Vision Payroll

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 13, checkboxes.

First Checkbox Is for Statutory Employees

Three checkboxes must be completed in certain circumstances. First is a checkbox for statutory employees. Statutory employees are independent contractors who are legally classified as employees for certain purposes. Employers must withhold social security tax and Medicare tax from statutory employees. Employers do not withhold federal income tax from statutory employees.

Second Checkbox Is for Retirement Plan Participation

The second checkbox is for retirement plan participation. Employers must check the box for active participants in certain retirement plans. Generally, employees are active participants in defined benefit plans if they are eligible to participate for that tax year. Employees are generally active participants in defined contribution plans for any tax year that either the employer or employee makes a contribution, including forfeitures added to the employee’s account.

Third Checkbox Is for Third-Party Sick Pay

The final checkbox is for third-party sick pay. This box is used either by payers of third-party sick pay filing on behalf of an insured or by employer’s reporting payments made by the insurer.

Deceased Employee Checkbox Has Been Eliminated

The checkbox for deceased employees was eliminated after the year 2000 reporting period and is no longer required.

Box 14, Other Is the Next Topic

The next topic in this continuing series will be Box 14, other. Contact Vision Payroll with any questions on the 2010 Form W-2.

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 12, codes.

Box Identifiers a, b, c, and d Are not Codes

Enter codes and amounts in boxes 12a, 12b, 12c, and 12d. The letters a, b, c, and d do not relate to the codes, but are strictly for identification purposes. If an employee has code C for $100 and that is the only code for that employee, the employer may enter code C in box 12a; it does not need to be entered in box 12c. If filing copy A on paper, enter only four codes on one Form W-2. Employers should use multiple forms for employees with more than four codes. There is no limit on the number of codes on any other copy of Form W-2. Enter the code and amount without dollar signs or commas.

The codes and their descriptions are as follows:

Code A	Uncollected social security or RRTA tax on tips
Code B	Uncollected Medicare tax on tips
Code C	Taxable cost of group-term life insurance over $50,000
Code D	Elective deferrals under §401(k) cash or deferred arrangement (plan)
Code E	Elective deferrals under §403(b) salary reduction agreement
Code F	Elective deferrals under §408(k)(6) salary reduction SEP
Code G	Elective deferrals and employer contributions (including nonelective deferrals) to any governmental or nongovernmental §457(b) deferred compensation plan
Code H	Elective deferrals under §501(c)(18)(D) tax-exempt organization plan
Code J	Nontaxable sick pay
Code K	20% excise tax on excess golden parachute payments
Code L	Substantiated employee business expense reimbursements
Code M	Uncollected social security or RRTA tax on taxable cost of group-term life insurance over $50,000 (for former employees)
Code N	Uncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (for former employees)
Code P	Excludable moving expense reimbursements paid directly to employee
Code Q	Nontaxable combat pay
Code R	Employer contributions to an Archer MSA
Code S	Employee salary reduction contributions under a §408(p) SIMPLE
Code T	Adoption benefits
Code V	Income from the exercise of nonstatutory stock option(s)
Code W	Employer contributions to a Health Savings Account (HSA)
Code Y	Deferrals under a §409A nonqualified deferred compensation plan
Code Z	Income under §409A on a nonqualified deferred compensation plan
Code AA	Designated Roth contributions under a §401(k) plan
Code BB	Designated Roth contributions under a §403(b) plan
Code CC	HIRE exempt wages and tips

Employers should combine elective deferrals and elective catch-up contributions into one sum and report under the appropriate elective deferral plan code.

Box 13, Checkboxes Is the Next Topic

The next topic in this continuing series will be Box 13, checkboxes. Contact Vision Payroll with any questions on the 2010 Form W-2.

This week’s question comes from Brenda, a company executive vice-president. I compared my Form W-2 to my last pay stub and there are differences between the amounts listed on the Form W-2 and the amounts on my last pay stub. How do I reconcile my W-2 to my last pay stub? Answer: The amounts on the Form W-2 may differ from gross pay on your last pay stub for several reasons. By starting with your last pay stub and adding or subtracting typical adjustments, most employees can easily reconcile the two amounts.

Vision Payroll Document Can Assist in Reconciling Form W-2 To Last Pay Stub

The Vision Payroll web site contains a document that helps employees reconcile their Form W-2 to their last pay stub. It contains the most common adjustments to reconcile a pay stub to the amounts in the various boxes. It also contains explanatory information for coded amounts on the Form W-2.

Visit VisionPayroll.com Regularly for Updated information

Contact Vision Payroll if you have any further questions.

According to the US Department of Labor, in the week ending January 15, the advance figure for seasonally adjusted initial claims was 404,000, a decrease of 37,000 from the previous week’s revised figure of 441,000. The 4-week moving average was 411,750, a decrease of 4,000 from the previous week’s revised average of 415,750.

Advance Seasonally Adjusted Insured Unemployment Rate Remains Unchanged

The advance seasonally adjusted insured unemployment rate was 3.1% for the week ending January 8, unchanged from the prior week’s unrevised rate of 3.1%.

Advance Seasonally Adjusted Insured Unemployment Decreases

The advance number for seasonally adjusted insured unemployment during the week ending January 8 was 3,861,000, a decrease of 26,000 from the preceding week’s revised level of 3,887,000. The 4-week moving average was 4,006,250, a decrease of 52,250 from the preceding week’s revised average of 4,058,500.

Employers, especially small and mid-sized companies, need to stay in compliance to flourish in the New Year. By knowing the business-critical HR practices that can help, employers can take the big first step toward staying in compliance.

Five Hot Areas Employers Must Address Now

1. Proof of Compliance
2. Misclassification of Workers
3. Recordkeeping Requirements
4. Health Care Reform
5. Workplace Technology

Learn the Best HR Practices for 2011 Now

To learn more about each of these areas, be sure to listen to Best HR Practices for 2011 in this month’s HRCast, a recording provided by our team of HR Pros and available exclusively on MyHRSupportCenter.

MyHRSupportCenter Provides Alerts, Best Practices, and HR Tools Every Day

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.

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 11, nonqualified plans.

Box 11 Shows Distributions from Nonqualified Plans

Box 11 shows the amount of distributions from a nonqualified plan or a nongovernmental §457(b) plan. These distributions should also be reported in box 1. Distributions from governmental §457(b) plans are not reported in this box.

Box 11 May Show Earnings and Deferrals That Became Taxable

Box 11 should show deferrals and earnings that became taxable for social security and Medicare purposes in 2010 because the deferrals and earnings were no longer subject to a substantial risk of forfeiture, but only if the amounts were for services before 2010 and no distributions were made in 2010. These amounts must also be reported in box 3, up to the $106,800 wage limit, and box 5.

Box 11 Not to Be Used for Deferrals Included in Box 3 and/or Box 5

Box 11 should not be used for deferrals that are included in box 3, up to the wage limit, and box 5 and that are for services performed in 2010.

Use Form SSA-131 to Report When Payments and Deferrals Are Made in the Same Year

Box 11 should also not be used when payments are made from a nonqualified plan and deferrals are included in box 3, up to the wage limit, and box 5. Employers should use Form SSA-131, Employer Report of Special Wage Payments, but only if the employee was age 62 or older by the end of 2010. Generally the employer should report the amount from box 1 of Form W-2, plus any amounts deferred during 2010, less any payments from the nonqualified plan.

Amounts for Form W-2
Wages	$50,000
Distributions from nonqualified plan	75,000
Sub-total	125,000
Less amount deferred	35,000
Form W-2, box 1 amount	$90,000
Wages	$50,000
Form W-2, box 3 amount	$50,000
Wages	$50,000
Form W-2, box 5 amount	$50,000

Assume Jessica retired during 2010. She earned $50,000 in wages, but deferred $35,000 of that amount in a nonqualified deferred compensation plan. Since she retired, she also received $75,000 in payments from the plan. Since there are both distributions and deferrals in 2010, no amount is reported in box 11. Box 11 should also not be used to report special wage payments earned in a prior year such as accrued sick pay or vacation pay. These amounts should be reported on Form SSA-131, however, so that the Social Security Administration may accurately calculate the recipient’s social security benefits.

Amounts for Form SSA-131
Form W-2, box 1 amount	$  90,000
Plus 2009 deferral	35,000
Sub-total	125,000
Less distributions from nonqualified plan	75,000
Form SSA-131, item 6 amount	$  50,000

Box 12, Codes Is the Next Topic

The next topic in this continuing series will be Box 12, codes. Contact Vision Payroll with any questions on the 2010 Form W-2.

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 10, dependent care benefits.

2010 Annual Exclusion Limit Is $5,000

Box 10 shows the amount paid or incurred by the employer under §129 of the Internal Revenue Code (IRC) for dependent care assistance provided to the employee if the assistance is furnished pursuant to a “dependent care assistance program” under that section. This box should include amounts paid or incurred for dependent care assistance in an IRC §125 (cafeteria) plan. The fair market value of any employer-sponsored or employer-provided day care facilities should also be included. Even though there is an annual exclusion limit of $5,000, the total amount paid or incurred must be reported in box 10. Amounts over $5,000 must also be reported in box 1 and box 5 and box 3, subject to the wage limitation. Amounts that cannot be excluded for other reasons such as benefits for highly compensated employees in plans described in IRC §129(d), must also be reported in box 1 and box 5 and box 3, subject to the wage limitation.

Box 11, Nonqualified Plans Is the Next Topic

The next topic in this continuing series will be Box 11, nonqualified plans. Contact Vision Payroll with any questions on the 2010 Form W-2.

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 9, advance EIC payment.

Maximum EIC Advance Payment in 2010 Was $1,830

Box 9 shows the amount of any advance EIC (earned income credit) payment paid to the employee. Employees must meet four criteria and file Form W-5, Earned Income Credit Advance Payment Certificate in order to receive advance EIC payments. For 2010, the maximum advance EIC was $1,830. Employees entitled to additional EIC are eligible to receive it when filing Form 1040, US Individual Income Tax Return.

Box 10, Dependent Care Benefits Is the Next Topic

The next topic in this continuing series will be Box 10, dependent care benefits. Contact Vision Payroll with any questions on the 2010 Form W-2.

This is one in a continuing series on the 2010 Form W-2, Wage and Tax Statement, which employers must generally furnish to employees no later than January 31, 2011. Forms mailed on the due date are considered furnished if properly addressed. Employers unable to meet that deadline may file a request for extension of time to furnish the forms. Today we review Box 8, allocated tips.

Use Form 8027 to Determine Box 8 Amount

Box 8 shows the amount of allocated tips. Large food and beverage establishments use Form 8027, Employee’s Annual Information Return of Tip Income and Allocated Tips to determine the amount of tips to report in Box 8. A large food and beverage establishment meets all three of the following criteria:

1. Food or beverage is provided for consumption on the premises.
2. Tipping is a customary practice.
3. More than 10 employees who work more than 80 hours were normally employed on a typical business day during the preceding calendar year.

Do Not Duplicate Box 8 Entries

The amount in this box is not to be reported in box 1, box 3, box 5, or box 7.

Box 9, Advance EIC Payment Is the Next Topic

The next topic in this continuing series will be Box 9, advance EIC payment. Contact Vision Payroll with any questions on the 2010 Form W-2.

This week’s question comes from Seth, a company controller. It seems as if there are many changes in payroll recently. What are 10 hot items for payroll in 2011? Answer: The payroll industry and payroll departments have seen many changes as Congress uses the payroll and payroll tax system as a means to implement desired changes in social policy. Many items are new or revamped for 2011.

10 Hot Payroll Items in 2011

1. 2011 Withholding Table Changes: Because of the recently passed Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act), employers should implement the 2011 withholding tables as soon as possible, but not later than January 31, 2011.
2. Reduced Social Security Tax Rate for Employees: For 2011, the employee tax rate for Social Security is 4.2%, down from 6.2% in 2010. The employer rate remains at 6.2%.
3. Expiration of Making Work Pay Credit: The Making Work Pay credit expired on December 31, 2010, resulting in higher federal withholding from many employees in 2011.
4. Extension of COBRA Premium Assistance Credit: The credit for COBRA premium assistance payments has been extended to include premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months.
5. Advance Payment of Earned Income Credit (EIC) Discontinued: The option to receive advance payroll payments of EIC expired on December 31, 2010.
6. Federal Tax Payments Must Be Made by Electronic Funds Transfer: With the discontinuation of Forms 8109 and 8109-B, most federal tax payments must now be made by electronic funds transfer.
7. FUTA Tax Rate Scheduled to Decrease: Under current law, the FUTA tax rate will decrease from 6.2% to 6.0%, effective July 1, 2011.
8. Withholding Allowance Amount Set at $3,700: For 2011, the amount for one withholding allowance on an annual basis is $3,700, up from $3,650 for 2009 and 2010.
9. Aggregate Form 940 and Form 941 Filers Must File Schedule R: Agents must complete the appropriate Schedule R when filling an aggregate Form 940 or Form 941.
10. Choose to File Form 941 Instead of Form 944: Employers notified that they should file Form 944, but who want to file Form 941 instead, may notify the IRS and request to file Form 941.

More Changes Expected Throughout 2011

Check VisionPayroll.com regularly as the only certain thing about payroll and payroll taxes for 2011 is that many more changes can be expected.