In the recently released, Working Draft Directive 09-XX, Requirements for Employers Filing Year-end Withholding Information, the Massachusetts Department of Revenue (DOR) proposes changes to the definition of “machine-readable form”. Employers who file fifty or more Forms W-2 in a calendar year are required to file them in machine-readable form. For 2009 and later, the definition of machine-readable form will no longer include diskette, magnetic tape, or cartridge 18-track magnetic media. Filing must be done through WebFile for Business or electronic data transfer. Contact Vision Payroll if you have any questions on the proposed changes.
This week’s question comes from Marco, a small business owner in Massachusetts. I terminated an employee. He wants to get his paycheck before he leaves the building. How quickly must I pay a terminated employee? Answer: Under Massachusetts General Law (MGL) c. 149 §148, “any employee discharged from such employment shall be paid in full on the day of his discharge.” Therefore, Massachusetts employers should pay terminated employees on the day of their termination. Contact Vision Payroll if you have any questions on paying terminated employees.
This week’s question comes from Matt, a business owner. I received my unemployment rate from the Commonwealth of Massachusetts, but don’t remember receiving my rate for Massachusetts Health Insurance Contribution Act Tax. How do I determine my tax rate for Massachusetts Health Insurance Contribution Act Tax? Answer: Under Massachusetts General Laws c. 151A, §14G, Unemployment health insurance contribution; medical security trust fund, employers are effectively exempt from the tax for the first two calendar years they become subject to the tax, regardless of employee count. For the third calendar year, the rate is 0.04%, for the fourth calendar year, the rate is 0.08%, and for the fifth and subsequent years, the rate is 0.12%. Employers must pay this tax on subject wages up to $14,000 per year per covered employee. Contact Vision Payroll if you have questions on the Massachusetts Health Insurance Contribution Act.
Vision Payroll has learned from informal discussions with the Massachusetts Division of Unemployment Assistance that some taxpayers may have incorrectly received letters indicating that they were exempt from filing the Fair Share Contribution Report for 2009. As a precaution, Vision Payroll is recommending that taxpayers that have received this letter file the Fair Share Contribution Report regardless. It is generally better to file a form unnecessarily than to not file a form that is required. Contact Vision Payroll if you have any questions or need assistance filing the Fair Share Contribution Report or the Employer Health Insurance Responsibility Disclosure (HIRD) Report.
This week’s question comes from Carolyn, a business owner. I recently hired some new employees. Am I required to file Massachusetts Form 1700-HI? Answer: Employers in Massachusetts should count the number of employees who worked or received pay for any part of the pay period that includes the twelfth of the month for each of the three months in the quarter. If the sum of those three numbers is eighteen or more, then the employer is required to file Form 1700-HI and pay tax at the rate assigned by the Massachusetts Division of Unemployment Assistance. Contact Vision Payroll if you have any questions on Form 1700-HI, Health Insurance Quarterly Contribution Report.
Masschusetts DD 09-2, Personal Income Tax Treatment of Employer-Provided Health Insurance Coverage for an Employee’s Former Spouse
The Internal Revenue Code of 1986 as amended (IRC) provides in §106 for an exclusion from income for employer-provided health insurance that covers the employee, the employee’s spouse, the employee’s children, and the employee’s qualifying relatives. Prop. Treas. Reg. § 1.125-1(h), 22 Fed. Reg. 43937 (August 6, 2007) clarified that coverage for a former spouse who is not a dependent is not excludible from an employee’s income. Therefore, the fair market value of coverage for a former spouse is includible in an employee’s income for federal income tax purposes.
In the recently released, Working Draft Directive 09-XX, Personal Income Tax Treatment of Employer-Provided Health Insurance Coverage for an Employee’s Former Spouse, the Massachusetts Department of Revenue concludes that any income required to be included in federal gross income for coverage required under Massachusetts General Laws (MGL) shall be excluded from Massachusetts gross income. Coverage may be required for former spouses under the following laws, among others: MGL c. 176G § 5A, MGL c. 32A § 11A, MGL c. 175 § 110, MGL c. 176A § 8F, and MGL c. 176B §6B. Contact Vision Payroll if you have any questions on this Working Draft Directive.
The Commonwealth of Massachusetts Department of Revenue has released a working draft of TIR 09-1, Individual Mandate Penalties for Tax Year 2009, which would provide the penalties in 2009 for adults without health insurance. Under the working draft, adults with annual family household incomes of 150% of the Federal Poverty Level or less are not subject to any penalty. Adults with annual family household incomes of more than 150% but not more than 200% of the Federal Poverty Level are subject to a penalty of $17 per month for each month of non-compliance. Adults with annual family household incomes of more than 200% but not more than 250% of the Federal Poverty Level are subject to a penalty of $35 per month for each month of non-compliance. Adults with annual family household incomes of more than 250% but not more than 300% of the Federal Poverty Level are subject to a penalty of $52 per month for each month of non-compliance. Adults aged 18-26 with annual family household incomes of more than 300% of the Federal Poverty Level are subject to a penalty of $52 per month for each month of non-compliance. Adults aged 27 and older with annual family household incomes of more than 300% of the Federal Poverty Level are subject to a penalty of $89 per month for each month of non-compliance. The TIR provides the annual income standards for the Federal Poverty Level by family size. Qualifying coverage is defined as enrollment “in health insurance policies that meet minimum creditable coverage standards adopted by the Commonwealth Health Insurance Connector Authority.” Written comments for the working draft are due by January 23, 2009. Contact Vision Payroll if you have any questions on TIR 09-1 or need a referral to a licensed benefits broker.
This week’s question comes from Nicole, an office manager. Our business is formed as two entities, an S corporation and a partnership. We’re located in Massachusetts. Do I now need to withhold income tax on distributions to partners and S corporation shareholders? Answer: All pass-through entities subject to pass-through withholding in Massachusetts must withhold unless the partner or shareholder to whom the distribution is paid has timely filed Form PTE-EX. The filing of Form PTE-EX with the entity certifies that the member is exempt from pass-through withholding. The deadline for filing Form PTE-EX the last day of the fourth month of the entity’s taxable year or within thirty days of the day that the member joins the entity, whichever is later. The form is now valid until changing circumstances invalidate the form, in which case the member must notify the entity within thirty days. Vision Payroll is ready to help its clients deal with the changes required by this new law. Please call us for our recommendations for a smooth transition to the new withholding requirements.
In Mullally, et al. v. Waste Management of Massachusetts, Inc., SJC-10181 (Mass. 11/6/2008), the Supreme Judicial Court of the Commonwealth of Massachusetts (SJC) ruled that the defendant (Waste Management) violated Massachusetts law by “calculating overtime wages using a regular hourly rate less than the prevailing wage eligible employees must be paid.” The employees who filed suit were required under Massachusetts General Laws (MGL) c. 149, §27F to receive the prevailing wage rate for “waste disposal employees performing under municipal contracts.” Waste Management had devised a formula under which employees always received the prevailing wage or higher when averaging the hourly rate for straight time and overtime. The SJC ruled that Massachusetts law (MGL c. 151, §1A) requires employees to receive at least the prevailing wage in cash and allowed benefits for straight time and one and one half time the prevailing wage in cash and allowed benefits for overtime. Allowing Waste Management’s formula would evade “the economic disincentive to have an employee work more than forty hours a week” since there would be little or no overtime premium paid regardless of the number of hours worked. The SJC remanded the case to Massachusetts Superior Court for further proceedings to determine the amount of damages. Vision Payroll strongly recommends that you review all overtime calculations with your labor attorney to ensure compliance with all applicable federal and state laws.
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