Vision Payroll

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. 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 7, social security tips.

Boxes 3 and 7 Combined Cannot Exceed $106,800

Box 7 shows the amount of tips reported by employees. In many situations, the cash wages paid are insufficient to collect the entire amount of social security and Medicare tax. Reported tips must still be shown in this box, even if social security or Medicare tax was not withheld on them. For 2010, the combined total of Boxes 3 and 7 cannot exceed $106,800. The reported tips should be included with amounts reported in Box 1, wages, tips, other compensation and Box 5, Medicare wages and tips. Since social security benefits are based on the amount of social security tips reported to the Social Security Administration (SSA), it is important that employees periodically review their social security earnings record and provide the SSA with the Form W-2 to update any incorrectly posted earnings records.

Box 8, Allocated Tips Is the Next Topic

The next topic in this continuing series will be Box 8, allocated tips. Contact Vision Payroll with any questions on the 2010 Form W-2.

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. 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 6, Medicare tax withheld.

No Limit in 2010 on Medicare Tax Withheld

Box 6 shows the total amount of employee Medicare withheld, including the amount withheld on tips. It does not include any employer contribution toward Medicare on the employee’s behalf. The 2010 rate was 1.45% and unlike social security, there is no taxable wage base. Therefore, there is no upper limit to the amount entered in this box. If the employer paid the employee’s share of such taxes rather than withholding them, the tax must be grossed up and included in boxes 1, 3, and 5.

Box 7, Social Security Tips Is the Next Topic

The next topic in this continuing series will be Box 7, social security tips. Contact Vision Payroll with any questions on the 2010 Form W-2.

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. 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 5, Medicare wages and tips.

No Limit in 2010 on Medicare Wages

Box 5 shows the total amount of wages subject to Medicare tax. For most employees, this amount equals the sum of boxes 3 and 7, with one exception. There is no limit on the amount of Medicare wages as there is with social security wages. Additionally, depending on the date of hire, some governmental employees may have Medicare wages, but not social security wages.

Box 6, Medicare Tax Withheld Is the Next Topic

The next topic in this continuing series will be Box 6, Medicare tax withheld. Contact Vision Payroll with any questions on the 2010 Form W-2.

The unemployment rate fell by 0.4 percentage points to 9.4% in December, and nonfarm payroll employment increased by 103,000, the US Bureau of Labor Statistics reported recently. Employment rose in leisure and hospitality and in health care but was little changed in other major industries.

Household Survey Data

The number of unemployed persons decreased by 556,000 to 14.5 million in December, and the unemployment rate dropped to 9.4%. Over the year, these measures were down from 15.2 million and 9.9%, respectively.

Among the major worker groups, the unemployment rates for adult men (9.4%) and whites (8.5%) declined in December. The unemployment rates for adult women (8.1%), teenagers (25.4%), blacks (15.8%), and Hispanics (13.0%) showed little change. The jobless rate for Asians was 7.2%, not seasonally adjusted.

In December, the number of job losers and persons who completed temporary jobs dropped by 548,000 to 8.9 million. The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 6.4 million and accounted for 44.3% of the unemployed.

The civilian labor force participation rate edged down in December to 64.3%, and the employment-population ratio was essentially unchanged at 58.3%.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged in December at 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.

About 2.6 million persons were marginally attached to the labor force in December, little different than 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.

Among the marginally attached, there were 1.3 million discouraged workers in December, an increase of 389,000 from December 2009. (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 Gabrielle, an office manager. I noticed that my federal income tax withholding increased for my first check of 2011 as compared to my last check of 2010. Several of my co-workers noticed the same thing. I thought the tax cuts were extended. Why did my federal income tax withholding go up in 2011? Answer: The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act) did extend lower marginal rates for many taxpayers and some taxpayers will see lower federal withholding.

Expiration of Making Work Pay Credit Will Increase Withholding for Many

The expiration of the Making Work Pay credit meant an adjustment in the withholding tables that results in increased federal withholding for many taxpayers. Since taxpayers no longer may claim the Making Work Pay credit on their tax returns, the withholding tables have been adjusted

Taxpayers May File an Amended Form W-4 to Adjust Federal Withholding

Employees may complete a revised 2011 Form W-4, Employee’s Withholding Allowance Certificate or its Spanish equivalent, Formulario W-4(SP), Certificado de Exención de la Retención del Empleado, to adjust their federal withholding for 2011.

Many Taxpayers Have Reduced Social Security Tax Withholding

For taxpayers subject to social security tax withholding, the 2010 Tax Act reduced the rate of withholding in 2011 from 6.2% to 4.2%. This reduced withholding will generally result in higher net pay as it will more than offset the increase in federal income tax withholding.

Vision Payroll Has Implemented New Withholding Tables

Vision Payroll has already updated its tax tables and will calculate both the reduced Social Security and updated federal income tax withholding for all 2011 paychecks.

According to the US Department of Labor, in the week ending January 1, the advance figure for seasonally adjusted initial claims was 409,000, an increase of 18,000 from the previous week’s revised figure of 391,000. The 4-week moving average was 410,750, a decrease of 3,500 from the previous week’s revised average of 414,250.

Advance Seasonally Adjusted Insured Unemployment Rate Remains Unchanged

The advance seasonally adjusted insured unemployment rate was 3.3% for the week ending December 25, unchanged from the prior week’s unrevised rate of 3.3%.

Advance Seasonally Adjusted Insured Unemployment Decreases

The advance number for seasonally adjusted insured unemployment during the week ending December 25 was 4,103,000, a decrease of 47,000 from the preceding week’s revised level of 4,150,000. The 4-week moving average was 4,122,500, a decrease of 2,750 from the preceding week’s revised average of 4,125,250.

The Internal Revenue Service (IRS) has released the 2011 Form W-4, Employee’s Withholding Allowance Certificate. Form W-4 is used by employers to calculate the amount of federal tax to be withheld from an employee’s paycheck.

Employees Claiming Exempt Status Must File a New Form W-4

Employees who have provided a Form W-4 claiming exemption from federal income tax withholding must file a new 2011 Form W-4 by February 16, 2011 in order to continue their exemption from federal income tax withholding. Employers must start withholding on February 16, 2011 if employees have not provided a 2011 Form W-4 claiming exemption.

Employees Changing from Exempt to Non-Exempt Should Also File Form W-4

Even employees who are no longer claiming exemption should file a 2011 Form W-4 so that employers may calculate the proper amount of withholding. If an employee has not provided a 2011 Form W-4 by February 16, 2011, the employer should withhold based on a previously filed Form W-4 not claiming exemption, if available or using single, zero allowances, if not.

Spanish Language Form Is not Yet Available

Spanish-speaking employees may complete Formulario W-4(SP), Certificado de Exención de la Retención del Empleado. This form is generally released in April of the applicable year. Further information will be available when the form is released.

Pre-Printed Forms W-4 Are Available from Vision Payroll

Upon request, Vision Payroll can provide employers with pre-printed 2011 Forms W-4 for all active employees. Vision Payroll will not automatically change any employee’s claimed withholding allowances. Employers should update the allowances claimed by logging in to their company file or providing Vision Payroll with the updated information.

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. 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 4, social security tax withheld.

Maximum Withholding for 2010 Was $6,621.60

Box 4 shows the total amount of employee social security tax withheld, including the amount withheld on tips. It does not include any employer contribution toward social security on the employee’s behalf. Since the 2010 rate was 6.2% and the taxable wage base was $106,800, the amount in this box should not exceed $6,621.60. If the employer paid the employee’s share of such taxes rather than withholding them, the tax must be grossed up and included in boxes 1, 3, and 5.

Box 5, Medicare Wages and Tips Is the Next Topic

The next topic in this continuing series will be Box 5, Medicare wages and tips. Contact Vision Payroll with any questions on the 2010 Form W-2.

Monday, January 17, 2011 will be the Birthday of Martin Luther King, Jr., a federal holiday. Although the offices of Vision Payroll will be open and payrolls will be processed, most banks will be closed in observance of the holiday.

Date Paid	Process Deadline
1/17/2011	1/12/2011
1/18/2011	1/13/2011
1/19/2011	1/14/2011

Payroll Dates May Be Affected by Birthday of Martin Luther King, Jr.

Payrolls dated January 17 will be paid January 14 unless a previous change in schedule has been submitted. Payrolls submitted after these processing deadlines will be pushed back until the next available processing day. No changes are required for payrolls dated January 20.

Washington’s Birthday Is Next Federal Holiday

The next federal holiday will be Monday, February 21, 2011, Washington’s Birthday. Contact Vision Payroll as soon as possible to make changes to or for questions on your processing schedule.

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. 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 3, social security wages.

Social Security Earnings Help Determine the Amount of Social Security Benefits

Box 3 shows the amount wages paid subject to social security tax. It does not include social security tips reported in box 7 or allocated tips reported in box 8. Wages should be reduced by amounts withheld for non-taxable benefits elected under §125 plans, certain clergy housing allowances, and third-party sick pay after the end of six calendar months after the calendar month that the employee last worked for the employer. For 2010, the combined total of boxes 3 and 7 cannot exceed $106,800. Since social security benefits are based on the amount of social security wages reported to the Social Security Administration (SSA), it is important that employees periodically review their social security earnings record and provide the SSA with the Form W-2 to update any incorrectly posted earnings records.

Box 4, Social Security Tax Withheld Is the Next Topic

The next topic in this continuing series will be Box 4, social security tax withheld. Contact Vision Payroll with any questions on the 2010 Form W-2.