Vision Payroll

The Internal Revenue Service (IRS) has released Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a payroll tax credit on their Form 941 to be reimbursed for the assistance provided.

In recently issued guidance, the IRS explained that when insurers or multiemployer plans are entitled to claim the COBRA premium reduction credit, they should obtain a statement from the employee or the employee’s former employer. A properly completed form, Request for Treatment as an Assistance Eligible Individual may be used as the required statement and maintained along with the employer’s name and address. Barring “fraud, malfeasance or misrepresentation of a material fact” or knowledge of or reason to know of the same, the IRS will not challenge the treatment of the former employee by insurers and multiemployer plans as involuntarily terminated. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

This week’s question comes from Norma, an HR manager. I know that students with J-1 visas are exempt from FICA tax withholding in certain circumstances. We hired a non-student with a J-1 visa. Is a non-student holding a J-1 visa exempt from FICA tax withholding? Answer: Non-resident aliens are exempt from paying FICA tax, variously known as social security tax, Medicare tax, or OASDI. Foreign scholars, teachers, researchers, trainees, physicians, au pairs, summer camp workers, and other non-students in J-1 nonimmigrant status who have been in the United States less than two calendar years are considered non-resident aliens during the first two calendar years of physical presence in the United States. After two years of physical presence, a non-student is considered a resident alien and therefore is subject to FICA tax withholding. Therefore, non-students with a J-1 visa are exempt from FICA tax during their first two years of physical presence and subject to FICA tax withholding thereafter. As with students, physical presence for non-students is tested on a calendar year basis; therefore, entry into the United States on December 31 is counted as presence in the United States for one calendar year. Contact Vision Payroll if you have any questions on FICA tax withholding for J-1 visa holders.

According to the US Department of Labor, in the week ending July 4, the advance figure for seasonally adjusted initial claims was 565,000, a decrease of 52,000 from the previous week’s revised figure of 617,000. The 4-week moving average was 606,000, a decrease of 10,000 from the previous week’s revised average of 616,000.

The advance seasonally adjusted insured unemployment rate was 5.1% for the week ending June 27, an increase of 0.1 percentage points from the prior week’s unrevised rate of 5.0%.

The advance number for seasonally adjusted insured unemployment during the week ending June 27 was 6,883,000, an increase of 159,000 from the preceding week’s revised level of 6,724,000. The 4-week moving average was 6,769,000, an increase of 12,000 from the preceding week’s revised average of 6,757,000.

The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.421 million.

Many employers are tempted to use layoffs as a method for avoiding problem employees. By failing to follow proper procedures for disciplining and terminating problem employees, however, employers may create more problems in the long-run. Employers should remember these three important guidelines when planning layoffs:

1. Eliminate the Position
2. Select the Least Fit
3. Don’t Fill the Position

To learn more be sure to read this month’s featured article by the HR pros at MyHRSupportCenter, Lay Off Using Layoffs to Manage Poor Performing Employees. If you’re not yet signed up or would like a free trial of MyHRSupportCenter, contact Vision Payroll today.

The Internal Revenue Service (IRS) has released Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a payroll tax credit on their Form 941 to be reimbursed for the assistance provided.

In recently issued guidance, the IRS provided information for an employer who has elected to file Form 2678, Employer/Payer Appointment of Agent. In such situations, the employer does not file Form 941; the agent files Form 941 using its own employer identification number. If the employer is entitled to claim a credit, the agent should claim the credit on its Form 941 and reduce the amount of taxes paid on behalf of the employer. The employer should not file a zero Form 941 showing only the credit as a refundable amount. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

The Internal Revenue Service (IRS) has released Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a payroll tax credit on their Form 941 to be reimbursed for the assistance provided.

In recently issued guidance, the IRS clarified that when assistance eligible individuals (AEIs) pay their COBRA premiums on a pretax basis from a health reimbursement arrangement (HRA), the premiums are treated as paid by the employer, not the employee. Consequently, the AEIs are not considered to have paid their thirty-five percent share of the premium for purposes of calculating the allowable credit. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

Democratic Governor Phil Bredesen of Tennessee recently signed HB2324/SB2315 into law. Under the newly-enacted legislation, the 2009 wage base is increased from $7,000 to $9,000 retroactively to January 1, 2009. The wage base will remain at $9,000 until the trust fund balance exceeds $900 million, decrease to $8,000 if the trust fund balance exceeds $900 million but not $1 billion, and decrease to $7,000 if the trust fund balance exceeds $1 billion. Also, an additional fee of 0.6% on all unemployment insurance premium rates on Premium Tables 1, 2, and 3 is imposed as well. The additional tax will stay in place until the trust fund balance equals or exceeds $650 million.

Employers should report the additional wages from quarter one on their quarter two form or if their payroll accounting system does not allow this, employers may amend their quarter one filing.

According to James G. Neeley, Commissioner of the Tennessee Department of Labor and Workforce Development (the Agency), the Agency will send an “Employer Statement” that shows the balance due from quarter one because of the increase in tax rates. He also pledged that the Agency would administer the legislation “in as efficient and equitable a manner as possible.”

Contact Vision Payroll for assistance if you’re impacted by the changes in Tennessee unemployment law.

Nonfarm payroll employment continued to decline in June (-467,000), and the unemployment rate was little changed at 9.5%, the Bureau of Labor Statistics of the US Department of Labor reported recently. Job losses were widespread across the major industry sectors, with large declines occurring in manufacturing, professional and business services, and construction.

The number of unemployed persons (14.7 million) and the unemployment rate (9.5%) were little changed in June. Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.2 million, and the unemployment rate has risen by 4.6 percentage points.

In June, unemployment rates for the major worker groups–adult men (10.0%), adult women (7.6%), teenagers (24.0%), whites (8.7%), blacks (14.7%), and Hispanics (12.2%)–showed little change. The unemployment rate for Asians was 8.2%, not seasonally adjusted.

Among the unemployed, the number of job losers and persons who completed temporary jobs (9.6 million) was little changed in June after increasing by an average of 615,000 per month during the first 5 months of this year.

The number of long-term unemployed (those jobless for 27 weeks or more) increased by 433,000 over the month to 4.4 million. In June, 3 in 10 unemployed persons were jobless for 27 weeks or more.

This week’s question comes from Ron, a payroll department manager. We have a student who works for us who holds a J-1 Visa. He says that he should not have FICA tax withheld. Is a student holding a J-1 visa exempt from FICA tax withholding? Answer: Non-resident aliens are exempt from paying FICA tax, variously known as social security tax, Medicare tax, or OASDI. A foreign student who arrives in the United States on a J-1 visa is considered a non-resident alien during the first five calendar years of physical presence in the United States. After five years of physical presence, a student is considered a resident alien and therefore is subject to FICA tax withholding. Therefore, students with a J-1 visa are exempt from FICA tax during their first five years of physical presence and subject to FICA tax withholding thereafter. Contact Vision Payroll if you have any questions on FICA tax withholding for J-1 visa holders.

According to the US Department of Labor, in the week ending June 27, the advance figure for seasonally adjusted initial claims was 614,000, a decrease of 16,000 from the previous week’s revised figure of 630,000. The 4-week moving average was 615,250, a decrease of 2,750 from the previous week’s revised average of 618,000.

The advance seasonally adjusted insured unemployment rate was 5.0% for the week ending June 20, a decrease of 0.1 percentage points from the prior week’s revised rate of 5.1%.

The advance number for seasonally adjusted insured unemployment during the week ending June 20 was 6,702,000, a decrease of 53,000 from the preceding week’s revised level of 6,755,000. The 4-week moving average was 6,751,500, a decrease of 13,750 from the preceding week’s revised average of 6,765,250.

The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.375 million.