Vision Payroll

April 26, 2014

IRS Releases Revised Form 941-X

 

IRS Releases Revised Form 941-X

IRS Releases Revised Form 941-X

The Internal Revenue Service (IRS) recently released a revised version of Form 941-X, Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund.

COBRA Premium Assistance Credit May Only Be Claimed on Form 941-X

For tax periods beginning after 2013, the COBRA premium assistance credit may only be claimed on Form 941-X. Employers are longer able to claim the credit on either Form 941 or Form 941-SS. Employers are instructed to first file the Form 941 or Form 941-SS and then file the Form 941-X. Employers should not file the Form 941-X in advance of their regular filing.

Social Security Tax Rates May Differ

Depending on the period being amended, different social security tax rates may be in effect. For years other than 2011 and 2012, the employee and employer social security tax rates are 6.2% each or a total of 12.4%. For 2011 and 2012, the employee tax rate is 4.2% and the employer tax rate is 6.2% for a total of 10.4%. The correct rate should be used for the period being amended.

Contact Vision Payroll for Questions on Form 941-X

Contact Vision Payroll if you have further questions on Form 941-X.

January 4, 2013

Question of the Week: Why Did My Paycheck Go Down in 2013?

Filed under: News — Tags: , , , , , — Vision @ 4:24 pm

This week’s question comes from Courteney, an office manager.

Courteney asks:

I just received my first 2013 paycheck and it is a lot less than my last check from 2012. Why did my paycheck go down in 2013?

Answer: The biggest impact most employees will see is the impact of the social security tax rate reverting to 6.2% after being 4.2% for 2011 and 2012.

Net Pay to Decrease 2% for Many Employees

For employees whose wages are subject to social security tax, many will see net pay decrease by 2% of gross pay. Employees who participate in a §125 cafeteria plan must reduce gross wages by the amount allocated to the cafeteria plan. Other adjustments to gross pay that reduce social security wages may also impact the calculation.

Social Security Wage Base Increases To $113,700 for 2013

The social security wage base increased from $110,100 in 2012 to $113,700 in 2013. Combined with the increase in the rate to 6.2%, the maximum social security tax withholding went from $4,624.20 in 2012 to $7,049.40 in 2013, or an increase of over 52%.

Federal Withholding Essentially Unchanged for Most Employees in 2013

With the release of Notice 1036 in January 2013, Vision Payroll has revised its withholding to comply with the guidance from the Internal Revenue Service (IRS). Most employees will see a small decrease of anyway from a few cents to just under $10 on a weekly paycheck, depending on federal taxable wages. Employees who earn more than $7,991 on a weekly basis will see federal withholding gradually increase over 2012 amounts. Since the highest rate is now 39.6% in 2013 compared to 35% in 2012, the differential will increase as taxable wages increase.

Vision Payroll Now Using Revised 2013 Withholding Tables for Federal Income Tax Withholding

As noted above, Vision Payroll has implemented the revised 2013 withholding tables for federal income tax withholding that were released by the IRS in Publication 1036.

January 1, 2013

Social Security Tax Rate on Employees Reverts To 6.2% of Taxable Wages

Social Security Tax Rate on Employees Reverts To 6.2% of Taxable Wages
Social Security Tax Rate on Employees Reverts To 6.2% of Taxable Wages
The temporary decrease of the social security tax rate to 4.2% has expired with the end of 2012. Beginning in 2013, the social security tax rate on employees reverts to 6.2%.

Net Pay Will Decrease Approximately 2%

Employees will notice a decrease in net pay by about 2% of gross pay. For example, if gross pay is $1000, net pay would decrease by $20. An adjustment must be made for items that reduce social security taxable wages such as §125 cafeteria plans.

Employers Social Security Tax Rate Had Not Decreased

There will be no change in the tax rate on employers as there had not been a provision to reduce it. The rate on employers remained at 6.2% throughout 2011 and 2012.

2010 Tax Act Had Temporarily Reduced the Rate To 4.2%

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act) reduced the social security tax withholding rate from 6.2% to 4.2 % effective with payments made after December 31, 2010. Although initially effective only for 2011, it was later extended to include 2012.

Contact Vision Payroll for Further Information

Contact Vision Payroll if you have any further questions on the social security tax rate.

October 30, 2011

IRS Releases 2011 Form 944

IRS Commissioner Douglas H. Shulman
IRS Commissioner Douglas H. Shulman
The Internal Revenue Service (IRS) has released the 2011 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 2011 Form 944

The 2011 Form 944 has several new items. The new items include the following:

Employee Tax for Social Security Cut To 4.2%

The employee tax rate for social security has been cut to 4.2%, although the employer rate remains at 6.2%. The Medicare tax rate remains at 1.45% for both employees and employers.

COBRA Premium Assistance Credit Continues

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. The credit is claimed on line 9a.

Social Security Wage Base for 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 expired on December 31, 2010. Individuals eligible for EIC in 2011 can still claim the credit when they file their federal income tax return.

Electronic Deposit Requirement

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). 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.

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.

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.

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 7, 2011

Question of the Week: Why Did My Federal Income Tax Withholding Go Up in 2011?

Why Did My Federal Income Tax Withholding Go Up in 2011?
Why Did My Federal Income Tax Withholding Go Up in 2011?
This week’s question comes from Gabrielle, an office manager. I noticed that my federal income tax withholding increased for my first check of 2011 as compared to my last check of 2010. Several of my co-workers noticed the same thing. I thought the tax cuts were extended. Why did my federal income tax withholding go up in 2011? Answer: The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act) did extend lower marginal rates for many taxpayers and some taxpayers will see lower federal withholding.

Expiration of Making Work Pay Credit Will Increase Withholding for Many

The expiration of the Making Work Pay credit meant an adjustment in the withholding tables that results in increased federal withholding for many taxpayers. Since taxpayers no longer may claim the Making Work Pay credit on their tax returns, the withholding tables have been adjusted

Taxpayers May File an Amended Form W-4 to Adjust Federal Withholding

Employees may complete a revised 2011 Form W-4, Employee’s Withholding Allowance Certificate or its Spanish equivalent, Formulario W-4(SP), Certificado de Exención de la Retención del Empleado, to adjust their federal withholding for 2011.

Many Taxpayers Have Reduced Social Security Tax Withholding

For taxpayers subject to social security tax withholding, the 2010 Tax Act reduced the rate of withholding in 2011 from 6.2% to 4.2%. This reduced withholding will generally result in higher net pay as it will more than offset the increase in federal income tax withholding.

Vision Payroll Has Implemented New Withholding Tables

Vision Payroll has already updated its tax tables and will calculate both the reduced Social Security and updated federal income tax withholding for all 2011 paychecks.

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.

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