Vision Payroll

New Jersey Governor Chris Christie recently signed into law S-1813, which reduces the unemployment tax rates that employers would have otherwise had to pay during the 2011 rate year (July 1, 2010 through June 30, 2011). During the 2010 rate year (July 1, 2009 through June 30, 2010), rates for employers in New Jersey were determined based on the rates in column B of the tax table. Without the passage of S-1813, employers would have had their rates for 2011 determined by column E of the tax table. Additionally, a 10% surcharge would have applied to all employers. Under S-1813, rates in 2011 will be determined by reference to column C of the tax table.

Additionally, the new law establishes three levels of misconduct, (misconduct, severe misconduct, and gross misconduct), which either prohibit payment of unemployment benefits or extend the waiting period before benefits can be paid.

Finally, the bill creates an Unemployment Insurance Fund Task Force to study and assess, among other things, the current unemployment crisis and recommend how the state can restore the trust fund to solvency in a way that balances the interests of workers, employers and the overall economy.

Contact Vision Payroll if you have any further questions on S-1813.

This week’s question comes from Julia, a business-owner. We have employees who work in more than one state. I understand how to determine which state’s income tax to withhold, but I don’t know what to do about unemployment tax. Where do I pay unemployment tax for employees who work in more than one state? Answer: The general rule for employees who work in more than one state is that employees should be covered by only one state to prevent employers from paying tax in two or more states for the same employee. To determine which state, employers should look at four factors, in the following order:

1. Localization of Services
2. Base of Operations
3. Place of Direction or Control
4. Place of Residence

The employee is covered by the state under which that employee first qualifies using these factors. For example, if an employee is determined to be covered by a state under the Localization of Services test, the results of the remaining tests are irrelevant. Only if a determination cannot be made under the Localization of Services test does the employer consider the Base of Operations test.

Contact Vision Payroll if you have further questions.

According to the US Department of Labor, in the week ending July 10, the advance figure for seasonally adjusted initial claims was 429,000, a decrease of 29,000 from the previous week’s revised figure of 458,000. The 4-week moving average was 455,250, a decrease of 11,750 from the previous week’s revised average of 467,000.

The advance seasonally adjusted insured unemployment rate was 3.7% for the week ending July 3, an increase of 0.2 percentage points from the prior week’s revised rate of 3.5%.

The advance number for seasonally adjusted insured unemployment during the week ending July 3 was 4,681,000, an increase of 247,000 from the preceding week’s revised level of 4,434,000. The 4-week moving average was 4,581,250, an increase of 22,000 from the preceding week’s revised average of 4,559,250.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.056 million.

The Internal Revenue Service (IRS) recently released Information Letter 2010-0146, which answers “several questions about the tax consequences of certain employer-provided transportation benefits.” Among the issues the IRS addressed are the ability to perform, and the repercussions of, rollovers of unused benefits on smartcards, limits on the amounts of rollovers or accumulations, the definition of a commuter, the requirement to use transit passes only for commuting and only by employees, as well as several other guideline questions. Vision Payroll recommends that employers providing such benefits review their plans and procedures with their attorney to ensure compliance with the latest guidance.

According to the office of Rod J. Rosenstein, US Attorney for the District of Maryland, George Anagnostou has pleaded guilty to harboring twenty-four illegal aliens who were employed at Timbuktu restaurant in Hanover, Maryland and By the Docks restaurant in Middle River, Maryland. Also participating in the announcement were Special Agent in Charge William Winter of US Immigration and Customs Enforcement and Anne Arundel County Police Chief James Teare, Sr.

“Employers who take advantage of illegal labor to gain a competitive advantage for their own profit should take note of today’s guilty plea,” said William Winter, Special Agent in Charge for US Immigration and Customs Enforcement (ICE) in Baltimore. “ICE is committed to investigating companies who engage in illegal employment schemes and targeting the profits that motivate them.”

According to the announcement, Anagnostou did not prepare a Form I-9, Employment Eligibility Verification, for several employees. When he received “no-match” letters from the Social Security Administration, he made no effort to investigate further and continued to employ those workers identified.

Anagnostou also provided housing to several of the illegal alien employees and in many cases he “deducted rental payments from the overtime owed to the illegal alien employees, many of who regularly worked up to 80 hours a week and were routinely paid in cash to avoid their tax liability. Anagnostou did not claim the rental income on his tax returns, nor did he withhold FICA taxes from these overtime payments, as he was legally required to do.”

In addition to facing up to ten years in prison, “Anagnostou is required to forfeit $378,386.21 from five bank accounts; $99,890 seized from the restaurants and Anagnostou’s home on March 11, 2010; an additional $256,696.67, also believed to be proceeds of the crime and payable by check to Immigration and Customs Enforcement upon sentencing; and a 2009 Harley Davidson.”

Vision Payroll recommends that employers familiarize themselves with Form I-9 and its requirements so that they may be prepared and filed for each new hire. Also, employers may not ignore obviously fake or fraudulent identification documentation and must make an effort to verify social security numbers that have been reported as mismatched.

In Medical Practice Solutions, LLC, et al., v. Commissioner, TC Memo 2010-98, the Tax Court ruled that an individual and her single-member LLC are not distinct taxpayers and thus she is personally liable for unpaid payroll taxes assessed against the LLC. Carolyn Britton was the sole member of Medical Practice Solutions, LLC (the LLC) in Beverly, Massachusetts. The Internal Revenue Service (IRS) assessed liabilities for unpaid employment taxes reported by the LLC on three different Forms 941. The IRS proceeded with collection proceedings against Ms. Britton when it was unable to collect the taxes from the LLC. According to the Tax Court, “Ms. Britton [made] several related arguments that [challenged] her liability, and they all [rested] on her insistence that she and the LLC [were] distinct taxpayers with distinct liabilities and the right to distinct notices and filings. This premise, however, is flawed both as a matter of law and as a matter of fact.” The court ruled that Ms. Britton and the LLC were a single taxpayer and she was personally responsible for the unpaid taxes. Vision Payroll recommends taxpayers review their rights and responsibilities as LLC members with their attorney to help ensure compliance with tax laws.

Due to the severe storms, flooding, mudslides and landslides in West Virginia beginning June 12, 2010, President Barack Obama declared the following counties a federal disaster area: Lewis, Logan, McDowell, Mingo, and Wyoming. Therefore, the Internal Revenue Service (IRS) announced recently that it will waive failure to deposit penalties for employment and excise taxes due after June 11, 2010 and before June 29, 2010 as long as the deposits were made by June 28, 2010. In addition, affected taxpayers will have until August 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.

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 past several weeks, Vision Payroll has provided information on the Small Business Health Care Tax Credit. Today’s topic is Transition Relief for Employers That Do Not Pay at Least Fifty Percent of the Premium.

The Internal Revenue Service (IRS) expects to issue transition relief that will allow employers that otherwise qualify to claim the credit even if those employers do not pay at least 50% of the premium cost for all employees. Employers are required to pay at least 50% of the cost for single coverage. For employees with more expensive coverage, such as family coverage, employers that otherwise qualify to claim the credit will qualify as long as they pay at least 50% of the premium cost for single coverage toward the more expensive coverage. Therefore, employers might still qualify even if they pay less than 50% of the cost of the more expensive coverage.

This concludes this series on the Small Business Health Care Tax Credit. Contact Vision Payroll if you have further questions on Transition Relief for Employers That Do Not Pay at Least Fifty Percent of the Premium or the Small Business Health Care Tax Credit.

This week’s question comes from Cliff, a sole proprietor. I am forming a corporation and will be converting from a sole proprietorship to a corporation. Do I need a separate EIN for my corporation? Answer: The new corporation is a distinct entity from the sole proprietorship and will require the corporation to apply for a new employer identification number (EIN). Taxpayers may use Form SS-4, Application for Employer Identification Number, to apply for a new EIN or visit the IRS website to apply online. Contact Vision Payroll if you have any further questions on the payroll tax implications of forming a corporation.

According to the US Department of Labor, in the week ending July 3, the advance figure for seasonally adjusted initial claims was 454,000, a decrease of 21,000 from the previous week’s revised figure of 475,000. The 4-week moving average was 466,000, a decrease of 1,250 from the previous week’s revised average of 467,250.

The advance seasonally adjusted insured unemployment rate was 3.4% for the week ending June 26, a decrease of 0.2 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 26 was 4,413,000, a decrease of 224,000 from the preceding week’s revised level of 4,637,000. The 4-week moving average was 4,554,000, a decrease of 18,750 from the preceding week’s revised average of 4,572,750.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.064 million.