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 14, 2011

Question of the Week: What Are 10 Hot Items for Payroll in 2011?

What Are 10 Hot Items for Payroll in 2011?
What Are 10 Hot Items for Payroll in 2011?
This week’s question comes from Seth, a company controller. It seems as if there are many changes in payroll recently. What are 10 hot items for payroll in 2011? Answer: The payroll industry and payroll departments have seen many changes as Congress uses the payroll and payroll tax system as a means to implement desired changes in social policy. Many items are new or revamped for 2011.

10 Hot Payroll Items in 2011

  1. 2011 Withholding Table Changes: Because of the recently passed Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act), employers should implement the 2011 withholding tables as soon as possible, but not later than January 31, 2011.
  2. Reduced Social Security Tax Rate for Employees: For 2011, the employee tax rate for Social Security is 4.2%, down from 6.2% in 2010. The employer rate remains at 6.2%.
  3. Expiration of Making Work Pay Credit: The Making Work Pay credit expired on December 31, 2010, resulting in higher federal withholding from many employees in 2011.
  4. Extension of COBRA Premium Assistance Credit: The credit for COBRA premium assistance payments has been extended to include premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months.
  5. Advance Payment of Earned Income Credit (EIC) Discontinued: The option to receive advance payroll payments of EIC expired on December 31, 2010.
  6. Federal Tax Payments Must Be Made by Electronic Funds Transfer: With the discontinuation of Forms 8109 and 8109-B, most federal tax payments must now be made by electronic funds transfer.
  7. FUTA Tax Rate Scheduled to Decrease: Under current law, the FUTA tax rate will decrease from 6.2% to 6.0%, effective July 1, 2011.
  8. Withholding Allowance Amount Set at $3,700: For 2011, the amount for one withholding allowance on an annual basis is $3,700, up from $3,650 for 2009 and 2010.
  9. Aggregate Form 940 and Form 941 Filers Must File Schedule R: Agents must complete the appropriate Schedule R when filling an aggregate Form 940 or Form 941.
  10. Choose to File Form 941 Instead of Form 944: Employers notified that they should file Form 944, but who want to file Form 941 instead, may notify the IRS and request to file Form 941.

More Changes Expected Throughout 2011

Check VisionPayroll.com regularly as the only certain thing about payroll and payroll taxes for 2011 is that many more changes can be expected.

August 29, 2010

Advance Earned Income Credit Is Repealed Starting in 2011

President Barack Obama
President Barack Obama
President Barack Obama recently signed the Education Jobs and Medicaid Assistance Act of 2010 (HR 1586) into law. As part of the legislation, the advance earned income credit, claimed by eligible employees by filing 2010 Form W-5, Earned Income Credit Advance Payment Certificate, is repealed for 2011 and thereafter.

Non-Refundable Portion Still Available by Adjusting Withholding

Eligible taxpayers will be able to claim the refundable portion of their credit on their individual income tax returns and can claim the non-refundable portion either on their individual income tax returns or by adjusting their federal income tax withholding on Form W-4, Employee’s Withholding Allowance Certificate or its Spanish equivalent, 2010 Formulario W-4(SP), Certificado de Exención de la Retención del Empleado.

Contact Vision Payroll if you have further questions on the advance earned income credit.

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 13, 2010

Tip of the Week: 2010 Form W-5 Now Available

The Internal Revenue Service (IRS) recently released 2010 Form W-5, Earned Income Credit Advance Payment Certificate. There are four criteria for claiming advance earned income credit (EIC) payments.

  1. Taxpayer (and spouse if filing jointly) must have a valid social security number.
  2. Taxpayer (or spouse if filing jointly) must have at least one qualifying child and be able to claim the credit using that child.
  3. Taxpayer’s expected earned income and adjusted gross income must be less than $35,535 ($40,545 if filing jointly).
  4. Taxpayer must expect to claim the EIC for 2010.

The maximum credit taxpayers may receive in advance is $1,830. Eligible taxpayers must file a new Form W-5 for 2010. The 2009 Form W-5 expired December 31, 2009. Contact Vision Payroll if you have any question on Form W-5.

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.

January 23, 2009

Question of the Week: Why Did My FIT Withheld Go Down?

This week’s question comes from Greg, a part-time accounts payable clerk. I made almost the same amount of money in 2008 as I did in 2007, but the amount of my federal income tax (FIT) withheld is significantly lower. Why did my FIT withheld go down? There are several reasons why your FIT withheld could be significantly lower, even though your income was almost the same.

  1. Inflation creep. Each year, as inflation reduces the value of the dollar, tax tables in Publication 15 (Circular E) are adjusted so that less tax would be withheld on the same amount of income. This is to adjust for the reduced buying power of the same dollar amount of income.
  2. Reduced income. At certain low-income levels, no tax is withheld if the withholding allowances claimed are greater than zero. Even FIT withholding of a few dollars each week can add up to a few hundred-dollar difference at year-end compared to no withholding at certain low-income levels.
  3. Increased withholding allowances. Many employees file a revised Form W-4, Employee’s Withholding Allowance Certificate or Formulario W-4(SP), Certificado de Exención de la Retención del Empleado. If the number of withholding allowances claimed increases, the amount of FIT withheld will decrease. Instead of receiving a big refund when a Form 1040 is filed, the employee receives a small net pay increase each week. Some employees also file Form W-4 claiming exemption from all FIT withholding.
  4. Claiming Earned Income Credit. Many employees file a new or revised Form W-5, Earned Income Credit Advance Payment Certificate. As in the case of increased withholding allowances, claiming an advance EIC payment will increase net pay received each week, but could reduce the amount of FIT withheld.
  5. Increase in pre-tax deductions. Employees who increase the amount of a §125 election or elect to contribute more money to a pre-tax retirement plan such as a SIMPLE plan or §401(k) plan, could have a significantly reduced amount of FIT withheld on the same amount of gross pay. Since those amounts are deducted before FIT withholding is calculated, the FIT deduction should be reduced.

Employees should work with their CPA to project their FIT liability for the current year then assess their progress toward meeting that liability each quarter. If the projected FIT withholding be less than the annualized projected liability a revised Form W-4 or Form W-5 should be filed or the need to pay quarterly estimated tax payments using Form 1040-ES should be considered. Employers should update the allowances claimed by logging in to their company file or providing Vision Payroll with the updated information.

January 3, 2009

IRS Releases 2009 Form W-5

The Internal Revenue Service (IRS) recently released 2009 Form W-5, Earned Income Credit Advance Payment Certificate. There are four criteria for claiming advance earned income credit (EIC) payments.

  1. Taxpayer (and spouse if filing jointly) must have a valid social security number.
  2. Taxpayer (or spouse if filing jointly) must have at least one qualifying child and be able to claim the credit using that child.
  3. Taxpayer’s expected earned income and adjusted gross income must be less than $35,463 ($38,583 if filing jointly).
  4. Taxpayer must expect to claim the EIC for 2009.

Eligible taxpayers must file a new Form W-5 for 2009. The 2008 Form W-5 expired December 31, 2008. Contact Vision Payroll if you have any question on Form W-5.

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