Vision Payroll

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 Determining the Number of Full-Time Equivalents.

To determine the number of full-time equivalents (FTEs), divide total hours worked by qualifying employees by 2,080, but exclude any hours worked by any single employee in excess of 2,080. Round the resulting quotient down to the nearest whole number. For example, if five employees work 2,080 hours each, three employees work 1,040 hours each, and one employee works 2,300 hours, calculate the number of FTEs as follows:

• 2,080 hours/employee X 5 employees = 10,400 hours
• 1,040 hours/employee X 3 employees = 3,120 hours
• 2,080 hours/employee X 1 employees = 2,080 hours (limited by law to 2,080 maximum per employee)
• 10,400 + 3,120 + 2,080 = 15,600
• 15,600 ÷ 2,080 = 7.5
• 7.5 rounded down to the nearest whole number is 7, so the employer has 7 FTEs.

The next topic to be covered in this series is Determining the Amount of Average Annual Wages. Contact Vision Payroll if you have further questions on Determining the Number of Full-Time Equivalents.

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 the Timing of Payments to be Counted in Calculating the Small Business Health Care Tax Credit.

The premiums to be counted are all qualifying premiums paid during the employer’s tax year beginning in 2010. Premiums paid before the passage of the Patient Protection and Affordable Care Act, but during the employer’s tax year beginning in 2010, do qualify for the credit as long as they otherwise qualify for the credit.

The next topic to be covered in this series is Determining the Number of Full-Time Equivalents. Contact Vision Payroll if you have further questions on the Timing of Payments to be Counted in Calculating the Small Business Health Care Tax Credit.

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 the Impact of More than Ten Full-time Equivalent Employees and Average Annual Wages Greater than $25,000.

Employers with ten or fewer full-time equivalent employees (FTEs) do not need to reduce their credit due to the number of FTEs and employers with average annual wages of $25,000 or less do not need to reduce their credit due to the average annual wage. For employers more than ten FTEs and with average annual wages greater than $25,000, the reduction is determined by calculating the individual reductions and adding them together to get the total reduction. If an employer has 13 employees with average annual wages of $33,000 and a credit before reduction of $50,000, then the credit reduction would be $24,000. The steps are as follows:

1. Calculate FTE reduction = $10,000
2. Calculate excess wages reduction = $16,000
3. Sum the reductions $10,000 + $16,000 = $26,000

The allowable credit would be $50,000 – $26,000 = $24,000.

The next topic to be covered in this series is the Timing of Payments to be Counted in Calculating the Small Business Health Care Tax Credit. Contact Vision Payroll if you have further questions on the Impact of More than Ten Full-time Equivalent Employees and Average Annual Wages Greater than $25,000.

This week’s question comes from Aaron, a business owner. I just found out about the payroll tax forgiveness under the HIRE Act. We’ve hired several qualifying employees and already deposited the payroll taxes that should’ve been forgiven. Can we go back and claim payroll tax forgiveness under the HIRE Act? Answer: Under the HIRE Act, for otherwise qualifying employees, the OASDI tax, “Shall not apply to wages paid…with respect to employment during the period beginning [March 19, 2010]…and ending on December 31, 2010.” Employers may claim the credit for taxes paid related to these wages even if the taxes that are being forgiven have already been deposited. Simply reduce other payroll tax deposits in the current quarter or claim a refund with the filing of Form 941. Contact Vision Payroll if you have any further questions concerning payroll tax forgiveness under the HIRE Act.

According to the US Department of Labor, in the week ending April 17, the advance figure for seasonally adjusted initial claims was 456,000, a decrease of 24,000 from the previous week’s revised figure of 480,000. The 4-week moving average was 460,250, an increase of 2,750 from the previous week’s revised average of 457,500.

The advance seasonally adjusted insured unemployment rate was 3.6% for the week ending April 10, a decrease of 0.1 percentage points from the prior week’s revised rate of 3.7%.

The advance number for seasonally adjusted insured unemployment during the week ending April 10 was 4,646,000, a decrease of 40,000 from the preceding week’s revised level of 4,686,000. The 4-week moving average was 4,643,750, a decrease of 5,500 from the preceding week’s revised average of 4,649,250.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.202 million.

The recently passed HIRE Act allows employers to save $2,500 in payroll taxes for new hires earning $33,000 and provides even greater savings for hiring more highly paid employees. The Health Care Reform bill added an income tax credit for employers who pay for a portion of their employees’ health insurance.

Don’t miss these significant tax savings. Vision Payroll is presenting a free one-hour seminar this Thursday, April 22 so qualifying employers can learn how to take advantage of these recent law changes. Click here for more information and to register online.

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 the Impact of Average Annual Wages Greater than $25,000.

Employers with average annual wages of $25,000 or less do not need to reduce their credit due to the average annual wage. For employers with average annual wages greater than $25,000, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the amount by which the average annual wages exceed $25,000 and the denominator of which is $25,000. If an employer has 10 employees with average annual wages of $33,000 and a credit before reduction of $50,000, then the credit reduction would be $16,000. The steps are as follows:

1. Calculate excess average annual wages $33,000 – $25,000 = $8,000.
2. Calculate fraction $8,000 ÷ $25,000 = 32%.
3. Multiply fraction by credit amount before reduction $50,000 X 32% = $16,000.

The allowable credit would be $50,000 – $16,000 = $34,000.

The next topic to be covered in this series is the Impact of More than Ten Full-time Equivalent Employees and Average Annual Wages Greater than $25,000. Contact Vision Payroll if you have further questions on the Impact of Average Annual Wages Greater than $25,000.

Due to the early April severe weather in North Dakota, the Internal Revenue Service (IRS) announced recently that it will consider abating late filing and/or late paying penalties if taxpayers were unable to file by the April 15, 2010 filing deadline. Taxpayers who are assessed a penalty should do the following:

1. Contact the IRS campus that issued the penalty assessment notice. The telephone number is listed on the notice.
2. Identify themselves as a taxpayer affected by the severe spring storms during the period of April 1, 2010, to April 3, 2010.
3. Request the abatement of associated penalties, based on reasonable cause criteria.

The IRS will review requests on a case-by-case basis. Contact Vision Payroll if you were affected by the severe weather and need further information on the relief provided by the IRS.

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 the Impact of More than Ten Full-time Equivalent Employees.

Employers with ten or fewer full-time equivalent employees (FTEs) do not need to reduce their credit due to the number of FTEs. For employers with more than ten FTEs, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the number of FTEs in excess of 10 and the denominator of which is 15. If an employer has 13 employees with average annual wages of $24,000 and a credit before reduction of $50,000, then the credit reduction would be $10,000. The steps are as follows:

1. Calculate excess employees 13 – 10 = 3.
2. Calculate fraction 3 ÷ 15 = 20%.
3. Multiply fraction by credit amount before reduction $50,000 X 20% = $10,000.

The allowable credit would be $50,000 – $10,000 = $40,000.

The next topic to be covered in this series is the Impact of Average Annual Wages Greater than $25,000. Contact Vision Payroll if you have further questions on the Impact of More than Ten Full-time Equivalent Employees.

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 the Maximum Credit for Tax-Exempt Qualified Employers.

For taxable years beginning in 2010 through 2013, the maximum credit is 25% of the Expenses Counted in Calculating the Health Care Credit. There is a further limitation equal to the amount of certain taxes that the qualified tax-exempt employer must pay with Form 941. The taxes are the sum of the federal income and Medicare taxes withheld and the employer portion of the Medicare tax.

If a qualified tax-exempt employer has eight employees who earn an average of $24,500 per year and the employer pays $90,000 in qualifying health care premiums, the maximum credit would be $90,000 X 25% = $22,500. This assumes that the qualifying health care premiums do not exceed the average premium for a small group market plan for the state or area of the state where the employer offers coverage. If the total federal income and Medicare taxes withheld and the employer portion of the Medicare tax, are greater than $22,500, the credit is $22,500. But if the federal income and Medicare taxes withheld and the employer portion of the Medicare tax are only $20,000, the credit must be limited to $20,000.

The next topic to be covered in this series is the Impact of More than Ten Full-time Equivalent Employees. Contact Vision Payroll if you have further questions on the Maximum Credit for Tax-Exempt Qualified Employers.