Vision Payroll

This week’s question comes from Lisa, an office manager. We may need to layoff a few employees. Some of them may elect COBRA continuation coverage. I know there was a subsidy for employees laid off through March 31, but I just heard that the subsidy period was extended. When does the COBRA subsidy period end? As noted by the Internal Revenue Service (IRS) in IR-2010-052, under The Continuing Extension Act of 2010, workers who are involuntarily terminated during April and May might be eligible for the sixty-five percent subsidy on COBRA continuation coverage. Eligible employees pay a reduced premium to their employer who then pays the difference. The employer may claim a credit on Form 941 for the amount paid. Contact Vision Payroll for further information on the COBRA subsidy period extension.

According to the US Department of Labor, in the week ending April 24, the advance figure for seasonally adjusted initial claims was 448,000, a decrease of 11,000 from the previous week’s revised figure of 459,000. The 4-week moving average was 462,500, an increase of 1,500 from the previous week’s revised average of 461,000.

The advance seasonally adjusted insured unemployment rate was 3.6% for the week ending April 17, unchanged from the prior week’s unrevised rate of 3.6%.

The advance number for seasonally adjusted insured unemployment during the week ending April 17 was 4,645,000, a decrease of 18,000 from the preceding week’s revised level of 4,663,000. The 4-week moving average was 4,639,000, a decrease of 9,000 from the preceding week’s revised average of 4,648,000.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.186 million.

The Internal Revenue Service (IRS) recently released a draft Form 941, Employer’s QUARTERLY Federal Tax Return, to be used by employers to claim payroll tax forgiveness under the HIRE Act for qualifying new hires. Newly added lines on Form 941 include the following:

• Number of qualified employees first paid exempt wages/tips this quarter
• Number of qualified employees paid exempt wages/tips this quarter
• Exempt wages/tips paid to qualified employees this quarter
• Number of qualified employees paid exempt wages/tips March 19–31
• Exempt wages/tips paid to qualified employees March 19–31

A final version of Form 941 is expected to be released next month. Contact Vision Payroll if you have any questions on the draft Form 941.

The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Over the next several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is Determining the Amount of Average Annual Wages.

To determine the amount of average annual wages, divide total wages paid to qualifying employees by the number of full-time equivalent employees (FTEs). Round the resulting quotient down to the nearest whole number. For example, if an employer pays $224,000 in wages and has 10 FTEs, compute average annual wages as follows:

• $224,000 ÷ 10 = $22,400
• $22,400 rounded down to the nearest $1,000 = $22,000, so average annual wages are $22,000.

The next topic to be covered in this series is the Impact of the Twenty-five or More Employees. Contact Vision Payroll if you have further questions on Determining the Amount of Average Annual Wages.

The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Over the next several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is Determining the Number of Full-Time Equivalents.

To determine the number of full-time equivalents (FTEs), divide total hours worked by qualifying employees by 2,080, but exclude any hours worked by any single employee in excess of 2,080. Round the resulting quotient down to the nearest whole number. For example, if five employees work 2,080 hours each, three employees work 1,040 hours each, and one employee works 2,300 hours, calculate the number of FTEs as follows:

• 2,080 hours/employee X 5 employees = 10,400 hours
• 1,040 hours/employee X 3 employees = 3,120 hours
• 2,080 hours/employee X 1 employees = 2,080 hours (limited by law to 2,080 maximum per employee)
• 10,400 + 3,120 + 2,080 = 15,600
• 15,600 ÷ 2,080 = 7.5
• 7.5 rounded down to the nearest whole number is 7, so the employer has 7 FTEs.

The next topic to be covered in this series is Determining the Amount of Average Annual Wages. Contact Vision Payroll if you have further questions on Determining the Number of Full-Time Equivalents.

The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Over the next several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is the Timing of Payments to be Counted in Calculating the Small Business Health Care Tax Credit.

The premiums to be counted are all qualifying premiums paid during the employer’s tax year beginning in 2010. Premiums paid before the passage of the Patient Protection and Affordable Care Act, but during the employer’s tax year beginning in 2010, do qualify for the credit as long as they otherwise qualify for the credit.

The next topic to be covered in this series is Determining the Number of Full-Time Equivalents. Contact Vision Payroll if you have further questions on the Timing of Payments to be Counted in Calculating the Small Business Health Care Tax Credit.

The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Over the next several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is the Impact of More than Ten Full-time Equivalent Employees and Average Annual Wages Greater than $25,000.

Employers with ten or fewer full-time equivalent employees (FTEs) do not need to reduce their credit due to the number of FTEs and employers with average annual wages of $25,000 or less do not need to reduce their credit due to the average annual wage. For employers more than ten FTEs and with average annual wages greater than $25,000, the reduction is determined by calculating the individual reductions and adding them together to get the total reduction. If an employer has 13 employees with average annual wages of $33,000 and a credit before reduction of $50,000, then the credit reduction would be $24,000. The steps are as follows:

1. Calculate FTE reduction = $10,000
2. Calculate excess wages reduction = $16,000
3. Sum the reductions $10,000 + $16,000 = $26,000

The allowable credit would be $50,000 – $26,000 = $24,000.

The next topic to be covered in this series is the Timing of Payments to be Counted in Calculating the Small Business Health Care Tax Credit. Contact Vision Payroll if you have further questions on the Impact of More than Ten Full-time Equivalent Employees and Average Annual Wages Greater than $25,000.

This week’s question comes from Aaron, a business owner. I just found out about the payroll tax forgiveness under the HIRE Act. We’ve hired several qualifying employees and already deposited the payroll taxes that should’ve been forgiven. Can we go back and claim payroll tax forgiveness under the HIRE Act? Answer: Under the HIRE Act, for otherwise qualifying employees, the OASDI tax, “Shall not apply to wages paid…with respect to employment during the period beginning [March 19, 2010]…and ending on December 31, 2010.” Employers may claim the credit for taxes paid related to these wages even if the taxes that are being forgiven have already been deposited. Simply reduce other payroll tax deposits in the current quarter or claim a refund with the filing of Form 941. Contact Vision Payroll if you have any further questions concerning payroll tax forgiveness under the HIRE Act.

According to the US Department of Labor, in the week ending April 17, the advance figure for seasonally adjusted initial claims was 456,000, a decrease of 24,000 from the previous week’s revised figure of 480,000. The 4-week moving average was 460,250, an increase of 2,750 from the previous week’s revised average of 457,500.

The advance seasonally adjusted insured unemployment rate was 3.6% for the week ending April 10, a decrease of 0.1 percentage points from the prior week’s revised rate of 3.7%.

The advance number for seasonally adjusted insured unemployment during the week ending April 10 was 4,646,000, a decrease of 40,000 from the preceding week’s revised level of 4,686,000. The 4-week moving average was 4,643,750, a decrease of 5,500 from the preceding week’s revised average of 4,649,250.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.202 million.

The recently passed HIRE Act allows employers to save $2,500 in payroll taxes for new hires earning $33,000 and provides even greater savings for hiring more highly paid employees. The Health Care Reform bill added an income tax credit for employers who pay for a portion of their employees’ health insurance.

Don’t miss these significant tax savings. Vision Payroll is presenting a free one-hour seminar this Thursday, April 22 so qualifying employers can learn how to take advantage of these recent law changes. Click here for more information and to register online.