Vision Payroll

February 28, 2011

IRS Confirms It Sent Incorrect Penalty Notices

IRS Confirms It Sent Incorrect Penalty Notices
IRS Confirms It Sent Incorrect Penalty Notices
In IMRS10-0001357, the Internal Revenue Service (IRS) confirmed that erroneous CP 276B and CP 207 notices were sent to several taxpayers.

IMRS Addresses Significant Issues Regarding IRS Policies, Practices and Issues

The Issue Management Resolution System (IMRS) was designed to capture, develop, and respond to stakeholder issues and to identify nationwide trends in the reporting, filing, and paying requirements that may indicate a need to change IRS processes or procedures.

HIRE Credit Misapplication Led To Erroneous Notices

A problem was identified in the way the 2010 first quarter HIRE credit (line 12e) was applied when computing the Failure to Deposit (FTD) penalty on 2010 second quarter Forms 941. As a result, erroneous CP276B notices were issued.

IRS Response To Incorrect Penalty Notices

The IRS response to this issue is:

Incorrect CP276B and CP207 notices were generated for Form 941 for the tax period ending [June] 30, 2010. There was a programming problem and the HIRE credit arising from the first quarter and claimed on second quarter Forms 941 was not used in the systemic FTD penalty calculation. As a result, the computer charged incorrect penalties in some cases and generated incorrect CP 276B systemic waiver notices in others. A recovery was run to reverse the incorrectly assessed FTD penalties. No corrective action is necessary for the incorrect CP 276B notices since no penalty was charged. This situation will not be considered for future determinations of whether First Time Abatement relief will be granted.

Contact Vision Payroll for Further Information

Contact Vision Payroll for further information regarding the incorrectly issued penalty notices.

February 26, 2011

IRS Releases Draft Form 941

IRS Releases Draft Form 941
IRS Releases Draft Form 941
The Internal Revenue Service (IRS) recently released a draft Form 941, Employer’s QUARTERLY Federal Tax Return. The revised Form 941 will be used for reporting information for the first quarter of 2011 and later quarters. It cannot be used to report information for 2010.

Social Security Rate Is Changed on Draft Form

Since the employee social security tax rate for 2011 is 4.2%, the rate used to calculate tax on both taxable social security wages and taxable social security tips has been changed from 12.4% to 10.4%.

New Line 5e Has Been Added

The draft form includes a new line 5e to report §3121(q) notice and demand—tax due on unreported tips. Under §3121(q), when notice and demand is made for such taxes, the remuneration is deemed to be paid on the date of the notice.

Lines 6a-6d Made Inactive

Lines 6a, 6b, 6c, and 6d have been made inactive on the draft Form 941. These lines were used to report on qualified employees and exempt wages under the HIRE Act.

Contact Vision Payroll for Further Information

Contact Vision Payroll for further information on the changes in the draft Form 941.

December 1, 2010

Tip of the Week: IRS Releases 2010 Form 944

IRS Commissioner Douglas H. Shulman
IRS Commissioner Douglas H. Shulman
The Internal Revenue Service (IRS) has released the 2010 Form 944, Employer’s ANNUAL Federal Tax Return, and related instructions. Form 944 is designed so the smallest employers (those whose annual liability for social security, Medicare, and withheld federal income taxes is $1,000 or less) will only file once a year instead of every quarter.

Several Changes Have Been Made To the 2010 Form 944

The 2010 Form 944 has several new items. The new items include the following:

Qualified Employer’s Social Security Tax Exemption

Qualified employers are allowed an exemption for their share (6.2%) of social security tax on wages/tips paid to qualified employees after March 31, 2010, and before January 1, 2011.

Qualified Employer’s Social Security Tax Credit

Qualified employers are allowed a credit for their share (6.2%) of social security tax on wages/tips paid to qualified employees after March 18, 2010, and before April 1, 2010.

COBRA Premium Assistance Credit Extended

The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months.

Social Security Wage Base for 2010 and 2011

Do not withhold or pay social security tax after an employee reaches $106,800 in social security wages for the year. There is no limit on the amount of wages subject to Medicare tax.

Advance Payment of Earned Income Credit (EIC)

The option of receiving advance payroll payments of EIC expires on December 31, 2010. Individuals eligible for EIC in 2011 can still claim the credit when they file their federal income tax return. Individuals who receive advance payments of EIC in 2010 must file a 2010 federal income tax return.

Electronic Deposit Requirement

The IRS has issued proposed regulations under §6302 of the Internal Revenue Code of 1986 which provide that beginning January 1, 2011, you must deposit all depository taxes (such as employment tax, excise tax, and corporate income tax) electronically using the Electronic Federal Tax Payment System (EFTPS). Under these proposed regulations, which are expected to be finalized by December 31, 2010, Forms 8109 and 8109-B, Federal Tax Deposit Coupon, cannot be used after December 31, 2010.

Vision Payroll Will File Form 944 for Eligible Taxpayers

Contact Vision Payroll if you have further questions on Form 944.

October 15, 2010

Question of the Week: What Is the Impact of a Temporary Layoff on the HIRE Act Incentives?

What is the Impact of Temporary Layoff on the HIRE Act Incentives?
What is the Impact of Temporary Layoff on the HIRE Act Incentives?
This week’s question comes from Andrea, an HR director. We hired an employee who qualified for the HIRE Act Incentives, including payroll tax forgiveness. We had to lay him off temporarily and don’t know if he still qualifies under his previous layoff or if he needs to requalify. What is the impact of temporary layoff on the HIRE Act incentives? Answer: Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are exempt from certain employment taxes and may receive other tax benefits. In order to qualify under the HIRE Act, employers are required to “get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period.” Workers who are temporarily laid off may or may not have to requalify and fill out a new Form W-11 or the Spanish-language equivalent, Form W-11(SP).

IRS Addresses Issue in Information Letter 2010-0198

The Internal Revenue Service (IRS) addressed this issue in Information Letter 2010-0198. According to the IRS:

An individual who is already a qualified employee and who experiences a short term or temporary interruption in his or her performance of services continues to be a qualified employee unless the interruption constitutes a termination of employment. Whether a short term or temporary interruption of an employee’s performance of services constitutes a termination of employment depends on the facts and circumstances. In the case of an individual who was previously employed as a qualified employee and whose employment is terminated, the employee will have to again meet the requirements for qualified employee status at the time the employment relationship is reestablished.

Documentation Is Key to Support Employer Position

Vision Payroll recommends that employers document thoroughly why a “temporary interruption” was not a termination of employment if they do not requalify an employee under the HIRE Act. Consultation with a qualified labor law attorney to determine when employment terminates is strongly recommended.

September 17, 2010

Question of the Week: Can We Still Claim a HIRE Act Credit for the Second Quarter?

Can We Still Claim a HIRE Act Credit for the Second Quarter?
Can We Still Claim a HIRE Act Credit for the Second Quarter?
This week’s question comes from Phil, a small-business owner. We just realized that one of our employees who we hired in April is eligible for the HIRE Act Credit. Can we still claim a HIRE Act credit for the second quarter? Answer: Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are exempt from certain employment taxes. In order to qualify under the HIRE Act, the wages must be paid by a qualified employer “with respect to employment” in the period beginning March 19, 2010 and ending December 31, 2010.

HIRE Act Credit Still Available for Second Quarter

Employers may still claim the credit for the second quarter by filing Form 941-X, Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund.

IRS Releases Revised Form 941-X to Claim HIRE Act Credit for Previous Quarters

On September 11, 2010, the Internal Revenue Service (IRS) released a revised Form 941-X which employers can use to claim the HIRE Act credit for previous quarters. The new form adds lines 11a-11c to adjust for the credit. The new lines are for the following:

  • 11a.    Number of qualified employees first paid exempt wages/tips this quarter.
  • 11b.    Number of qualified employees paid exempt wages/ tips this quarter.
  • 11c.    Exempt wages/tips paid to qualified employees this quarter.

Vision Payroll Is Ready to Help

Contact Vision Payroll if you need assistance filing Form 941-X to claim the HIRE Act credit for previous quarters.

August 22, 2010

Replacing Employees Who Are Terminated for Poor Performance Under the HIRE Act

Replacements for Employees Terminated for Poor Performance May Qualify Under the HIRE ACT
Replacements for Employees Terminated for Poor Performance May Qualify Under the HIRE ACT
Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are exempt from certain employment taxes. In order to qualify under the HIRE Act, the wages must be paid by a qualified employer “with respect to employment” in the period beginning March 19, 2010 and ending December 31, 2010. The Internal Revenue Service (IRS) has provided employers further information on the HIRE Act.

Replacing Poor Performers Not a Bar to Payroll Tax Forgiveness Under the HIRE Act

Under the HIRE Act, employees who are hired to replace other employees are generally not eligible to be qualified employees. One exception to this rule is for employees hired to replace other employees who were terminated due to poor performance. If they otherwise meet the qualification standards, such employees are qualified employees under the HIRE Act.

Review Recent Hires to See if Any Qualify for Payroll Tax Forgiveness Under the HIRE Act

Employers should review employees who were hired to replace employees who were terminated due to poor performance to see if they otherwise qualify and are therefore eligible under the HIRE Act.

Vision Payroll Helps Employers Claim Payroll Tax Forgiveness

Contact Vision Payroll if you have further questions on the HIRE Act.

August 17, 2010

Replacing Employees Who Are Terminated for Gross Misconduct Under the HIRE Act

Replacements for Employees Terminated for Gross Misconduct May Qualify Under the HIRE ACT
Replacements for Employees Terminated for Gross Misconduct May Qualify Under the HIRE ACT
Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are exempt from certain employment taxes. In order to qualify under the HIRE Act, the wages must be paid by a qualified employer “with respect to employment” in the period beginning March 19, 2010 and ending December 31, 2010. The Internal Revenue Service (IRS) has provided employers further information on the HIRE Act.

Under the HIRE Act, employees who are hired to replace other employees are generally not eligible to be qualified employees. One exception to this rule is for employees hired to replace other employees who were terminated due to gross misconduct. If they otherwise meet the qualification standards, such employees are qualified employees under the HIRE Act.

Employers should review employees who were hired to replace employees who were terminated due to gross misconduct to see if they otherwise qualify and are therefore eligible under the HIRE Act.

Contact Vision Payroll if you have further questions on the HIRE Act.

August 16, 2010

Replacing Employees Who Voluntarily Terminate Employment Under the HIRE Act

Replacements for Employees Who Voluntarily Terminate Employment May Qualify Under the HIRE ACT
Replacements for Employees Who Voluntarily Terminate Employment May Qualify Under the HIRE ACT
Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are exempt from certain employment taxes. In order to qualify under the HIRE Act, the wages must be paid by a qualified employer “with respect to employment” in the period beginning March 19, 2010 and ending December 31, 2010. The Internal Revenue Service (IRS) has provided employers further information on the HIRE Act.

Under the HIRE Act, employees who are hired to replace other employees are generally not eligible to be qualified employees. One exception to this rule is for employees hired to replace other employees who terminated employment voluntarily. If they otherwise meet the qualification standards, such employees are qualified employees under the HIRE Act.

Employers should review employees who were hired to replace employees who terminated voluntarily to see if they otherwise qualify and are therefore eligible under the HIRE Act.

Contact Vision Payroll if you have further questions on the HIRE Act.

August 14, 2010

Hiring Self-Employed Individuals and Claiming the HIRE Credit

Hours Worked as a Self-Employed Individual Do Not Count as Employment for HIRE Act Test
Hours Worked as a Self-Employed Individual Do Not Count as Employment for HIRE Act Test
Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are exempt from certain employment taxes. In order to qualify under the HIRE Act, the wages must be paid by a qualified employer “with respect to employment” in the period beginning March 19, 2010 and ending December 31, 2010. The Internal Revenue Service (IRS) has provided employers further information on the HIRE Act.

Under the HIRE Act, employers are required “get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period.” According to the IRS, work performed as self-employed individual does not count toward the forty hours or less that an employee must have worked in the sixty day period in order to be a qualified individual.

Employers should review employees who may have been disqualified under the mistaken belief that work performed as a self-employed individual counted toward the forty hours test.

Contact Vision Payroll if you have further questions on the HIRE Act.

August 10, 2010

Resuming Active Status Under the HIRE Act

Rehired Employees May Qualify for Payroll Tax Exemption Under the HIRE Act
Rehired Employees May Qualify for Payroll Tax Exemption Under the HIRE Act
Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are exempt from certain employment taxes. In order to qualify under the HIRE Act, the wages must be paid by a qualified employer “with respect to employment” in the period beginning March 19, 2010 and ending December 31, 2010. The Internal Revenue Service (IRS) has provided employers further information on the HIRE Act.

According to the IRS, the HIRE Act payroll tax exemption applies to an employee who has been on furlough, standby status or temporary layoff “only if the furlough, standby status, or temporary layoff constitutes a termination of employment and, upon reestablishment of the employment relationship, the requirements to be a qualified employee are satisfied. Whether the employment relationship has terminated is based on facts and circumstances.” An earlier post reviewed when employment begins for purposes of the HIRE Act.

Employers should review employees who have been on furlough, standby status or temporary layoff and determine if the rehired employee is eligible under the HIRE Act.

Contact Vision Payroll if you have further questions on the HIRE Act.

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