Vision Payroll

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 Average Annual Wages Greater than $25,000.

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 with average annual wages greater than $25,000, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the amount by which the average annual wages exceed $25,000 and the denominator of which is $25,000. If an employer has 10 employees with average annual wages of $33,000 and a credit before reduction of $50,000, then the credit reduction would be $16,000. The steps are as follows:

1. Calculate excess average annual wages $33,000 – $25,000 = $8,000.
2. Calculate fraction $8,000 ÷ $25,000 = 32%.
3. Multiply fraction by credit amount before reduction $50,000 X 32% = $16,000.

The allowable credit would be $50,000 – $16,000 = $34,000.

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

Due to the early April severe weather in North Dakota, the Internal Revenue Service (IRS) announced recently that it will consider abating late filing and/or late paying penalties if taxpayers were unable to file by the April 15, 2010 filing deadline. Taxpayers who are assessed a penalty should do the following:

1. Contact the IRS campus that issued the penalty assessment notice. The telephone number is listed on the notice.
2. Identify themselves as a taxpayer affected by the severe spring storms during the period of April 1, 2010, to April 3, 2010.
3. Request the abatement of associated penalties, based on reasonable cause criteria.

The IRS will review requests on a case-by-case basis. Contact Vision Payroll if you were affected by the severe weather and need further information on the relief provided by the IRS.

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.

Employers with ten or fewer full-time equivalent employees (FTEs) do not need to reduce their credit due to the number of FTEs. For employers with more than ten FTEs, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the number of FTEs in excess of 10 and the denominator of which is 15. If an employer has 13 employees with average annual wages of $24,000 and a credit before reduction of $50,000, then the credit reduction would be $10,000. The steps are as follows:

1. Calculate excess employees 13 – 10 = 3.
2. Calculate fraction 3 ÷ 15 = 20%.
3. Multiply fraction by credit amount before reduction $50,000 X 20% = $10,000.

The allowable credit would be $50,000 – $10,000 = $40,000.

The next topic to be covered in this series is the Impact of Average Annual Wages Greater than $25,000. Contact Vision Payroll if you have further questions on the Impact of More than Ten Full-time Equivalent Employees.

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 Maximum Credit for Tax-Exempt Qualified Employers.

For taxable years beginning in 2010 through 2013, the maximum credit is 25% of the Expenses Counted in Calculating the Health Care Credit. There is a further limitation equal to the amount of certain taxes that the qualified tax-exempt employer must pay with Form 941. The taxes are the sum of the federal income and Medicare taxes withheld and the employer portion of the Medicare tax.

If a qualified tax-exempt employer has eight employees who earn an average of $24,500 per year and the employer pays $90,000 in qualifying health care premiums, the maximum credit would be $90,000 X 25% = $22,500. This assumes that the qualifying health care premiums do not exceed the average premium for a small group market plan for the state or area of the state where the employer offers coverage. If the total federal income and Medicare taxes withheld and the employer portion of the Medicare tax, are greater than $22,500, the credit is $22,500. But if the federal income and Medicare taxes withheld and the employer portion of the Medicare tax are only $20,000, the credit must be limited to $20,000.

The next topic to be covered in this series is the Impact of More than Ten Full-time Equivalent Employees. Contact Vision Payroll if you have further questions on the Maximum Credit for Tax-Exempt Qualified Employers.

This week’s question comes from Dan, a small-business owner. I have several employees that I hired who have signed Form W-11. What information do I need to provide to Vision Payroll to qualify for the HIRE Act Credit? Answer: Under the HIRE Act, employers may avoid paying social security tax on qualified employees and receive an income tax credit for retaining those employees. Employers are required to obtain a signed affidavit from qualified employees. The Internal Revenue Service (IRS) has released Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit that employers must have signed by eligible employees to claim the credit. Once an employer has obtained a signed form from an employee, contact Vision Payroll to inform us that the employee is eligible for the credit. Vision Payroll will work with employers to determine the eligible wages already paid in 2010 and ensure that future wages are not taxed. Contact Vision Payroll if you have further questions on the HIRE Act Credit.

According to the US Department of Labor, in the week ending April 10, the advance figure for seasonally adjusted initial claims was 484,000, an increase of 24,000 from the previous week’s unrevised figure of 460,000. The 4-week moving average was 457,750, an increase of 7,500 from the previous week’s unrevised average of 450,250.

The advance seasonally adjusted insured unemployment rate was 3.6% for the week ending April 3, an increase of 0.1 percentage points from the prior week’s unrevised rate of 3.5%.

The advance number for seasonally adjusted insured unemployment during the week ending April 3 was 4,639,000, an increase of 73,000 from the preceding week’s revised level of 4,566,000. The 4-week moving average was 4,638,500, a decrease of 13,750 from the preceding week’s revised average of 4,652,250.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.217 million.

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act, landmark legislation reforming health care in the US. While this newly enacted law will affect healthcare insurance coverage for millions of workers, many companies are wondering what is to be expected. Some of the elements of the law will not take effect for a few years, but other features will become effective almost immediately. Small business owners need to consider a number of provisions and implications.

What are the implications of a company’s size? Which provisions are effective this year? Which provisions are effective in later years?

To learn the answers to these questions and much more, be sure to read the featured article by the HR pros at MyHRSupportCenter, The Impact of Health Care Reform on Small Businesses. If you’re not yet signed up or would like a free trial of MyHRSupportCenter, contact Vision Payroll today.

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 Maximum Credit for Qualified Employers other than Tax-Exempt Employers.

For taxable years beginning in 2010 through 2013, the maximum credit is 35% of the Expenses Counted in Calculating the Health Care Credit. If an employer has eight employees who earn an average of $24,500 per year and the employer pays $90,000 in qualifying health care premiums, the maximum credit would be $90,000 X 35% = $31,500. This assumes that the qualifying health care premiums do not exceed the average premium for a small group market plan for the state or area of the state where the employer offers coverage.

The next topic to be covered in this series is the Maximum Credit for Tax-Exempt Qualified Employers. Contact Vision Payroll if you have further questions on the Maximum Credit for Qualified Employers other than Tax-Exempt Employers.

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 Expenses Counted in Calculating the Health Care Credit.

Employers must make a nonelective contribution on behalf of each employee participating in a qualified health plan. The percentage contributed on behalf of each employee must be uniform for all employees and must not be less than 50% of the cost of the coverage. If the portion paid by the employer is less than 100%, only the portion paid by the employer counts toward the credit. For example, if a monthly premium is $1,000 and the employer pays $700 or 70%, only the $700 counts toward the credit. This is true even if the employee’s portion is treated as paid by the employer through a salary reduction arrangement under §125 of the Internal Revenue Code of 1986.

Furthermore, an additional cap is imposed that limits the portion eligible for the credit to the amount that would have been paid if the employer had been enrolled in a plan that charges the average premium for a small group market plan for the state or area of the state where the employer offers coverage. The average premium and the state or area of the state to which it applies will be determined by the Secretary of Health and Human Services.

The next topic to be covered in this series is the Maximum Credit for Qualified Employers other than Tax-Exempt Employers. Contact Vision Payroll if you have further questions on Expenses Counted in Calculating the Health Care Credit.

According to the California Employment Development Department (EDD), employers in the county of Imperial directly affected by the earthquake may request up to a 60-day extension of time from EDD to file their State payroll reports and/or deposit State payroll taxes without penalty or interest. This extension may be granted under Section 1111.5 of the California Unemployment Insurance Code (CUIC). Written request for extension must be received within 60 days from the original delinquent date of the payment or return to file/pay. Contact Vision Payroll if you’ve been affected and need to file the extension request.