Vision Payroll

This week’s question comes from Dan, a small-business owner. I have several employees that I hired who have signed Form W-11. What information do I need to provide to Vision Payroll to qualify for the HIRE Act Credit? Answer: Under the HIRE Act, employers may avoid paying social security tax on qualified employees and receive an income tax credit for retaining those employees. Employers are required to obtain a signed affidavit from qualified employees. The Internal Revenue Service (IRS) has released Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit that employers must have signed by eligible employees to claim the credit. Once an employer has obtained a signed form from an employee, contact Vision Payroll to inform us that the employee is eligible for the credit. Vision Payroll will work with employers to determine the eligible wages already paid in 2010 and ensure that future wages are not taxed. Contact Vision Payroll if you have further questions on the HIRE Act Credit.

According to the US Department of Labor, in the week ending April 10, the advance figure for seasonally adjusted initial claims was 484,000, an increase of 24,000 from the previous week’s unrevised figure of 460,000. The 4-week moving average was 457,750, an increase of 7,500 from the previous week’s unrevised average of 450,250.

The advance seasonally adjusted insured unemployment rate was 3.6% for the week ending April 3, an increase of 0.1 percentage points from the prior week’s unrevised rate of 3.5%.

The advance number for seasonally adjusted insured unemployment during the week ending April 3 was 4,639,000, an increase of 73,000 from the preceding week’s revised level of 4,566,000. The 4-week moving average was 4,638,500, a decrease of 13,750 from the preceding week’s revised average of 4,652,250.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.217 million.

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act, landmark legislation reforming health care in the US. While this newly enacted law will affect healthcare insurance coverage for millions of workers, many companies are wondering what is to be expected. Some of the elements of the law will not take effect for a few years, but other features will become effective almost immediately. Small business owners need to consider a number of provisions and implications.

What are the implications of a company’s size? Which provisions are effective this year? Which provisions are effective in later years?

To learn the answers to these questions and much more, be sure to read the featured article by the HR pros at MyHRSupportCenter, The Impact of Health Care Reform on Small Businesses. If you’re not yet signed up or would like a free trial of MyHRSupportCenter, contact Vision Payroll today.

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 Qualified Employers other than Tax-Exempt Employers.

For taxable years beginning in 2010 through 2013, the maximum credit is 35% of the Expenses Counted in Calculating the Health Care Credit. If an 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 35% = $31,500. 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.

The next topic to be covered in this series is the Maximum Credit for Tax-Exempt Qualified Employers. Contact Vision Payroll if you have further questions on the Maximum Credit for Qualified Employers other than 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 Expenses Counted in Calculating the Health Care Credit.

Employers must make a nonelective contribution on behalf of each employee participating in a qualified health plan. The percentage contributed on behalf of each employee must be uniform for all employees and must not be less than 50% of the cost of the coverage. If the portion paid by the employer is less than 100%, only the portion paid by the employer counts toward the credit. For example, if a monthly premium is $1,000 and the employer pays $700 or 70%, only the $700 counts toward the credit. This is true even if the employee’s portion is treated as paid by the employer through a salary reduction arrangement under §125 of the Internal Revenue Code of 1986.

Furthermore, an additional cap is imposed that limits the portion eligible for the credit to the amount that would have been paid if the employer had been enrolled in a plan that charges the average premium for a small group market plan for the state or area of the state where the employer offers coverage. The average premium and the state or area of the state to which it applies will be determined by the Secretary of Health and Human Services.

The next topic to be covered in this series is the Maximum Credit for Qualified Employers other than Tax-Exempt Employers. Contact Vision Payroll if you have further questions on Expenses Counted in Calculating the Health Care Credit.

According to the California Employment Development Department (EDD), employers in the county of Imperial directly affected by the earthquake 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). Written request for extension must be received within 60 days from the original delinquent date of the payment or return to file/pay. Contact Vision Payroll if you’ve been affected and need to file the extension request.

Due to the severe storms, flooding, mudslides and landslides in New Jersey beginning March 12, 2010, President Barack Obama declared the following counties a federal disaster area: Atlantic, Bergen, Burlington, Cape May, Cumberland, Essex, Gloucester, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, and Union. Therefore, the Internal Revenue Service (IRS) announced recently that it will waive failure to deposit penalties for employment and excise taxes due after March 11, 2010 and before March 30, 2010 as long as the deposits were made by March 29, 2010. In addition, affected taxpayers will have until May 11, 2010 to file most tax returns. Contact Vision Payroll if you were affected by the severe storms, flooding, mudslides and landslides and need further information on the relief provided by the IRS.

This week’s question comes from Franz, a small-business owner. We provide health insurance for our employees. We heard that we can get a credit on our tax return this year. What is the Small Business Health Care Tax Credit? Answer: the Small Business Health Care Tax Credit takes effect in 2010 and is available to many small businesses and tax-exempt employers. To determine if your business or tax-exempt organization qualifies, follow these steps:

1. Determine the number of employees who work at least forty hours per week, but don’t count owners or family members. These employees are considered full-time employees.
2. Determine the number of full-time equivalent employees by dividing the total number of hours worked by employees who work less than forty hours per week by 2080. Again, do not count owners or family members.
3. Calculate the sum of the numbers calculated in steps 1 and 2. If the sum is less than twenty-five, continue to step 4. If the sum is twenty-five or more, stop. Your business does not qualify for the credit.
4. Divide the total annual wages paid to the employees counted in steps 1 and 2 by the sum calculated in step 3. If the quotient is less than $50,000, continue to step 5. If the quotient is $50,000 or more, stop. Your business does not qualify for the credit.
5. Determine if your business pays at least half of the insurance premiums for your employees at the single (employee-only) coverage rate. If you do, your business may qualify for the credit. If you don’t, stop. Your business does not qualify for the credit.

Over the next several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. These details will help employers more accurately determine qualifying employers and average annual wages and also calculate and claim the credit.

According to the US Department of Labor, in the week ending April 3, the advance figure for seasonally adjusted initial claims was 460,000, an increase of 18,000 from the previous week’s revised figure of 442,000. The 4-week moving average was 450,250, an increase of 2,250 from the previous week’s revised average of 448,000.

The advance seasonally adjusted insured unemployment rate was 3.5% for the week ending March 27, 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 March 27 was 4,550,000, a decrease of 131,000 from the preceding week’s revised level of 4,681,000. The 4-week moving average was 4,648,250, a decrease of 36,000 from the preceding week’s revised average of 4,684,250.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.236 million.

The Internal Revenue Service (IRS) has released Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit. Employers can use Form W-11 to confirm that an employee is a qualified employee under the HIRE Act. Alternatively, they can use another similar statement if it contains the same information and the employee signs it under penalties of perjury.

Only employees who meet all the requirements of a qualified employee may complete this affidavit or similar statement. You cannot claim the HIRE Act benefits, including the payroll tax exemption or the new hire retention credit, unless the employee completes and signs this affidavit or similar statement under penalties of perjury and is otherwise a qualified employee.

A “qualified employee” is an employee who:

• Begins employment with you after February 3, 2010, and before January 1, 2011;
• Certifies by signed affidavit, or similar statement under penalties of perjury, that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employee begins employment with you;
• Is not employed by you to replace another employee unless the other employee separated from employment voluntarily or for cause (including downsizing); and
• Is not related to you. An employee is related to you if he or she is your child or a descendent of your child, your sibling or stepsibling, your parent or an ancestor of your parent, your stepparent, your niece or nephew, your aunt or uncle, or your in-law. An employee also is related to you if he or she is related to anyone who owns more than 50% of your outstanding stock or capital and profits interest or is your dependent or a dependent of anyone who owns more than 50% of your outstanding stock or capital and profits interest.

Contact Vision Payroll if you have further questions on the HIRE Act. If you prefer, you can attend one of our upcoming seminars that will cover what you need to know about the HIRE Act.