Vision Payroll

Due to the damage caused by the severe storms, flooding, and straight-line winds in North Carolina on September 27, 2010, President Barack Obama declared the following counties a federal disaster area: Beaufort, Bertie, Brunswick, Craven, Hertford, Jones, Pender, Pitt, Onslow and Tyrrell.

Declaration Leads to Extension of Payroll Tax and Other Deadlines

Therefore, the Internal Revenue Service (IRS) announced recently that it will waive failure to deposit penalties for employment and excise taxes due after September 26, 2010 and before October 13, 2010 as long as the deposits were made by October 12, 2010. In addition, affected taxpayers had until November 26, 2010 to file most tax returns.

Vision Payroll is Here to Help Affected Taxpayers with Payroll Tax Issues

Contact Vision Payroll if you were affected by the severe storms, flooding, and straight-line winds and need further information on the relief provided by the IRS.

This week’s question comes from Anne, a company president. We just received a Notice of Change in Filing Frequency from the Massachusetts Department of Revenue (DOR). What is a Notice of Change in Filing Frequency? Answer: In Massachusetts, employers are required to deposit payroll taxes on one of four filing frequencies:

• Depository
• Monthly
• Quarterly
• Annual

Frequencies Are Based upon Taxes Paid

These frequencies are based upon the amount of tax paid in a twelve-month period. For payroll taxes, the amounts are as follows:

• Depository is greater than $25,000
• Monthly is between $1,200 and $25,000
• Quarterly is between $100 and $2,500
• Annual is less than $100

Consequently, when the amount an employer is expected to pay passes one of the thresholds, the DOR will change the filing frequency.

DOR Mails Notices to Affected Employers

Each year, the DOR mails notices to employers whose frequency will change for the next calendar year. This notice is called a Notice of Change in Filing Frequency.

Forward Notices to Vision Payroll

Although Vision Payroll will review each client’s filing frequency in January, employers who receive a notice can send a copy to Vision Payroll if they wish to have their filing status change on file.

According to the US Department of Labor, in the week ending October 16, the advance figure for seasonally adjusted initial claims was 452,000, a decrease of 23,000 from the previous week’s revised figure of 475,000. The 4-week moving average was 458,000, a decrease of 4,250 from the previous week’s revised average of 462,250.

Advance Seasonally Adjusted Insured Unemployment Rate Remains Unchanged

The advance seasonally adjusted insured unemployment rate was 3.5% for the week ending October 9, 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 October 9 was 4,441,000, a decrease of 9,000 from the preceding week’s revised level of 4,450,000. The 4-week moving average was 4,478,000, a decrease of 23,250 from the preceding week’s revised average of 4,501,250.

On July 1, 2010, the Vital Statistics Office of the Commonwealth of Puerto Rico began issuing new, more secure certified copies of birth certificates to US citizens born in Puerto Rico because of a new Puerto Rico birth certificate law.

As of September 30, 2010, Certified Copies of Puerto Rico Birth Certificates Issued Before July 1, 2010, Will Now Be Valid Through October 30, 2010. The Dates Below Reflect this Extension.

After October 30, 2010, all certified copies of birth certificates issued prior to July 1, 2010, will become invalid. This new law does not affect the US citizenship status of individuals born in Puerto Rico. It only affects the validity of certified copies of Puerto Rico birth certificates.

How Will this Law Impact the Employment Eligibility Verification (Form I-9) Process?

New Employees

• All certified copies of Puerto Rico birth certificates are acceptable for Form I-9 purposes through October 30, 2010.
• Beginning October 31, 2010, only certified copies of Puerto Rico birth certificates issued on or after July 1, 2010, are acceptable for Form I-9 purposes.
• Beginning October 31, 2010, if an employee presents for List C a birth certificate issued by the Vital Statistics Office of the Commonwealth of Puerto Rico, the employer must look at the date the certified copy of the birth certificate was issued to ensure that it is still valid.

Existing Employees

Employers must not re-verify the employment eligibility of existing employees who presented a certified copy of a Puerto Rico birth certificate for Form I-9 purposes and whose employment eligibility was verified on Form I-9 prior to October 31, 2010. 

Federal Contractors

Employers awarded a federal contract that contains the Federal Acquisition Regulation (FAR) E-Verify clause have special Form I-9 rules for the verification of existing employees. 

If completing new Forms I-9 for existing employees, certified copies of Puerto Rico birth certificates are acceptable as a List C document under the following circumstances:

• Prior to October 31, 2010, all certified copies of Puerto Rico birth certificates are acceptable for Form I-9 purposes.
• Beginning October 31, 2010, only certified copies of Puerto Rico birth certificates issued on or after July 1, 2010, are acceptable for Form I-9 purposes. 

If updating existing Forms I-9, an employer must not ask an employee to present a new certified copy of a Puerto Rico birth certificate if the employee presented a certified copy of a birth certificate issued in Puerto Rico before July 1, 2010 that was valid and acceptable for the Form I-9 at the time it was presented.

See the E-Verify Supplemental Guide for Federal Contractors for more information on E-Verify and FAR requirements.

How Will this Law Affect the Retention of Documents with Form I-9?

Existing federal law governing the Form I-9 process prohibits employers from keeping original certified copies of birth certificates, including those issued in Puerto Rico, but allows employers to keep photocopies of these documents. Employers who choose to make photocopies of documents their employees present when completing Form I-9 must do so for all employees, regardless of national origin or citizenship status.

For more information about Form I-9, visit http://www.uscis.gov/. More information about birth certificates issued in Puerto Rico can be found at www.prfaa.com/birthcertificates and www.prfaa.com/certificadosdenacimiento.

Contact Vision Payroll if you have further questions on the changes to Form I-9.

The Job Service North Dakota has announced an increase in the taxable wage base for 2011. The wage base will increase from $24,700 for 2010 to $25,500 for 2011.

Annual Increase Is Mandated by Law

This amount is set annually and is 70% of a statewide average wage.

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 the North Dakota unemployment taxable wage base or visit our Unemployment Taxable Wage Base page.

The Internal Revenue Service (IRS) recently released a draft Form W-2, Wage and Tax Statement for 2011.

Box 9 Is not Applicable for 2011 Form

Box 9, which formerly showed the amount of any Advance Earned Income Credit (EIC) payment, is not applicable for 2011 since it was repealed. The credit will now be claimed on the taxpayer’s individual income tax return, when filed.

Code DD Added to Box 12

The reporting in Box 12, using Code DD, of the cost of employer-sponsored health coverage is for information only. This reporting will be optional for 2011 and required starting for 2012 tax year reporting.

Contact Vision Payroll if you have further questions on the 2011 draft Form W-2.

According to the California Employment Development Department (EDD), employers in the county of Imperial directly affected by the storm 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).

Imperial County Is in a Declared State of Emergency

Written request for extension must be received within 60 days from the original delinquent date of the payment or return to file/pay.

Vision Payroll Can Assist Imperial County Clients with Extension Application

Contact Vision Payroll if you’ve been affected and need to file the extension request.

The Social Security Administration announced recently that the Maximum Taxable Earnings or Social Security Wage Base would not change for 2011.

Social Security Increases Based on CPI Change

Since there was no increase in the Consumer Price Index (CPI-W) from the third quarter of 2008 to the third quarter of 2010, the Social Security Wage Base will remain at $106,800. There is no provision for a Cost-of-Living Adjustment (COLA) when there is no increase in the CPI-W. Wages are taxed at 6.2%, so the maximum tax to be paid by each employee will be $6,621.60. About 7% of workers who pay Social Security Tax are expected to reach the maximum in 2010.

Retirement Earnings Test Exempt Amounts Remain Unchanged for 2011

For workers under full retirement age, $1 in benefits will be withheld for every $2 above the Retirement Earnings Test Exempt Amount of $14,160 per year or $1,180 per month. The year an individual reaches full retirement age, $1 in benefits will be withheld for every $3 above the Retirement Earnings Test Exempt Amount of $37,680 per year or $3,140 per month. The month an individual reaches full retirement age there is no limit on earnings. These amounts are also unchanged from 2010 to 2011.

Quarter of Coverage Amounts Stay at $1,120

Also unchanged for 2011 is that amount needed to earn a Social Security credit, formerly known as a quarter of coverage. In 2011, a credit will be earned for every $1,120 of earnings, up to a maximum of four credits.

Contact Vision Payroll if you have any questions on the Social Security changes for 2011 or get further information at Important Facts and Figures.

This week’s question comes from Andrea, an HR director. We hired an employee who qualified for the HIRE Act Incentives, including payroll tax forgiveness. We had to lay him off temporarily and don’t know if he still qualifies under his previous layoff or if he needs to requalify. What is the impact of temporary layoff on the HIRE Act incentives? Answer: Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are exempt from certain employment taxes and may receive other tax benefits. In order to qualify under the HIRE Act, employers are required to “get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period.” Workers who are temporarily laid off may or may not have to requalify and fill out a new Form W-11 or the Spanish-language equivalent, Form W-11(SP).

IRS Addresses Issue in Information Letter 2010-0198

The Internal Revenue Service (IRS) addressed this issue in Information Letter 2010-0198. According to the IRS:

An individual who is already a qualified employee and who experiences a short term or temporary interruption in his or her performance of services continues to be a qualified employee unless the interruption constitutes a termination of employment. Whether a short term or temporary interruption of an employee’s performance of services constitutes a termination of employment depends on the facts and circumstances. In the case of an individual who was previously employed as a qualified employee and whose employment is terminated, the employee will have to again meet the requirements for qualified employee status at the time the employment relationship is reestablished.

Documentation Is Key to Support Employer Position

Vision Payroll recommends that employers document thoroughly why a “temporary interruption” was not a termination of employment if they do not requalify an employee under the HIRE Act. Consultation with a qualified labor law attorney to determine when employment terminates is strongly recommended.

According to the US Department of Labor, in the week ending October 9, the advance figure for seasonally adjusted initial claims was 462,000, an increase of 13,000 from the previous week’s revised figure of 449,000. The 4-week moving average was 459,000, an increase of 2,250 from the previous week’s revised average of 456,750.

Advance Seasonally Adjusted Insured Unemployment Rate Decreases

The advance seasonally adjusted insured unemployment rate was 3.5% for the week ending October 2, a decrease of 0.1 percentage points from the prior week’s revised rate of 3.6%.

Advance Seasonally Adjusted Insured Unemployment Decreases

The advance number for seasonally adjusted insured unemployment during the week ending October 2 was 4,399,000, a decrease of 112,000 from the preceding week’s revised level of 4,511,000. The 4-week moving average was 4,488,500, a decrease of 34,500 from the preceding week’s revised average of 4,523,000.