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 1, wages, tips, other compensation.
Box 1 shows the amount employees must enter on line 7 of Form 1040, US Individual Income Tax Return. It may be, but is not necessarily, equal to gross wages. Common adjustments that increase or decrease gross wages include the following:
- Employee elective deferral to qualified retirement plans such as §401(k) plans, SIMPLE plans, and §403(b) plans (decrease).
- Amounts withheld for non-taxable benefits elected under §125 plans (decrease).
- Taxable non-cash fringe benefits, such as personal use of company automobile (increase).
- Certain clergy housing allowances (decrease).
- Reported tips (increase).
- Expense reimbursements paid under a non-accountable plan (increase).
- Accident and health insurance premiums for so-called 2% S corporation shareholders (increase).
- Cost of group-term life insurance in excess of $50,000 (increase).
The next topic in this continuing series will be Box 2, federal income tax withheld. Contact Vision Payroll with any questions on 2008 Form W-2.
President-Elect Barack Obama recently nominated Rep. Hilda Solis (D-CA) to be the new Secretary of Labor. Solis, 51, has served four terms in the House of Representatives and recently won a fifth term. According to the AFL-CIO, Solis has voted right 97% of the time in her congressional career and 100% of the time in 2007. In accepting the nomination Solis said, “As Secretary of Labor, I will work to strengthen our unions and support every American in our nation’s diverse workforce…We also must enforce federal labor laws and strengthen regulations to protect our nation’s workers, such as wage and hour laws, and rules regarding overtime pay and pay discrimination.” If confirmed, Solis would succeed current Labor Secretary Elaine Chao.
This week’s question comes from Nicole, an office manager. Our business is formed as two entities, an S corporation and a partnership. We’re located in Massachusetts. Do I now need to withhold income tax on distributions to partners and S corporation shareholders? Answer: All pass-through entities subject to pass-through withholding in Massachusetts must withhold unless the partner or shareholder to whom the distribution is paid has timely filed Form PTE-EX. The filing of Form PTE-EX with the entity certifies that the member is exempt from pass-through withholding. The deadline for filing Form PTE-EX the last day of the fourth month of the entity’s taxable year or within thirty days of the day that the member joins the entity, whichever is later. The form is now valid until changing circumstances invalidate the form, in which case the member must notify the entity within thirty days. Vision Payroll is ready to help its clients deal with the changes required by this new law. Please call us for our recommendations for a smooth transition to the new withholding requirements.
According to the US Department of Labor, in the week ended December 13, the advance figure for seasonally adjusted initial claims was 554,000, a decrease of 21,000 from the previous week’s revised figure of 575,000. The 4-week moving average was 543,750, an increase of 2,750 from the previous week’s revised average of 541,000.
As the January 16, 2009 deadline for implementing the new Family and Medical Leave Act (FMLA) regulations draws closer, it becomes increasingly important to ensure that your company policies are compliant. What is the FMLA? Who does the FMLA affect at the company level as well as the employee level? What should you be doing now to ensure compliance? What is the impact of the National Defense Authorization Act? How has the definition of a qualifying serious health condition changed under the new regulations? Which new standard forms has the Department of Labor issued and where can you download copies of these forms? Learn the answers to these questions and more in this month’s HRCast, a recording provided by our team of HR Pros and available exclusively on MyHRSupportCenter. Visit MyHRSupportCenter regularly not only for our HRCasts, but also to get late-breaking compliance alerts, best practices to implement, and HR tools to use every day. If you’re not yet signed up or would like a free trial of MyHRSupportCenter, contact Vision Payroll today.
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 general information regarding Form W-2.
Forms W-2 should be typed or machine-printed in black ink, using 12-point Courier font. Dollar signs and commas must be omitted, but decimal points and cents, even if zero, must be included. Forms W-2 must be prepared on a calendar year basis using pay dates, not work dates. Wages for work performed in 2007 and paid in 2008 is included and wages for work performed in 2008 and paid in 2009 is excluded.
Report the employee’s social security number (SSN) in box a. Employees who have applied for, but not received, an SSN should be reported with all zeroes and corrected on a Form W-2c. Enter in box b the employer’s employer identification number, not the owner’s SSN. Box c must contain the employer’s address as shown on Forms 941, 943, 944, CT-1 or Schedule H of Form 1040. Box d is an optional box for employer use to identify individual forms. Box e should report the employee’s name exactly as shown on the social security card. Suffixes such as Sr. or Jr. should only be included if on the social security card. Do not include professional and academic titles and degrees such as CPA or Ph.D. as part of the employee’s names. Names should not be changed on Form W-2 unless the employee has received a revised card from the Social Security Administration. The Address in box f should be the address where the employee receives mail. Foreign country names are not to be abbreviated.
The next topic in this continuing series will be Box 1, wages, tips, other compensation. Contact Vision Payroll with any questions on 2008 Form W-2.
Thursday, January 1, 2009 will be New Year’s Day, a federal holiday. The offices of Vision Payroll will close New Year’s Eve, December 31 at 2 pm and re-open Friday January 2. Most banks will also be closed in observance of the holiday. Payrolls dated January 1 will be paid December 31 unless a previous change in schedule has been submitted. Payroll changes and hours must be submitted before the processing deadline on December 29. For payrolls dated January 2, payroll changes and hours must be submitted before the processing deadline on December 30. For payrolls dated January 5, payroll changes and hours must be submitted before the processing deadline on December 30. Payrolls submitted after these processing deadlines will be pushed back until the next available processing day. Due to heavy USPS and UPS delivery requirements, we strongly recommend submitting payrolls during this time as early as practicable. UPS does not ship ground deliveries received on December 31 until January 2 so we do not recommend submitting payrolls on that date. No changes are required for payrolls dated January 6. Contact Vision Payroll as soon as possible to make changes to or for questions on your processing schedule.
The US Department of Labor recently issued non-Administrator signed Opinion Letter FLSA2008-13NA. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA). Unlike signed Opinion Letters, unsigned Opinion Letters do not “provide a potential good faith reliance defense for violations of the FLSA.”
This Opinion Letter discusses whether daycare instructors who spend a majority of their time teaching qualify as exempt teachers under the FLSA. The Opinion Letter stated “that the daycare center instructors [spent] a majority of their time teaching children between the ages of three and five a curriculum of basic reading, counting, and social skills.” The relevant State Department of Education did not license the daycare centers where the instructors worked, although they were licensed by the state’s Department of Public Welfare. The implication of this distinction is “that the state does not consider the day care centers to be providing educational services.” The Opinion Letter concludes that the instructors do not qualify for the teacher exemption since they do not provide elementary education under the laws of their state.
State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.
In conjunction with recent amendments to the Payday Loan Act (Code of Virginia §§6.1-444 et seq.) that take effect January 1, 2009, the Virginia State Corporation Commission has adopted conforming regulations (Case Number BFI-2008-00295) on licensed payday lenders. In addition to requiring development of an internet database for licensed lenders to access and transmit loan information to, the new law made significant changes in interest rates and fees allowed, and placed restrictions on the frequency of such loans. Payday loans can be an expensive form of borrowing for employees; a two-week loan with a 15% fee works out to an Annual Percentage Rate (APR) of 391%. With the increased restrictions and higher fees allowed under the new law, employers may face more requests from employees for payday advances. Vision Payroll highly recommends consulting with your labor law attorney to ensure that any loans are properly documented and that deductions from pay checks comply with federal and state laws.
This week’s question comes from Carl, a partner in a partnership. I am an investor in a partnership and own a 25% interest as a partner. I also work for the business that the partnership owns. Can I be paid through payroll, have tax withheld, and receive a Form W-2? Answer: It is long established in tax law that partners in a partnership are not employees of the partnership. In Rev. Rul. 69-184, 1969-1 CB 256, the Internal Revenue Service confirmed this, stating:
Remuneration received by a partner from the partnership is not “wages” with respect to “employment” and therefore is not subject to the taxes imposed by the Federal Insurance Contributions Act and the Federal Unemployment Tax Act. Such remuneration also is not subject to Federal income tax withholding.
Partners cannot receive a Form W-2 from the partnership. They may receive a draw from the partnership and must pay quarterly federal estimated tax payments to cover the amount of federal income tax and self-employment tax liability they will have, unless covered by withholding on other income. Vision Payroll can work with you and your CPA to determine an appropriate draw and estimated tax payment schedule. You can then receive the draw as a check or direct deposit with each payroll and schedule appropriate deductions such as retirement plan contributions. Contact Vision Payroll today to get started.
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