Vision Payroll

In IR-2010-108, the Internal Revenue Service (IRS) announced the limits on deferral contributions for 2011 under §401(k), §403(b), and §457(e)(15). These limitations are codified in those sections of the Internal Revenue Code of 1986 (IRC). Under IRC §415, the Commissioner of the IRS is required to adjust the plan limitations to keep pace with inflation.

2011 Contribution Limits Remains Unchanged

For 2011, the deferral contribution limitation will remain at $16,500. The age 50 and over catch-up contribution will remain at $5,500 for 2011 for individuals who plan to reach age 50 before the end of 2011.

Contact Vision Payroll for More Information on 2011 Retirement Plan Changes

Contact Vision Payroll if you have questions on changes to the 2011 Retirement Plan Contribution and Compensation Limitations or get further information at Important Facts and Figures.

In IR-2010-108, the Internal Revenue Service (IRS) announced that for 2011 the compensation limitation will remain at $245,000 under §401(a)(17), §404(l), §408(k)(3)(C), and §408(k)(6)(D)(ii) of the Internal Revenue Code of 1986 (IRC).

2011 Contribution Limit Also Remains Unchanged

The contribution limit under IRC §415(c)(1)(A) for defined contribution plans will remain at $49,000. This limit does not include the age 50 and over catch-up contribution of $5,500 when applicable; therefore the total limitation for eligible taxpayers age 50 or over in qualifying plans will be $54,500.

Contact Vision Payroll for More Information on 2011 Retirement Plan Changes

Contact Vision Payroll if you have questions on changes to the 2011 Retirement Plan Contribution and Compensation Limitations or get further information at Important Facts and Figures.

This week’s question comes from Cristina, a company president. We’re doing some planning for next year. What are the 2011 Highly Compensated Employee Limits?

IRS Releases 2011 Highly Compensated Employee Limits in IR-2010-108

In IR-2010-108, the Internal Revenue Service (IRS) announced that for 2011 the Highly Compensated Employee Limitation under §414(q)(1)(B) of the Internal Revenue Code of 1986 will remain unchanged. Non-discrimination testing in some types of retirement plans limits the deferral rate of “highly compensated employees” (HCEs) based upon the deferral rate (ADP) of the “non-highly compensated employees”.

Highly Compensated Employee Compensation Limit Remains at $110,000

For 2011, an HCE is anyone who was a “5-percent owner” at any time during 2010 or 2011 or anyone who received in excess of $110,000 in compensation during 2010 and, if elected by the employer, is in the top twenty percent of employees based upon compensation. The HCE limit was $110,000 for 2008 and 2009.

Look-back Provision Impacts HCE Testing Period

Since the law includes a look-back provision, employees who earned more than $110,000 in 2009 are generally considered HCEs for 2010 plan year testing, employees who will earn more than $110,000 in 2010 are generally considered HCEs for 2011 plan year testing, and employees who will earn more than $110,000 in 2011 are generally considered HCEs for 2012 plan year testing.

Contact Vision Payroll for More Information on HCEs

Contact Vision Payroll if you have questions on changes to the HCE definition for 2010 and 2011 or get further information at Important Facts and Figures.

Due to the damage caused by the severe storms, flooding, and straight-line winds in North Carolina on September 27, 2010, President Barack Obama declared the following counties a federal disaster area: Beaufort, Bertie, Brunswick, Craven, Hertford, Jones, Pender, Pitt, Onslow and Tyrrell.

Declaration Leads to Extension of Payroll Tax and Other Deadlines

Therefore, the Internal Revenue Service (IRS) announced recently that it will waive failure to deposit penalties for employment and excise taxes due after September 26, 2010 and before October 13, 2010 as long as the deposits were made by October 12, 2010. In addition, affected taxpayers had until November 26, 2010 to file most tax returns.

Vision Payroll is Here to Help Affected Taxpayers with Payroll Tax Issues

Contact Vision Payroll if you were affected by the severe storms, flooding, and straight-line winds and need further information on the relief provided by the IRS.

The Internal Revenue Service (IRS) recently released a draft Form W-2, Wage and Tax Statement for 2011.

Box 9 Is not Applicable for 2011 Form

Box 9, which formerly showed the amount of any Advance Earned Income Credit (EIC) payment, is not applicable for 2011 since it was repealed. The credit will now be claimed on the taxpayer’s individual income tax return, when filed.

Code DD Added to Box 12

The reporting in Box 12, using Code DD, of the cost of employer-sponsored health coverage is for information only. This reporting will be optional for 2011 and required starting for 2012 tax year reporting.

Contact Vision Payroll if you have further questions on the 2011 draft Form W-2.

In Notice 2010-69, the Internal Revenue Service (IRS) announced that the reporting of the cost of coverage under an employer-sponsored group health plan on Form W-2, Wage and Tax Statement, would not be mandatory for 2011 Forms W-2.

Additional Time Is Needed to Make Changes to Payroll Systems

According to Notice 2010-69, “[t]he Treasury Department and the IRS have determined that this relief is appropriate to provide employers with additional time to make any necessary changes to their payroll systems or procedures in preparation for compliance with the reporting requirement.”

Aggregate Cost Determined Using COBRA Rules

When reporting begins, “the aggregate cost is to be determined under rules similar to the rules of §4980B(f)(4), referring to the definition of the “applicable premium” under the rules providing for COBRA continuation coverage.”

Vision Payroll Will Assist Employers in Transition to New Rules

Contact Vision Payroll today for assistance in planning your transition to the new reporting rules for Form W-2.

In Rev. Proc. 2010-39, the Internal Revenue Service (IRS) released updated per diem rates for 2011 and made some minor changes to list of high-cost areas.

Per Diem Rates Decrease for High-Cost and Other Localities

In §5.02, the IRS announced that per diem rate for high-cost localities is $233 (down from $258 in 2010) and the per diem rate for other localities is $160 (down from $163 in 2010).

Meal Rates and Incidental Rates Remain the Same for 2010

In §5.02, the IRS announced that meal rate for high-cost localities is $65 and the meal rate for other localities is $52. These rates are unchanged from 2010. Also unchanged is the incidental expenses rate. In §4.05, the IRS announced that the incidental rate is $5 for 2011.

High-Cost Localities Announced

In §5.03, the IRS announced the localities that “are high-cost localities for all of the calendar year or the portion of the calendar year specified in parentheses under the key city name.”

Additions to and Deletions from the High-Cost List

In §5.04, the IRS announced the localities that have been added to the list of high-cost localities. They are:

• Yosemite National Park, California;
• Silverthorne/Breckenridge, Colorado;
• New Orleans, Louisiana;
• Falmouth, Massachusetts;
• Riverhead/Ronkonkoma/Melville, New York;
• Kill Devil, North Carolina;
• Stowe, Vermont; and
• Virginia Beach, Virginia.

In §5.04, the IRS announced the localities that have had the portion of the year for which they are considered high-cost localities changed from 2010. They are:

• South Lake Tahoe, California;
• Aspen, Colorado;
• Telluride, Colorado;
• Vail, Colorado;
• Fort Lauderdale, Florida;
• Miami, Florida; and
• Martha’s Vineyard, Massachusetts.

In §5.04, the IRS also announced that Hershey, Pennsylvania has been removed from the list of high-cost localities.

New Per Diem Rates Effective October 1, 2010 or January 1, 2011

The new per diem rates are effective October 1, 2010 for taxpayers using the fiscal year period for reimbursements and January 1, 2011 for those using the calendar year period for reimbursements.

Contact Vision Payroll if you have any questions on Rev. Proc. 2010-39.

This week’s question comes from Katy, an HR administrator. We know we need to capture the cost of health coverage and report it on Form W-2, starting in 2011. How do we determine the cost of health insurance to report on Form W-2? Answer: Employers are required to use rules “similar to the rules of §4980I(d)(1)”, which are the rules used to calculate the cost to qualified beneficiaries who elect COBRA coverage.

Further Guidance for Reporting the Cost Health Insurance on Form W-2 Is Expected

As further guidance from the Internal Revenue Service (IRS) becomes available in this area, Vision Payroll will provided updated guidelines for calculating the amount to be included on Form W-2.

Declaration Leads to Extension of Payroll Tax and Other Deadlines

Therefore, the Internal Revenue Service (IRS) announced recently that it will waive failure to deposit penalties for employment and excise taxes due after July 19, 2010 and before August 5, 2010 as long as the deposits were made by August 4, 2010. In addition, affected taxpayers had until September 20, 2010 to file most tax returns.

Vision Payroll is Here to Help Affected Taxpayers with Payroll Tax Issues

Contact Vision Payroll if you were affected by the severe storms, flooding, and tornadoes and need further information on the relief provided by the IRS.

This week’s question comes from Phil, a small-business owner. We just realized that one of our employees who we hired in April is eligible for the HIRE Act Credit. Can we still claim a HIRE Act credit for the second quarter? Answer: Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are exempt from certain employment taxes. In order to qualify under the HIRE Act, the wages must be paid by a qualified employer “with respect to employment” in the period beginning March 19, 2010 and ending December 31, 2010.

HIRE Act Credit Still Available for Second Quarter

Employers may still claim the credit for the second quarter by filing Form 941-X, Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund.

IRS Releases Revised Form 941-X to Claim HIRE Act Credit for Previous Quarters

On September 11, 2010, the Internal Revenue Service (IRS) released a revised Form 941-X which employers can use to claim the HIRE Act credit for previous quarters. The new form adds lines 11a-11c to adjust for the credit. The new lines are for the following:

• 11a.    Number of qualified employees first paid exempt wages/tips this quarter.
• 11b.    Number of qualified employees paid exempt wages/ tips this quarter.
• 11c.    Exempt wages/tips paid to qualified employees this quarter.

Vision Payroll Is Ready to Help

Contact Vision Payroll if you need assistance filing Form 941-X to claim the HIRE Act credit for previous quarters.