Vision Payroll

Release of Massachusetts Unemployment Rates Is Delayed

Due to late action by the Massachusetts legislature and the governor, unemployment rates will NOT be available by the legally mandated deadline of April 20, 2014.

At Vision Payroll, we will be submitting wage information by the filing deadline of April 30, 2014. Employer rates will not be available until May 19, 2014. Unemployment contributions must be paid by May 30, 2014.

Although the rate schedule used to determine the rates remains unchanged from 2013, most employers will have a different rate for 2014. That is because in addition to the rate tables, employer rates are determined by wages paid, unemployment benefits charged directly to your account, and the solvency assessment that the state charges employers to pay for benefits paid to the employees of other employers.

If your rate increases from 2013 to 2014, we will need to withdraw additional money beginning May 19, 2014 to pay the additional tax by the deadline. We will contact all employers with the additional amount due. Additionally, we will begin to collect with the new rate (higher or lower) with each payroll as soon as possible after rates are released. Further, with the last payroll of the second quarter, we will make the final adjustment for second quarter taxes.

Since we cannot finalize your first quarter quarterlies until the new unemployment rates are released, we are not going to post online or mail out quarterly packages for affected employers. If you need certain forms, e.g., for a workers comp audit, please contact our offices and we can make them available. Otherwise, we will be sending first quarter packages to affected employers in late May and early June.

Please contact Vision Payroll if you have any questions.

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.

This week’s question comes from Rick, a restaurant owner. I started my business in June of this year. Since I didn’t have a big payroll in June, the Internal Revenue Service (IRS) recently informed me that I should file Form 944. Since my payroll will be much higher in 2010, I should file Form 941. How do I opt out of filing Form 944? Answer: In Rev. Proc. 2009-51, the IRS explained the procedure to opt out of filing Form 944. Employers who have previously filed Form 941 or Form 944 should call or write the IRS stating that they want to opt out of filing Form 944 before April 2, 2010. New businesses should call or write the IRS before the second day “of the month that the first required Form 941 for the current tax year is due.” In 2010, those days are April 2, 2010, July 2, 2010, October 2, 2010, and January 4, 2011 (due to automatic extensions for holiday and weekend days). Telephone numbers and mailing addresses are provided in Rev. Proc. 2009-51. Contact Vision Payroll if you have any questions on opting out of Form 944.

This week’s question comes from Kevin, a sole proprietor. I am forming an LLC and will be converting from a sole proprietorship to a single member LLC, but still taxed as a sole proprietor. Do I need a separate EIN for my single member LLC? Answer: As explained earlier, in TD 9356, the IRS announced that single member LLCs would be treated as corporations for employment tax purposes, but that the single member would still be treated as self-employed and not an employee of the LLC. Therefore, sole proprietors forming an LLC should apply for and obtain a new Employer Identification Number (EIN) using Form SS-4, Application for Employer Identification Number. Contact Vision Payroll if you have any further questions on single member LLCs.

This week’s question comes from Scott, a small business owner. I have received notification from the Internal Revenue Service (IRS) that I should file Form 944. Should I file Form 944 instead of Form 941? Answer: Employers who are notified that they should file Form 944 must file Form 944 unless they opt out of filing Form 944. In TD 9440, the IRS issued revised “temporary regulations relating to the annual filing of Federal employment tax returns and requirements for employment tax deposits.” These regulations make participation in filing Form 944 voluntary, beginning in 2010. According to Rev. Proc. 2009-13, employers are eligible to opt out in 2009 if they meet one of the following conditions:

1. The employer anticipates that its employment tax liability for tax year 2009 will be more than $1,000; or
2. The employer wants to file electronically quarterly Forms 941 for tax year 2009.

Eligible employers who had previously filed Form 941 or Form 944 must either call the IRS before April 2, 2009 or have written correspondence postmarked no later than March 15, 2009 to opt out of filing the 2009 Form 944.

Businesses newly required to Form 941 or Form 944 have their due dates based on the month their first Form 941 will be due. Telephone calls must therefore be made before April 2, 2009, July 2, 2009, October 2, 2009, or January 2, 2010 if their filing requirement is effective for the first, second, third, or fourth quarter, respectively. Written correspondence must be postmarked no later than the fifteenth of the month prior to the month that the Form 941 is first due. For 2009, the postmark due dates are March 15, 2009, June 15, 2009, September 15, 2009, and December 15, 2009.

As with most federal tax deadlines, any due date that falls on a Saturday, Sunday, or legal holiday is extended to the next day that is not a Saturday, Sunday, or legal holiday. For example, the March 15, 2009 deadline is automatically extended to March 16, 2009.

Whether an employer files Form 941 or Form 944, the deposit rules are generally the same, although “the de minimis deposit amount may be different.”

Contact Vision Payroll if you have any questions on the filing of Form 941 or Form 944 and the related tax deposit requirements.

In TD 9356, the Internal Revenue Service made final the regulations on disregarded entities effective August 16, 2007. In order to allow taxpayers sufficient time to make the changes required by the regulations, the IRS delayed the effective date for the payroll tax changes until January 1, 2009. Under the new regulations, qualified subchapter S subsidiaries (QSubs) (under §1361(b)(3)(B) of the Internal Revenue Code of 1986) and single-owner eligible entities (under §301.7701-1, §301.7701-2, and §301.7701-3 of the Procedure and Administrative Regulations) that are treated as disregarded entities for most federal tax purposes will be treated as corporations for employment tax purposes. Therefore, owners of single-member LLCs who are treated as sole proprietors for income tax purposes must treat their LLCs as separate entities for employment tax and related reporting purposes. The final regulations clarify that an owner of a disregarded entity will continue to be treated as self-employed and not as an employee of the entity. The regulations also clarify that disregarded entities that are owned solely by a §501(c)(3) organization will maintain the organization’s exemption from federal unemployment tax or FUTA. Contact Vision Payroll if you have questions on changes to the payroll tax reporting procedures for single-owner eligible entities and QSubs.

A successor law firm is liable for unpaid payroll taxes of its predecessor and could not prevent the IRS from levying and placing liens on its accounts. In Hwang Law Firm, LLC v. United States, DC PA, C 07-2973 LFS, July 9, 2008, the court looked at continuity of ownership, continuation of enterprise, cessation of business, and assumption of obligations. In the predecessor, Hwang and Associates (H&A), and the successor, Hwang Law Firm, LLC, (HLF) Samuel Y. Hwang, a Pennsylvania attorney, was the “sole owner, officer, director, and stockholder.” The firms used some of the same office space and office equipment, had the same telephone and fax numbers, and passed client contracts and files from H&A to HLF. “Considered cumulatively, the balance of evidence on each factor” persuaded the court to grant summary judgment to the US on its claim that HLF was a successor to H&A under Pennsylvania law and therefore liable for payment of the unpaid employment taxes.