Employees who have provided a Form W-4, Employee’s Withholding Allowance Certificate claiming exemption from federal income tax withholding must file a new 2009 Form W-4 by February 16, 2009 in order to continue their exemption from federal income tax withholding. Employers must start withholding on February 16, 2009 if employees have not provided a 2009 Form W-4 claiming exemption. Even employees who are no longer claiming exemption should file a 2009 Form W-4 so that employers may calculate the proper amount of withholding. If an employee has not provided a 2009 Form W-4 by February 16, 2009, the employer should withhold based on a previously filed Form W-4 not claiming exemption, if available or using single, zero allowances, if not. Spanish-speaking employees may complete Formulario W-4(SP), Certificado de Exención de la Retención del Empleado. Upon request, Vision Payroll can provide employers with pre-printed 2009 Forms W-4 for all active employees. Vision Payroll will not automatically change any employee’s claimed withholding allowances. Employers should update the allowances claimed by logging in to their company file or providing Vision Payroll with the updated information.
The Internal Revenue Service has released an updated version of Publication 1494, Tables for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income (Forms 668-W(C), 668-W(c)(DO) and 668-W(ICS)). The table is used to calculate the amount of wages and other income exempt from levies for delinquent taxes. In addition to levies issued in 2009, employers use the revised amounts to calculate the exempt amount if the employee should provide a revised statement showing a change in filing status or exemptions. Contact Vision Payroll for assistance in automating the calculation of the exemption and levy amounts on employees’ paychecks.
The Internal Revenue Service recently released an updated version of Publication 15-B, Employer’s Tax Guide to Fringe Benefits. Publication 15-B provides an overview of fringe benefits as well as sections on fringe benefit exclusion rules and fringe benefit valuation rules. In addition, guidelines for withholding, depositing, and reporting taxable non-cash fringe benefits are also provided. Contact Vision Payroll if you any questions on Publication 15-B.
According to a recent article in the Wall Street Journal, celebrity chef Wolfgang Puck would like to eliminate the minimum wage for waiters. In a story on resolutions for 2009, Puck was asked, “What problem should your industry or professional community tackle more effectively?” Puck responded:
The industry should lobby to establish a federal law that allows restaurants nationwide to exempt waiters who earn tips from the minimum wage. Waiters would not lose money because they could work overtime, and we could use the savings to provide health care or raise the wages of dishwashers.
Currently, tipped employees must be paid a minimum wage of $2.63 per hour in cash wages and with tips must earn at least $6.55 per hour. State laws may provide rules that are more beneficial to the employee and must be followed.
The Internal Revenue Service recently released an updated version of Publication 15, (Circular E) Employer’s Tax Guide. In addition to providing information on classifying employees, determining which types of payments are considered wages for federal employment tax purposes, and depositing taxes, Circular E also provides updated tables for use in calculating the amount of federal income tax to be withheld using either the percentage method or the wage bracket method. Tables for both the percentage method and the wage bracket method of calculating the amount of any Advance Earned Income Credit Payment are also provided. Vision Payroll has already incorporated the updated tables into its tax calculations for paychecks and will begin using the updated tables for all wages paid during 2009. Contact Vision Payroll if you any questions on Publication 15.
This week’s question comes from Madeleine, an executive. I’ve averaged about 30% of my pay going toward federal income tax withholding each pay period. This week I had 35% of my pay withheld from my bonus for federal income tax. Why did my federal income tax withholding increase? Answer: In TD 9276, the IRS promulgated regulations covering supplemental wage payments paid by a single employer (or group of employers under common control) that exceeded $1,000,000 to a single employee in a calendar year. The American Jobs Creation Act of 2004 (Public Law 108-357) requires that withholding from such wages be at a flat rate of 35%. The regulations provide rules for determining whether wages should be considered regular wages or supplemental wages for withholding purposes. Contact Vision Payroll if you have any questions on TD 9276 and withholding on supplemental wages.
According to the US Department of Labor, in the week ended December 20, the advance figure for seasonally adjusted initial claims was 586,000, an increase of 30,000 from the previous week’s revised figure of 556,000. The 4-week moving average was 558,000, an increase of 13,750 from the previous week’s revised average of 544,250.
Employers often question whether employees who work in one year and are paid in the next year should have the wages reported in the year the work was performed or the year the wages were paid. Generally, wages are reported based on payment date. For example, if the pay period ends on December 27, 2008 and the wages are paid on Wednesday, December 31, 2008, those wages are included on the fourth quarter 2008 Form 941 (or equivalent) and reported to the employee on the 2008 Form W-2. Alternatively, if the pay period ends on December 27, 2008 and the wages are paid on Friday, January 2, 2009, those wages are included on the first quarter 2009 Form 941 (or equivalent) and reported to the employee on the 2009 Form W-2. Contact Vision Payroll if you have any questions on which year employees’ pay should be reported.
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 2, federal income tax withheld.
Box 2 shows the amount employees must enter on line 62 of Form 1040, US Individual Income Tax Return. Employers determine the amount of withheld federal income tax each pay period by the amount of taxable wages, the pay frequency, and the number of withholding allowances claimed on Form W-4, Employee’s Withholding Allowance Certificate. Spanish-speaking employees may complete Formulario W-4(SP), Certificado de Exención de la Retención del Empleado. Employers may use either the percentage method or the wage bracket method to calculate the amount of tax to withhold. Both methods are explained in Publication 15, (Circular E) Employer’s Tax Guide. Employers should not accept “reverse withholding” where employees write checks to the employer to pay withholding tax. Employees should make such payments using Form 1040-ES. Also, any amounts that employers pay toward an employee’s withholding to “gross-up” non-cash payments such as taxable fringe benefits must also be included as wages in boxes 1, 3, 5, and 7 as required.
The next topic in this continuing series will be Box 3, social security wages. Contact Vision Payroll with any questions on 2008 Form W-2.
The Commonwealth of Massachusetts Department of Revenue has released a working draft of TIR 09-1, Individual Mandate Penalties for Tax Year 2009, which would provide the penalties in 2009 for adults without health insurance. Under the working draft, adults with annual family household incomes of 150% of the Federal Poverty Level or less are not subject to any penalty. Adults with annual family household incomes of more than 150% but not more than 200% of the Federal Poverty Level are subject to a penalty of $17 per month for each month of non-compliance. Adults with annual family household incomes of more than 200% but not more than 250% of the Federal Poverty Level are subject to a penalty of $35 per month for each month of non-compliance. Adults with annual family household incomes of more than 250% but not more than 300% of the Federal Poverty Level are subject to a penalty of $52 per month for each month of non-compliance. Adults aged 18-26 with annual family household incomes of more than 300% of the Federal Poverty Level are subject to a penalty of $52 per month for each month of non-compliance. Adults aged 27 and older with annual family household incomes of more than 300% of the Federal Poverty Level are subject to a penalty of $89 per month for each month of non-compliance. The TIR provides the annual income standards for the Federal Poverty Level by family size. Qualifying coverage is defined as enrollment “in health insurance policies that meet minimum creditable coverage standards adopted by the Commonwealth Health Insurance Connector Authority.” Written comments for the working draft are due by January 23, 2009. Contact Vision Payroll if you have any questions on TIR 09-1 or need a referral to a licensed benefits broker.
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