Vision Payroll

Several states have minimum wage increases effective for work performed after July 23, 2008. Idaho, Indiana, Maryland, Montana, Nebraska, New Hampshire, North Carolina, North Dakota, Oklahoma, Puerto Rico, South Dakota, Texas, Utah, and Virginia all have increases to $6.55 to match the federal minimum wage. The District of Columbia minimum wage increases to $7.55. Different minimum wages may be paid to certain classes of employees in some situations. Contact Vision Payroll if you have any questions on minimum wage law changes.

In TIR 08-8: Sales/Use Tax, Withholding and Administrative Changes Contained in Chapter 182 of the Acts of 2008, the Massachusetts Department of Revenue (DOR) commented on the changes required by the new law. For withholding purposes, the law allows the DOR to require withholding by S corporations and entities treated as partnerships for tax purposes on distributions to shareholders or partners. In Proposed 830 CMR 62B.2.2: Pass-Through Entity Withholding, the DOR listed which entities would be required to withhold and which shareholders and partners would be exempt from withholding. It also addressed several administrative issues related to registration, payment, and reporting. TIR 08-8 confirmed that a final form of the proposed regulation will soon be promulgated effective for tax years beginning on or after January 1, 2009. Vision Payroll is ready to help its clients deal with the changes required by this new law. Please call us for our recommendations for a smooth transition to the new withholding requirements.

This week’s question comes from Jasmine, a business owner: I’m on the road visiting clients and can’t always call my hours in during the day. I’m also out-of-town frequently. What’s the best way for me to submit my payroll information? Answer: Online Employer is the perfect solution for employers to submit and receive payroll information. All you need to do is log in to our secure website, submit hours and changes, and transmit your encrypted files. We’ll take care of the rest. You can log in to review your current and past payroll reports, create your own custom reports, and even calculate a manual check 24 hours a day, 365 days a year. Get the information you need on your schedule—sign up for Online Employer today.

According to the US Department of Labor, in the week ending July 12, the advance figure for seasonally adjusted initial claims was 366,000, an increase of 18,000 from the previous week’s revised figure of 348,000. The 4-week moving average was 376,500, a decrease of 4,500 from the previous week’s revised average of 381,000.

In Rev. Proc. 2008-25, the IRS provided a safe harbor method of accounting for accrual-basis taxpayers to use to account for FICA and FUTA taxes. It also established procedures for taxpayers to use to change their method of accounting to this safe harbor method. Under Rev. Proc. 2008-25, taxpayers who use the safe harbor method may deduct FUTA and the employer’s portion of FICA in the same year in which the all-events test has been met for the related compensation and the IRS will not challenge such use. This is true even if the amount of the tax liability is not fixed at the time of accrual of the compensation because, for example, the taxpayer does not know if a particular employee will have reached an applicable payroll tax ceiling when the liability is paid. Examples are provided in Rev. Proc. 2008-25 to further clarify the IRS position. Because the change in accounting method requires the filing of Form 3115, taxpayers are advised to consult their tax advisors for further information.

Do you wish you could be better organized? Do you wonder where you put that payroll report that you need? Is your filing cabinet overflowing? Do you worry about identity theft? Do you need to protect your sensitive payroll data from nosy employees? If you answered yes to any of these questions, ViewChoice is the answer for you. Don’t wait for payroll reports to arrive in the mail. Get access to your reports instantly as soon as your payroll is processed. Using encrypted files and proprietary viewing software, your reports can be made more secure from unauthorized access while reducing clutter and storage requirements. Print the reports that you need when you need them. Easily create Adobe pdf files of any report, check stub, or W-2. At year-end, you’ll automatically get a CD that contains all these reports and more. Simply give it to your CPA and eliminate those pesky payroll questions. All the answers are on your CD, saving time for both of you. And time is money. Sign up for ViewChoice today and be better organized tomorrow!

In Private Letter Ruling 200825043, the IRS concluded that employers who receive a determination letter from the IRS that someone previously classified as an independent contractor should be classified as a employee may use §3509 to reduce the amount of employee FICA tax and federal income tax payable. The federal withholding in such cases is reduced to 1.5% of wages regardless of what the employee claims on a Form W-4. The FICA tax rate is reduced from 7.65% to 1.53% on the employee’s portion. The employer’s rate remains at 7.65%. If the employer did not file Form 1099-MISC for payments made to the newly-classified employee, the employee withholding rates are doubled. Furthermore, no interest is charged on the late payment of the employee’s portion of the tax.

The federal minimum wage is set to increase from $5.85 per hour to $6.55 per hour for work performed after July 23, 2008. Under current law, an additional increase to $7.25 per hour is scheduled for work performed after July 23, 2009. The Fair Labor Standards Act sets the minimum wage for nonexempt, covered employees. Employees in states with laws that set higher minimum wages are entitled to higher minimum wages. Different minimum wages may be paid to certain classes of employees in some situations, including tipped employees, disabled workers, full-time students, student-learners and youth under age 20 in their first 90 consecutive calendar days of employment. If state and federal rules differ, employers are generally required to follow the rules that are more beneficial to employees. Contact Vision Payroll if you have any questions on minimum wage law changes.

In Revenue Ruling 2008-29, the IRS clarified the amount of federal income tax to be withheld on certain supplemental wages. Situations covered include sales commissions, draws, signing bonuses, severance pay, annual leave, vacation and sick pay, and sick pay paid at a different rate. Contact Vision Payroll if you have any questions on this ruling.

The IRS recently issued Notice 2008-59 on Health Savings Accounts (HSA), which are available to taxpayers enrolled in a High Deductible Health Plan. Qualified contributions to an HSA are not subject to federal income tax and distributions from an HSA for qualified medical expenses may also be made tax-free. The guidance is in the form of 42 questions and answers and the topics covered are: Eligible Individuals, High Deductible Health Plans, Contributions, Distributions, Prohibited Transactions, Establishing an HSA, and Administration. Vision Payroll can work with you and your benefits broker to determine if an HSA is right for you and, if so, to ensure that your HSA is properly established. Vision Payroll will also ensure that your deductions are properly calculated and reported for federal and state tax purposes. An HSA can be a cost-effective alternative to traditional health plans—shouldn’t you find out more today?