Vision Payroll

The Internal Revenue Service (IRS) has released Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a credit on their Form 941 to be reimbursed for the assistance provided.

In recently issued guidance, the IRS confirmed that an employee “hired only for a limited period such as a seasonal worker or a teacher hired only for one school year” is considered involuntarily terminated for premium subsidy purposes if the employee works to the end of season or contract period, is not offered employment, and is able and willing to work. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

The Internal Revenue Service (IRS) has released Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a credit on their Form 941 to be reimbursed for the assistance provided.

In recently issued guidance, the IRS stated that if an insurer is providing continuation coverage under a comparable state law, the coverage still qualifies for premium subsidy even if the group health plan has terminated after the employer has gone out of business. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

The Internal Revenue Service (IRS) has released Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a credit on their Form 941 to be reimbursed for the assistance provided.

In recently issued guidance, the IRS stated that when an employer voluntarily provides continuation coverage when the plan is not subject to “COBRA continuation coverage”, then the subsidy does not apply to the voluntary coverage. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

In Notice 2009-46, Substantiating Business Use of Employer Provided Cell Phones, the Internal Revenue Service requested comments from the public on several proposals for simplifying employer documentation of an employee’s business use of an employer-provided cell phone. For this purpose, the term “cell phone” includes similar telecommunications devices such as iPhones, Blackberries, and Windows Mobile Devices. An employee’s business use of an employer-provided cell phone is excludible from the employee’s income, but the fair market value of any personal use is includible in the employee’s taxable income.

The IRS is considering three methods for an employer to use to value such use of a cell phone. First is the “Minimal Personal Use Method” which might require an employee to establish use of a personal cell phone for personal use during business hours or a showing that the business cell phone was used for less than a certain established limit for personal use. Secondly, the “Safe Harbor Substantiation Method” would require a certain amount, such as seventy-five percent (75%), to be treated as business use. Finally, under the “Statistical Sampling Method”, an employer could use a statistical sampling method (subject to IRS approval) to determine an average employee business use percentage.

The IRS is also looking for a method to value the employee’s personal use for tax purposes. The IRS states that the employer’s cost “is not determinative of the fair market value of an employee’s fringe benefit.”

Notice 2009-46 provides further details on how employers may comment on the proposals and lists a deadline of September 4, 2009. Contact Vision Payroll if you have any questions on Notice 2009-46.

The Internal Revenue Service (IRS) has released Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a credit on their Form 941 to be reimbursed for the assistance provided.

In recently issued guidance, the IRS stated that when an employer makes a “reasonable interpretation of the applicable statutory provisions and IRS guidance” while determining that an employee was involuntarily terminated, the IRS won’t challenge the determination for purposes of deciding if the employer is entitled to the COBRA premium reduction credit. The employer is required to maintain the supporting documentation to support the determination. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

Due to severe storms, tornadoes, flooding and mudslides in Kentucky on May 3, 2009, President Barack Obama declared the following counties a federal disaster area: Breathitt, Floyd, Owsley and Pike. Therefore, the Internal Revenue Service (IRS) announced recently that it will waive failure to deposit penalties for employment and excise taxes due after May 2, 2009 and before May 19, 2009 as long as the deposits were made by May 18, 2009. In addition, affected taxpayers will have until July 2, 2009 to file most tax returns. Contact Vision Payroll if you were affected by the severe storms, tornadoes, flooding and mudslides and need further information on the relief provided by the IRS.

Due to severe storms, flooding, tornadoes and straight-line winds in Florida on May 17, 2009, President Barack Obama declared the following county a federal disaster area: Volusia. Therefore, the Internal Revenue Service (IRS) announced recently that it will waive failure to deposit penalties for employment and excise taxes due after May 16, 2009 and before June 2, 2009 as long as the deposits were made by June 1, 2009. Also, affected taxpayers will have until July 16, 2009 to file most tax returns. Contact Vision Payroll if you were affected by the severe storms, flooding, tornadoes and straight-line winds and need further information on the relief provided by the IRS.

The Internal Revenue Service (IRS) has updated its instructions for Form 941, Employer’s QUARTERLY Federal Tax Return. Using the new guidance, employers are now instructed to report on line 12a “65% of the COBRA premiums for assistance eligible individuals” (AEIs). Previously, employers were instructed to report “COBRA assistance payments [they] made.” Also, the IRS clarified that when entering the number of AEIs provided COBRA premium assistance, reach AEI who paid a premium should count as one individual even if the premium was for a policy that covered more than one AEI. Contact Vision Payroll if you have any questions on the revised Form 941 reporting instructions.

The Internal Revenue Service (IRS) recently issued Notice 2009-28 offering guidance on the Work Opportunity Tax Credit (WOTC) under §51 of the Internal Revenue Code of 1986 (IRC). Under the American Recovery and Reinvestment Act of 2009 or ARRA, unemployed veterans and disconnected youth were both added as members of a targeted group for purposes of the WOTC.

IRC §51 defines veteran, unemployed veteran, and disconnected youth. According to Notice 2009-28 a veteran is someone:

1. Having served on active duty (other than active duty for training) in the Armed Forces of the United States (Armed Forces) for a period of more than 180 days; or
2. Having been discharged or released from active duty in the Armed Forces for a service-connected disability.

Notice 2009-28 also reiterates that an unemployed veteran is someone “certified by the designated local agency” as:

1. Having been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date; and
2. Being in receipt of unemployment compensation under State or Federal law for not less than four weeks during the one-year period ending on the hiring date.

According to Notice 2009-28, a disconnected youth is defined as “any individual who is certified by the designated local agency” as:

1. As having attained age 16 but not age 25 on the hiring date;
2. As not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date;
3. As not regularly employed during such 6-month period; and
4. As not readily employable by reason of lacking a sufficient number of basic skills.

Notice 2009-28 also defines “not regularly attending any secondary, technical, or post-secondary school”, “not regularly employed”, and “not readily employable by reason of lacking a sufficient number of basic skills”.

“Not regularly attending any secondary, technical, or post-secondary school” is defined as someone who “states in writing that during the six months preceding his or her hiring date, he or she has not attended a secondary, technical or postsecondary school for more than an average of 10 hours per week, not counting periods during which the school is closed for scheduled vacations.” For this purpose, a secondary school is either “a secondary school as defined in 20 USC §7801(38); or a for-profit secondary school that otherwise meets the definition in 20 USC §7801(38).”

“Not regularly employed” is defined as someone who “during each consecutive three-month period within the six months preceding his or her hiring date, the individual earned less than an amount equal to the gross amount he or she would have been paid at the [higher of the federal or applicable state] minimum wage if he or she worked 30 hours every week during the three-month period.”

“Not readily employable by reason of lacking a sufficient number of basic skills” is defined as someone who “states in writing that he or she does not have a certificate of graduation from a secondary school or a GED Certificate” or someone who “states in writing that he or she has a certificate of graduation from a secondary school or a GED Certificate that was awarded no less than 6 months preceding his or her hiring date and has not held a job or been admitted to a technical school or post-secondary school since receiving the certificate.”

In order to receive the WOTC, an employer is generally required to obtain certification on or before the day the individual begins work or to complete Form 8850 on or before the date employment is offered and to submit Form 8850 within twenty-eight days from when the individual starts employment. Notice 2009-28 provides transitional relief for employers hiring unemployed veterans or disconnected youth after December 31, 2008 and before July 17, 2009. Employers will be eligible as long as Form 8850 is submitted to the designated local agency before August 18, 2009.

Contact Vision Payroll if you have any questions on Notice 2009-28 or the WOTC.

On May 18, 2009, the Internal Revenue Service (IRS) published at 74 FR 23134, REG-115699-09, Suspension or Reduction of Safe Harbor Nonelective Contributions. The proposed regulations take effect May 18, 2009 and may be relied upon by taxpayers until final regulations are issued.

Under §401(k)(12) and §401(k)(13) of the Internal Revenue Code of 1986 (IRC), plans can avoid an IRC §401(k)(3) actual deferral percentage (ADP) failure through the use of a design based safe harbor method that requires specified qualified matching contributions (QMACs) for eligible non-highly compensated employees (NHCEs). The proposed regulations would allow employers that incur a substantial business hardship (similar to one described in IRC §412(c)) the option of reducing the safe harbor contribution during a plan year, eliminating the safe harbor contribution during a plan year, or terminating the employer’s safe harbor plan.

The factors to be taken into account in determining if there is a substantial business hardship include determining whether or not:

1. The employer is operating at an economic loss,
2. There is substantial unemployment or underemployment in the trade or business and in the industry concerned,
3. The sales and profits of the industry concerned are depressed or declining, and
4. It is reasonable to expect that the plan will be continued only if the waiver is granted.

The proposed regulations also require the following:

1. Thirty days notice to eligible employees of the suspension or reduction (the proposed regulations provide the required information to be provided to eligible employees);
2. Reasonable opportunity for employees to change their cash or deferred elections and their employee contributions elections;
3. Amendment of the plan to provide that the ADP test will be satisfied for the year of change of the safe harbor contribution; and
4. That the plan satisfies the safe harbor nonelection contribution requirement through the date of the amendment.

The IRS will hold a public hearing on the proposed regulations on September 23, 2009. Contact Vision Payroll if you have any questions on REG-115699-09.