Vision Payroll

This week’s question comes from Terry, a small business owner in New York City. My net pay is the same every week, but last week’s net pay changed. Upon further review, the difference is because the withholding tax for New York City increased from the week before. Why did my NYC withholding go up? Answer: Effective September 1, 2010, new withholding tables went into effect for New York City withholding.

Increase Affects Employees Earning $500,000 or More per Year

The change in withholding affects taxpayers who make $500,000 or more per year. Tax must be withheld according to Publication NYS-50-T.2, Revised New York City Withholding Tax Computation Rules.

New York State and Yonkers Withholding not Affected

The New York State personal income tax rates, Yonkers resident personal income surcharge tax rate, and Yonkers nonresident earnings tax rate have not changed. Employers should continue to use the methods in Publications NYS-50-T (dated 1/06) and NYS-50-T.1 (dated 1/10) to determine the amounts to be withheld for these taxes.

Vision Payroll Has Updated Withholding Tables in Use

Effective September 1, 2010, Vision Payroll is using the revised withholding calculations for all affected taxpayers.

According to the US Department of Labor, in the week ending September 4, the advance figure for seasonally adjusted initial claims was 451,000, a decrease of 27,000 from the previous week’s revised figure of 478,000. The 4-week moving average was 477,750, a decrease of 9,250 from the previous week’s revised average of 487,000.

Advance Seasonally Adjusted Insured Unemployment Rate Remains Unchanged

The advance seasonally adjusted insured unemployment rate was 3.5% for the week ending August 28, unchanged from the prior week’s unrevised rate of 3.5%.

Advance Seasonally Adjusted Insured Unemployment Decreases

The advance number for seasonally adjusted insured unemployment during the week ending August 28 was 4,478,000, a decrease of 2,000 from the preceding week’s revised level of 4,480,000. The 4-week moving average was 4,488,000, a decrease of 3,250 from the preceding week’s revised average of 4,491,250.

Seasonally Adjusted Weekly Insured Unemployment

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 4.986 million.

The Virginia Department of Taxation has announced that it will abate penalties for taxpayers who were unable to file withholding tax returns for July 2010 (due August 25, 2010) through the Business iFile system.

Business iFile System Was Unavailable August 25

Due to inability of some taxpayers to file through the Business iFile system, all taxpayers were given an extension of time to file.

Returns Had to Have Been Filed by September 7

July 2010 returns filed and paid in full by September 7, 2010 will be treated as timely filed.

Contact Virginia Department of Taxation if a Penalty Is Incorrectly Assessed

Taxpayers that filed and paid their July 2010 withholding return by the extended due date and still received a penalty notice should contact a customer service representative at (804) 367-8037 for assistance.

All Virginia July 2010 Withholding Returns Were Timely Filed for All Vision Payroll Clients

Vision Payroll successfully filed all July 2010 withholding returns for its clients on or before the August 25, 2010 deadline.

In IR-2010-096, the Internal Revenue Service (IRS) today announced the release of a draft version of new Form 8941, Credit for Small Employer Health Insurance Premiums. Vision Payroll has previously provided details on how employers become eligible for the Small Business Health Care Tax Credit (the Credit).

Small Businesses and Tax-Exempt Organizations Will Use Form 8941

Since Form 8941 is used to calculate the amount of the Credit, both taxable small businesses and tax-exempt organizations will use it. The Credit will then be carried to a tax return to be filed by the employer.

Entity Type Determines Reporting of Credit

Many small businesses will report the amount of the Credit on Form 3800, General Business Credit. Others may pass it through to other taxpayers such as partners, S corporation shareholders, trust beneficiaries, etc.

Tax-Exempt Organizations Will Use Form 990-T to Claim Credit

Tax-exempt organizations will claim the Credit on a revised Form 990-T, Exempt Organization Business Income Tax Return (and proxy tax under section 6033(e)). Tax-exempt organizations not otherwise required to file Form 990-T will be required to file it to claim the Credit.

Contact Vision Payroll if you have further questions on the Small Business Health Care Tax Credit.

Director Gary W. Child of the Wyoming Department of Employment has announced a decrease in the taxable wage base for 2011.

$500 Decrease Is the First in Many Years

The wage base will decrease from $22,800 for 2010 to $22,300 for 2011.

Find Out the Wage Base for All States by Visiting the Vision Payroll Unemployment Taxable Wage Base Page

Contact Vision Payroll if you have any questions on Wyoming unemployment taxable wage base or visit our Unemployment Taxable Wage Base page.

The General Services Administration (GSA) updated the maximum per diem rates for travel after September 30, 2010 and before October 1, 2011.

Standard Lodging Rate Increases 10%

For destinations or counties not specifically listed, the lodging per diem is $77 and the meals and incidental expenses per diem is $46. The rates for 2010 were $70 and $46, respectively.

Many Locations Have a Non-Standard Rate

Certain destinations or counties are listed with higher per diem rates for part or all the fiscal year.

Contact Vision Payroll if you have any questions on maximum per diem rates.

Nonfarm payroll employment changed little (-54,000) in August, and the unemployment rate was about unchanged at 9.6%, the US Bureau of Labor Statistics reported recently. Government employment fell, as 114,000 temporary workers hired for the decennial census completed their work. Private-sector payroll employment continued to trend up modestly (+67,000).

Household Survey Data

The number of unemployed persons (14.9 million) and the unemployment rate (9.6% percent) were little changed in August. From May through August, the jobless rate remained in the range of 9.5 to 9.7 percent.

Major Work Groups Data

Among the major worker groups, the unemployment rate for adult men (9.8%), adult women (8.0%), teenagers (26.3%), whites (8.7%), blacks (16.3%), and Hispanics (12.0%) showed little change in August. The jobless rate for Asians was 7.2%, not seasonally adjusted.

Decline in Long-term Unemployed

The number of long-term unemployed (those jobless for 27 weeks and over) declined by 323,000 over the month to 6.2 million. In August, 42.0 percent of unemployed persons had been jobless for 27 weeks or more.

Civilian Labor Force Increases Slightly

In August, the civilian labor force participation rate (64.7%) and the employment-population ratio (58.5%) were essentially unchanged.

Increase in Involuntary Part-time Workers

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 331,000 over the month to 8.9 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

Little Change in Marginally Attached Labor Force

About 2.4 million persons were marginally attached to the labor force in August, little changed from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Discouraged Workers up 47% in One Year

Among the marginally attached, there were 1.1 million discouraged workers in August, an increase of 352,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.3 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

This week’s question comes from Eric, an HR manager. I know there are changes to flexible spending arrangements (FSAs) because of health care reform. How does health care reform affect reimbursements for over-the-counter medicines in FSAs? Answer: The Patient Protection and Affordable Care Act (PPACA) made changes to reimbursements for over-the-counter medicines in the following types of accounts:

• Flexible Spending Arrangements (FSAs),
• Health Reimbursement Arrangements (HRAs),
• Health Savings Accounts (HSAs), and
• Archer Medical Savings Accounts (Archer MSAs).

Over-the-Counter Medicines Generally Are No Longer Reimbursable

Generally, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eyeglasses, contact lenses, co-pays and deductibles.

Change Is Effective for 2011

The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan.

IRS Provides Guidance on New Rules

The Internal Revenue Service (IRS) recently released Notice 2010-59 to provide guidance to employers and employees on the impact of PPACA and how it revises the definition of medical expenses as it relates to over-the-counter drugs.

Rev. Rul. 2003-102 Obsoleted

In conjunction with this change, the IRS also released Rev. Rul. 2010-23, which obsoletes Rev. Rul. 2003-102. This ruling provided guidance on employer reimbursements of amounts paid by an employee to purchase nonprescription medicines or drugs.

Employees Need to Plan for Changes When Making 2011 Elections

Vision Payroll recommends employees start to plan now to account for the impact of these changes on how they will make their elections under these types of plans.

According to the US Department of Labor, in the week ending August 28, the advance figure for seasonally adjusted initial claims was 472,000, a decrease of 6,000 from the previous week’s revised figure of 478,000. The 4-week moving average was 485,500, a decrease of 2,500 from the previous week’s revised average of 488,000.

Advance Seasonally Adjusted Insured Unemployment Rate Remains Unchanged

The advance seasonally adjusted insured unemployment rate was 3.5% for the week ending August 21, unchanged from the prior week’s unrevised rate of 3.5%.

Advance Seasonally Adjusted Insured Unemployment Decreases

The advance number for seasonally adjusted insured unemployment during the week ending August 21 was 4,456,000, a decrease of 23,000 from the preceding week’s revised level of 4,479,000. The 4-week moving average was 4,485,250, a decrease of 28,500 from the preceding week’s revised average of 4,513,750.

Seasonally Adjusted Weekly Insured Unemployment

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 4.994 million.

Many employers are aware of the new requirement under the Patient Protection and Affordable Care Act (PPACA), soon to be implemented, that an employer’s health insurance costs be included on an employee’s Form W-2.

Reporting Health Care Costs on Form W-2 Does NOT Make Them Taxable

Many have misunderstood this requirement to mean that an employer’s health insurance costs are taxable to the employee. To help clarify this, the Internal Revenue Service (IRS) recently released the following explanation:

Starting in tax year 2011, the [PPACA] requires employers to report the value of the health insurance coverage they provide employees on each employee’s annual Form W-2. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee’s income and it is not taxable.

Health Care Costs That Were Already Taxable Are Still Taxable

In some circumstances, the employer’s cost of health insurance is included in an employee’s income, e.g., certain S corporation shareholders. This change does not affect the taxability of employer’s costs that were already taxable.

Vision Payroll Is Ready to Implement This Change

Contact Vision Payroll if you have any further questions on Form W-2.