2010 Form W-2 Tips, Part 10, Box 9 Advance EIC Payment

Filed under: News — Tags: , , , , , , — Vision @ 11:37 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 9, advance EIC payment.

Maximum EIC Advance Payment in 2010 Was $1,830

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 2010, the maximum advance EIC was $1,830. Employees entitled to additional EIC are eligible to receive it when filing Form 1040, US Individual Income Tax Return.

Box 10, Dependent Care Benefits Is the Next Topic

The next topic in this continuing series will be Box 10, dependent care benefits. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 15, 2011

2010 Form W-2 Tips, Part 9, Box 8 Allocated Tips

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 8, allocated tips.

Use Form 8027 to Determine Box 8 Amount

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.

Do Not Duplicate Box 8 Entries

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

Box 9, Advance EIC Payment Is the Next Topic

The next topic in this continuing series will be Box 9, advance EIC payment. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 11, 2011

2010 Form W-2 Tips, Part 8, Box 7 Social Security Tips

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 7, social security tips.

Boxes 3 and 7 Combined Cannot Exceed $106,800

Box 7 shows the amount of tips reported by employees. In many situations, the cash wages paid are insufficient to collect the entire amount of social security and Medicare tax. Reported tips must still be shown in this box, even if social security or Medicare tax was not withheld on them. For 2010, the combined total of Boxes 3 and 7 cannot exceed $106,800. The reported tips should be included with amounts reported in Box 1, wages, tips, other compensation and Box 5, Medicare wages and tips. Since social security benefits are based on the amount of social security tips reported to the Social Security Administration (SSA), it is important that employees periodically review their social security earnings record and provide the SSA with the Form W-2 to update any incorrectly posted earnings records.

Box 8, Allocated Tips Is the Next Topic

The next topic in this continuing series will be Box 8, allocated tips. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 10, 2011

2010 Form W-2 Tips, Part 7, Box 6 Medicare Tax Withheld

Filed under: News — Tags: , , , — Vision @ 6:24 pm

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 6, Medicare tax withheld.

No Limit in 2010 on Medicare Tax Withheld

Box 6 shows the total amount of employee Medicare withheld, including the amount withheld on tips. It does not include any employer contribution toward Medicare on the employee’s behalf. The 2010 rate was 1.45% and unlike social security, there is no taxable wage base. Therefore, there is no upper limit to the amount entered in this box. If the employer paid the employee’s share of such taxes rather than withholding them, the tax must be grossed up and included in boxes 1, 3, and 5.

Box 7, Social Security Tips Is the Next Topic

The next topic in this continuing series will be Box 7, social security tips. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 9, 2011

2010 Form W-2 Tips, Part 6, Box 5 Medicare Wages and Tips

Filed under: News — Tags: , , , — Vision @ 12:39 pm

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 5, Medicare wages and tips.

No Limit in 2010 on Medicare Wages

Box 5 shows the total amount of wages subject to Medicare tax. For most employees, this amount equals the sum of boxes 3 and 7, with one exception. There is no limit on the amount of Medicare wages as there is with social security wages. Additionally, depending on the date of hire, some governmental employees may have Medicare wages, but not social security wages.

Box 6, Medicare Tax Withheld Is the Next Topic

The next topic in this continuing series will be Box 6, Medicare tax withheld. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 4, 2011

2010 Form W-2 Tips, Part 5, Box 4 Social Security Tax Withheld

Filed under: News — Tags: , , , , — Vision @ 10:00 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 4, social security tax withheld.

Maximum Withholding for 2010 Was $6,621.60

Box 4 shows the total amount of employee social security tax withheld, including the amount withheld on tips. It does not include any employer contribution toward social security on the employee’s behalf. Since the 2010 rate was 6.2% and the taxable wage base was $106,800, the amount in this box should not exceed $6,621.60. If the employer paid the employee’s share of such taxes rather than withholding them, the tax must be grossed up and included in boxes 1, 3, and 5.

Box 5, Medicare Wages and Tips Is the Next Topic

The next topic in this continuing series will be Box 5, Medicare wages and tips. Contact Vision Payroll with any questions on the 2010 Form W-2.

January 2, 2011

2010 Form W-2 Tips, Part 4, Box 3 Social Security Wages

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 3, social security wages.

Social Security Earnings Help Determine the Amount of Social Security Benefits

Box 3 shows the amount wages paid subject to social security tax. It does not include social security tips reported in box 7 or allocated tips reported in box 8. Wages should be reduced by amounts withheld for non-taxable benefits elected under §125 plans, certain clergy housing allowances, and third-party sick pay after the end of six calendar months after the calendar month that the employee last worked for the employer. For 2010, the combined total of boxes 3 and 7 cannot exceed $106,800. Since social security benefits are based on the amount of social security wages reported to the Social Security Administration (SSA), it is important that employees periodically review their social security earnings record and provide the SSA with the Form W-2 to update any incorrectly posted earnings records.

Box 4, Social Security Tax Withheld Is the Next Topic

The next topic in this continuing series will be Box 4, social security tax withheld. Contact Vision Payroll with any questions on the 2010 Form W-2.

December 28, 2010

2010 Form W-2 Tips, Part 2, Box 1 Wages, Tips, Other Compensation

2010 Form W-2 Tips, Part 2, Box 1 Wages, Tips, Other Compensation
2010 Form W-2 Tips, Part 2, Box 1 Wages, Tips, Other Compensation
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 1, wages, tips, other compensation.

Box 1 May Include Several Adjustments To Gross Wages

Box 1 shows the amount employees must enter on line 7 of Form 1040, US Individual Income Tax Return. It may be, but is not necessarily, equal to gross wages. Common adjustments that increase or decrease gross wages include the following:

  • Employee elective deferral to qualified retirement plans such as §401(k) plans, SIMPLE plans, and §403(b) plans (decrease).
  • Amounts withheld for non-taxable benefits elected under §125 plans (decrease).
  • Taxable non-cash fringe benefits, such as personal use of company automobile (increase).
  • Certain clergy housing allowances (decrease).
  • Reported tips (increase).
  • Expense reimbursements paid under a non-accountable plan (increase).
  • Accident and health insurance premiums for so-called 2% S corporation shareholders (increase).
  • Cost of group-term life insurance in excess of $50,000 (increase).

Box 2, Federal Income Tax Withheld Is the Next Topic

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

November 28, 2010

Indiana Is a Credit Reduction State for 2010

Filed under: News — Tags: , , , , — Vision @ 5:40 pm
Mark W. Everson, Commissioner, Indiana Department of Workforce Development
Mark W. Everson, Commissioner, Indiana Department of Workforce Development
According to the Indiana Department of Workforce Development, Indiana will be a FUTA tax credit reduction state in 2010.

Standard Credit Rate is 5.4% for 2010

Generally, employers who pay their state unemployment tax by the due date for filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return receive a credit 5.4% against their Federal Unemployment Tax Act (FUTA) tax. This credit is claimed on Form 940.

FUTA Wage Base is $7,000 for 2010

Since the FUTA wage base is $7,000 for 2010, a maximum tax of $56 per employee is due, calculated as follows:

FUTA Taxable Wage Base
FUTA Taxable Wage Base$7,000
FUTA Tax Rate6.2%
Maximum FUTA Tax per Employee Before Credit $434.00$434
Less: FUTA Tax Credit Reduction ($7,000 X 5.4%)$378
Maximum Net FUTA Tax per Employee$56

Employers in Certain States Are Subject To Credit Reduction

Federal law provides for a reduction in the FUTA tax credit when a state has outstanding federal loans for two years. The credit reduction is calculated on Schedule A of Form 940.

Indiana Is Subject To Credit Reduction for First Time

Since Indiana was not a credit reduction state in 2009, the credit reduction rate will be 0.3% for 2010. Adding the credit reduction rate of 0.3% to the normal rate of 0.8% results in an effective FUTA rate of 1.1% for Indiana employers in 2010. The credit reduction will continue to increase by 0.3 percentage points each year until the loan is paid, e.g., 0.6% in 2011, 0.9% in 2012, etc. Adding the credit reduction rate of 0.3% to the normal rate of 0.8% results in an effective FUTA rate of 1.1% for Indiana employers in 2010.

Vision Payroll Will Calculate the Credit Reduction for All Indiana Clients

Contact Vision Payroll if you have any further questions on the Indiana credit reduction.

November 19, 2010

Question of the Week: Are There Any Other Credit Reduction States for 2010?

Filed under: News — Tags: , , , , , — Vision @ 3:12 pm

Governor Mark Sanford, Courtesy of South Carolina Governor's Office
Governor Mark Sanford, Courtesy of South Carolina Governor's Office
This week’s question comes from Peter, a company controller. I read that Michigan is a credit reduction state for 2010. Are there any other credit reduction states for 2010? Answer: Federal law provides for a reduction in the FUTA tax credit when a state has outstanding federal loans for two years. The credit reduction is calculated on Schedule A of Form 940.

South Carolina and Michigan Are the Credit Reduction States for 2010

In addition to Michigan, the South Carolina Department of Employment and Workforce has announced that South Carolina is also a FUTA credit reduction state for 2010.

Maximum Tax Increase Is $21 per Employee

Since this is South Carolina’s first year as a credit reduction state, the credit reduction will be 0.3% or a maximum of $21 per employee. This is calculated by multiplying the wage base of $7,000 by the credit reduction of 0.3%.

Michigan, South Carolina and Indiana Are Credit Reduction States for 2010

As noted elsewhere and in the comments, the three credit reduction states for 2010 are Michigan, South Carolina, and Indiana. Unless Congress changes the rules or states make significant changes, as many as thirty-eight states may be credit reduction states in 2011.

Vision Payroll Will Calculate the Credit Reduction for All South Carolina Clients

Contact Vision Payroll if you have any further questions on the South Carolina credit reduction.

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