Vision Payroll

According to the Unemployment Insurance Agency of the State of Michigan Department of Energy, Labor & Economic Growth, the FUTA tax credit reduction rate will increase from 0.3% in 2009 to 0.6% 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 Rate	6.2%
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.

Michigan Is Subject To Credit Reduction for Second Consecutive Year

Since Michigan was already subject to a credit reduction in 2009 of 0.3%, the credit reduction will increase to 0.6% for 2010. The credit reduction will continue to increase by 0.3 percentage points each year until the loan is paid, e.g., 0.9% in 2011, 1.2% in 2012, etc.

Vision Payroll Will Calculate the Credit Reduction for All Michigan Clients

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

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.

In Rev. Proc. 2010-39, the Internal Revenue Service (IRS) released updated per diem rates for 2011 and made some minor changes to list of high-cost areas.

Per Diem Rates Decrease for High-Cost and Other Localities

In §5.02, the IRS announced that per diem rate for high-cost localities is $233 (down from $258 in 2010) and the per diem rate for other localities is $160 (down from $163 in 2010).

Meal Rates and Incidental Rates Remain the Same for 2010

In §5.02, the IRS announced that meal rate for high-cost localities is $65 and the meal rate for other localities is $52. These rates are unchanged from 2010. Also unchanged is the incidental expenses rate. In §4.05, the IRS announced that the incidental rate is $5 for 2011.

High-Cost Localities Announced

In §5.03, the IRS announced the localities that “are high-cost localities for all of the calendar year or the portion of the calendar year specified in parentheses under the key city name.”

Additions to and Deletions from the High-Cost List

In §5.04, the IRS announced the localities that have been added to the list of high-cost localities. They are:

• Yosemite National Park, California;
• Silverthorne/Breckenridge, Colorado;
• New Orleans, Louisiana;
• Falmouth, Massachusetts;
• Riverhead/Ronkonkoma/Melville, New York;
• Kill Devil, North Carolina;
• Stowe, Vermont; and
• Virginia Beach, Virginia.

In §5.04, the IRS announced the localities that have had the portion of the year for which they are considered high-cost localities changed from 2010. They are:

• South Lake Tahoe, California;
• Aspen, Colorado;
• Telluride, Colorado;
• Vail, Colorado;
• Fort Lauderdale, Florida;
• Miami, Florida; and
• Martha’s Vineyard, Massachusetts.

In §5.04, the IRS also announced that Hershey, Pennsylvania has been removed from the list of high-cost localities.

New Per Diem Rates Effective October 1, 2010 or January 1, 2011

The new per diem rates are effective October 1, 2010 for taxpayers using the fiscal year period for reimbursements and January 1, 2011 for those using the calendar year period for reimbursements.

Contact Vision Payroll if you have any questions on Rev. Proc. 2010-39.

The General Services Administration (GSA) updated the maximum per diem rates for travel after September 30, 2010 and before October 1, 2011.

Standard Lodging Rate Increases 10%

For destinations or counties not specifically listed, the lodging per diem is $77 and the meals and incidental expenses per diem is $46. The rates for 2010 were $70 and $46, respectively.

Many Locations Have a Non-Standard Rate

Certain destinations or counties are listed with higher per diem rates for part or all the fiscal year.

Contact Vision Payroll if you have any questions on maximum per diem rates.

The United States Department of Transportation (DOT) recently released updated Standard Industry Fare Level (SIFL) rates which are used to value employee personal use of company aircraft. The revised rates are 22.43¢ per mile for 500 or fewer miles traveled, 17.10¢ per mile for greater than 500 miles traveled and up to 1,500 miles traveled, and 16.44¢ per mile for greater than 1,500 miles traveled. The terminal charge is $41.00. These rates apply to the period from July 1, 2010 to December 31, 2010.

Contact Vision Payroll if you have any questions on SIFL changes.

Michael Tanchek, Labor Commissioner for the Department of Business and Industry, State of Nevada, announced recently that effective July 1, 2010 the minimum wage for employees to whom qualifying health benefits have been made available by the employer will be $7.25 per hour and the minimum wage for all other employees will be $8.25 per hour. Contact Vision Payroll if you have any questions on the Nevada minimum wage increase or visit our Minimum Wage Chart.

The Massachusetts Division of Unemployment Assistance (DUA) has released the 2010 employer contribution rates for unemployment taxes. Employers may check their rate using QUEST. Rates were determined using Schedule E, the same schedule as was used in 2009. Even though the rate schedule remained the same, individual employer rates generally changed based on activity in their account during the measurement period of October 1, 2008 to September 30, 2009. Since the rates were released late in the quarter, some employers may have significant overpayments or underpayments of tax because the rate differential must be applied to all subject wages for the entire first quarter.

Employers who received their rate decrease before the last payroll of the quarter will receive a credit in the last payroll of the quarter for the difference between the tax collected and the tax now due using the new rate. Employers who received their rate decrease after the last payroll of the quarter will receive a refund check for the difference between the tax collected and the tax now due using the new rate.

Employers who received their rate increase before the last payroll of the quarter will need to pay the additional tax equal to the difference between the tax collected and the tax now due using the new rate in the last payroll of the quarter. Employers who received their rate increase after the last payroll of the quarter will need to pay the additional tax equal to the difference between the tax collected and the tax now due using the new rate in an additional end-of-quarter payroll.

The adjustment in the last payroll or additional payroll should be the only adjustment required to correct the tax liability for 2010. Contact Vision Payroll if you have further questions on the 2010 employer contribution rates for unemployment taxes.

The Massachusetts Division of Unemployment Assistance (DUA) has released the UHI contribution rates for 2010. According to MGL c. 151A, §14G(f):

There shall be a rate review board composed of the commissioner of medical assistance or his designee, the deputy director of employment and training or his designee and the commissioner of insurance or his designee. The rate review board shall determine if the unemployment health insurance contribution rate and the unemployment health insurance contribution wage base established in this section shall be adequate to provide for the estimated costs for the subsequent year of unemployment health insurance programs established pursuant to subsection (j) provided by said division of employment and training. If in the opinion of said board the unemployment health insurance contribution wage base or the unemployment health insurance contribution rate as established above would be inadequate to properly fund the unemployment health insurance program, said rate of health insurance inflation or the unemployment health insurance contribution rate shall be appropriately adjusted in order to properly fund said unemployment health insurance program.

On or before November 30 of each year, the deputy director of employment and training shall certify to said board the estimated costs for the subsequent year of health insurance programs provided by the division of employment and training for individuals and their families who are eligible for the health insurance program established by subsection (j) for individuals receiving unemployment insurance compensation. Such estimated costs shall be exclusive of amounts to be covered by premiums, co-payments, deductibles and co-insurance to be paid by covered individuals and any anticipated appropriations. The rate review board shall further adjust such estimated costs to reflect prudent levels of reserves sufficient to carry out the responsibilities of the division of employment and training for said unemployment health insurance program. If in the opinion of said board the rate of health insurance inflation on the unemployment health insurance contribution wage base as established or calculated above would be inadequate to properly fund said unemployment health insurance program, said rate of health insurance inflation or the unemployment health insurance contribution rate shall be appropriately adjusted in order to properly fund said health insurance programs.

According to the DUA, for 2010 rates will be as follows:

The health insurance contribution rate is a flat rate of 0.24% for calendar year 2010 for all subject employers—except for those meeting the exempt or reduced rate criteria. (Employers operating within two calendar years following the “newly subject” status pay at rates of 0.04% and 0.08%, respectively.)

Contact Vision Payroll if you have any questions on the 2010 UHI contribution rates.

South Dakota Governor Mike Rounds recently signed SB 186, which increases the taxable wage base from $10,000 in 2010, to $11,000 in 2011, $12,000 in 2012, $13,000 in 2013, $14,000 in 2014, and $15,000 in 2015. The surcharge was reduced from 1.5% to 1.0% in 2010 and to 0.75% in 2011. The maximum rate for 2010 was increased, however, from 8.5% to 9.5%. Contact Vision Payroll if you have any questions on the South Dakota unemployment tax law changes.

Governor Linda Lingle signed into law HB 2169 that lowers the taxable wage base for 2010 from $38,800 to $34,900 or 90% of the average annual wage for 2010 and 2011. The new law also sets the rate schedule to Schedule D for 2010 and Schedule F for 2011. Vision Payroll has updated its tax table calculation for Hawai’i employers and will adjust tax liabilities on the next live payroll for all Hawai’i employers. Contact Vision Payroll if you have any questions on the Hawai’i wage base and rate changes or visit our Unemployment Taxable Wage Base page.