Vision Payroll

June 25, 2010

Question of the Week: Can an LLC Member Receive a Paycheck from the LLC?

This week’s question comes from Nikki, an LLC member. I am a member in an LLC. My neighbor is a member and receives a paycheck, but I’ve been told that I can’t receive a paycheck. Can an LLC member receive a paycheck from the LLC? Answer: For federal tax purposes, an LLC can make an election to be taxed in one of the following three ways:

  • Sole proprietorship (if only one member in LLC)
  • Partnership (if two members or more in LLC)
  • Corporation (any number of members in LLC)

This election is generally made when the entity is formed and must be done by the time the entity files its first income tax return.

If your LLC has elected to be taxed as a sole proprietorship, the LLC cannot pay wages to the member and the member cannot have income tax, social security tax, or Medicare tax withheld, and cannot receive a Form W-2 from the LLC.

If your LLC has elected to be taxed as a partnership, the LLC cannot pay wages to the members and the members cannot have income tax, social security tax, or Medicare tax withheld, and cannot receive a Form W-2 from the LLC.

If your LLC has elected to be taxed as a corporation, the LLC can pay wages to the members and the members can have income tax, social security tax, and Medicare tax withheld, and can receive a Form W-2 from the LLC. This is true even if there is only a single member in the LLC.

As for LLCs that have elected to be taxed as a sole proprietorship or a partnership, members may receive a draw from the LLC and must pay quarterly federal estimated tax payments to cover the amount of federal income tax and self-employment tax liability they will have, unless covered by withholding on other income. Vision Payroll can work with you and your CPA to determine an appropriate draw and estimated tax payment schedule. You can then receive the draw as a check or direct deposit with each payroll and schedule appropriate deductions such as retirement plan contributions. Contact Vision Payroll today to get started.

June 24, 2010

Unemployment Insurance Weekly Claims Report Update for June 19, 2010

According to the US Department of Labor, in the week ending June 19, the advance figure for seasonally adjusted initial claims was 457,000, a decrease of 19,000 from the previous week’s revised figure of 476,000. The 4-week moving average was 462,750, a decrease of 1,500 from the previous week’s revised average of 464,250.

The advance seasonally adjusted insured unemployment rate was 3.5% for the week ending June 12, a decrease of 0.1 percentage points from the prior week’s unrevised rate of 3.6%.

The advance number for seasonally adjusted insured unemployment during the week ending June 12 was 4,548,000, a decrease of 45,000 from the preceding week’s revised level of 4,593,000. The 4-week moving average was 4,586,500, a decrease of 21,750 from the preceding week’s revised average of 4,608,250.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.084 million.

June 23, 2010

Tip of the Week: Employees vs. Interns

Many businesses consider having an intern due to budgetary concerns in hiring an employee. However, an intern is not free labor. An internship must be a learning experience for the benefit of the intern and not the employer.

  • Are interns entitled to benefits under federal law such as minimum wage, overtime pay, and a workplace free from discrimination?
  • How does an employer determine if a legitimate employee relationship exists?
  • What resources does the Department of Labor (DOL) provide to help employers make these determinations?

Get answers to these questions by listening to Employees vs. Interns in this month’s HRCast, a recording provided by our team of HR Pros and available exclusively on MyHRSupportCenter. You’ll also learn the six key criteria the DOL uses to help determine if an intern must be paid.

Visit MyHRSupportCenter regularly, not only for our HRCasts, but also to get late-breaking compliance alerts, best practices to implement, and HR tools to use every day. If you haven’t yet signed up and would like a free trial of MyHRSupportCenter, contact Vision Payroll today.

June 22, 2010

Former Williams College Professor Denied COBRA Coverage Due to Gross Misconduct

An Assistant Professor in the Williams College (Williams) Political Science Department was denied continuing health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) after Williams terminated his three-year teaching contract “for cause because of his guilty plea [to student aid fraud, bank fraud, and social security fraud], his failure to notify [Williams] of the crimes and subsequent plea, fraudulent credentials he had supplied to Williams…in seeking employment, and his misuse of a Williams…credit card.”

In Moore v. Williams, DCMA, 09cv30208, 4/7/2010, the court granted the defendant’s motion to dismiss, thereby closing the case. Under COBRA, terminated employees may elect to continue their health care coverage, generally at their own expense. An exception disallows COBRA coverage when an employee is terminated for gross misconduct. Although the court stated that there are no regulations defining gross misconduct for this purpose, “The conduct in this case is sufficiently outrageous to constitute gross misconduct, and while it did not arise from an ‘evil design’ to harm [Williams], it indicated a reckless disregard for [Williams’s] interests.”

Due to the clear lack of standards to determine gross misconduct for COBRA purposes, Vision Payroll strongly recommends that employers consult with a competent labor law attorney for assistance in deciding if COBRA coverage should be denied because of gross misconduct.

June 21, 2010

Independence Day Holiday May Require Change in Processing Schedule

Filed under: News — Tags: , , — Vision @ 2:59 pm

Monday, July 5, 2010 will be the celebration of Independence Day, a federal holiday. The offices of Vision Payroll will close July 2 at 5 pm EDT and re-open Tuesday July 6. Most banks will also be closed in observance of the holiday.

Date Paid Process Deadline
7/05/2010 6/30/2010
7/06/2010 6/30/2010
7/07/2010 7/01/2010

Payrolls dated July 5 will be paid July 2 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 July 8.

The next federal holiday will be Monday, September 6, 2010, Labor Day. Contact Vision Payroll as soon as possible to make changes to or for questions on your processing schedule.

June 20, 2010

Impact of the Small Business Health Care Tax Credit on Estimated Tax Payments

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 several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is Impact of the Small Business Health Care Tax Credit on Estimated Tax Payments.

The amount of the credit that will be allowed may be used in determining the amount of estimated tax payments that must be made in accordance with the rules for making such payments.

The next topic to be covered in this series is Impact of the Small Business Health Care Tax Credit on Deductions for Health Insurance Premiums. Contact Vision Payroll if you have further questions on Impact of the Small Business Health Care Tax Credit on Estimated Tax Payments.

June 19, 2010

Claiming the Small Business Health Care Tax Credit Without Taxable Income for 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 Claiming the Small Business Health Care Tax Credit Without Taxable Income for Tax-Exempt Employers.

The Small Business Health Care Tax Credit will be claimed by tax-exempt employers as a refundable credit. As such, the only limit is the previously discussed limit of federal income tax withholding and Medicare tax liability.

The next topic to be covered in this series is Impact of  the Small Business Health Care Tax Credit on Estimated Tax Payments. Contact Vision Payroll if you have further questions on Claiming the Small Business Health Care Tax Credit Without Taxable Income for Tax-Exempt Employers.

June 18, 2010

Question of the Week: Are Health Insurance Costs Required To Be Reported on Form W-2?

This week’s question comes from Beverly, a small-business owner. We pay health insurance costs for our employees. I heard there was a change in reporting health insurance costs under the new law. Are health insurance costs required to be reported on Form W-2? Answer: Under the Patient Protection and Affordable Care Act (PPACA), beginning in the 2011 tax year (reported to Social Security Administration (SSA) in 2012), employers will be required to start including the aggregate cost for “applicable employer-sponsored coverage” for each employee on that employee’s Form W-2, Wage and Tax Statement. There is no requirement to include this information on the 2010 Form W-2, to be reported to the SSA in 2011. Contact Vision Payroll if you have any further questions on Form W-2.

June 17, 2010

Unemployment Insurance Weekly Claims Report Update for June 12, 2010

According to the US Department of Labor, in the week ending June 12, the advance figure for seasonally adjusted initial claims was 472,000, an increase of 12,000 from the previous week’s revised figure of 460,000. The 4-week moving average was 463,500, a decrease of 500 from the previous week’s revised average of 464,000.

The advance seasonally adjusted insured unemployment rate was 3.6% for the week ending June 5, an increase of 0.1 percentage points from the prior week’s unrevised rate of 3.5 percent.

The advance number for seasonally adjusted insured unemployment during the week ending June 5 was 4,571,000, an increase of 88,000 from the preceding week’s revised level of 4,483,000. The 4-week moving average was 4,601,500, a decrease of 21,250 from the preceding week’s revised average of 4,622,750.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.097 million.

June 16, 2010

Tip of the Week: IRS Releases Updated Form 8846

The Internal Revenue Service (IRS) recently released an information sheet attached to 2009 Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips. The note on the information sheet relates to employers that have claimed payroll tax forgiveness under the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act).

According to the note, employers should do the following (all line references are to Form 8846):

If any tipped employee’s wages are exempt from social security taxes, check the box on line 4 and attach a separate computation showing the amount of tips subject to only the Medicare tax rate of 1.45%. Subtract these tips from the line 3 tips, and multiply the difference by .0765. Then, multiply the tips subject only to the Medicare tax by .0145. Enter the sum of these amounts on line 4.

Contact Vision Payroll if you have any further questions on the revision to Form 8846.

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