Vision Payroll

This week’s question comes from Lindsay, an office manager. I read before that businesses were going to have expanded Form 1099-MISC reporting requirements starting in 2012. Now I’ve heard that these requirements may have been repealed. Have the expanded Form 1099 reporting requirements been repealed? Answer: The expanded reporting requirements for Form 1099 that were added as part of the Patient Protection and Affordable Care Act have been repealed.

Business Reporting Reverts To Previous Rules

Business reporting now reverts to the previous rules, requiring reporting of payments of $600 or more for services performed by non-employees. Most payments to corporations are exempt.

Reporting by Landlords Also Repealed

Expanded reporting requirements for landlords have also been repealed. Landlords not in the trade or business of renting property will have no Form 1099-MISC reporting requirements.

Contact Vision Payroll Today

Contact Vision Payroll for further information regarding the repeal of the Form 1099-MISC expanded reporting requirements.

The California Employment Development Department (EDD) has released a clarification to the original guidance provided on the tax treatment of health care coverage extended to adult children.

Patient Protection and Affordable Care Act Requires Extension up to Age 26

The Patient Protection and Affordable Care Act requires plans and issuers that offer dependent coverage to make the coverage available until a child reaches the age of 26. Both married and unmarried children qualify for this coverage.

Employment Taxes not Applicable To the Value of This Coverage

According to the EDD:

The extended coverage to adult children under the federal legislation referenced above is not considered wages that are subject to Unemployment Insurance (UI), Employment Training Tax (ETT), or State Disability Insurance (SDI), taxes. Existing State law, Section 931 of the California Unemployment Insurance Code (CUIC) excludes payments for employer-provided coverage under accident or health plans to a dependent from being considered taxable income for UI, ETT, or SDI purposes.

Section 931 of the CUIC does not apply to California Personal Income Tax (PIT) provisions. The fair market value for health care coverage to an adult child under the new federal provision is considered reportable income for California PIT purposes and subject to California PIT withholding. The fair market value of the health care coverage is set at the discretion of the employer.

Further Changes Are Expected In California and Other States

Check VisionPayroll.com frequently for updates to taxation of this coverage in California and other states.

This week’s question comes from Jordan, a company controller. For most employees in our company, the Massachusetts wages reported on the Form W-2 equal the federal wages on the Form W-2. My Massachusetts wages, however, are higher than my federal wages. Why don’t my Massachusetts wages equal my federal wages on my W-2? Answer: There may be several reasons why Massachusetts wages don’t equal federal wages on a Form W-2.

Differences Between Federal Wages and Massachusetts Wages on Form W-2

Although Massachusetts generally follows federal law on income taxation of wage benefits, certain items may increase or decrease Massachusetts wages as compared to federal wages. Among the differences are the following:

1. Employee and employer contributions to Massachusetts governmental unit §414(h) retirement plans are taxable for Massachusetts purposes and not for federal purposes,
2. The value of an employer-provided monthly transit pass in excess of $120 and not in excess of $230 per month is taxable for Massachusetts purposes and not for federal purposes,
3. Imputed income from cost of health insurance coverage of former spouses and non-dependent children as required under Massachusetts law is taxable for federal purposes and not for Massachusetts purposes (prior to the change included in the Patient Protection and Affordable Care Act),
4. Employee contributions to cafeteria plans for the benefit of a same-sex spouse and that spouse’s children when the same-sex spouse or that spouse’s children do not qualify as a dependent of the employee are taxable for federal purposes and not for Massachusetts purposes,
5. Qualified tuition reduction that an educational organization provides to the same-sex spouse of an employee is taxable for federal purposes and not for Massachusetts purposes, and
6. Employer contributions to an accident or health insurance plan for the benefit of a same-sex spouse and that spouse’s children when the same-sex spouse or that spouse’s children do not qualify as a dependent of the employee are taxable for federal purposes and not for Massachusetts purposes.

Contact Vision Payroll Now

Contact Vision Payroll if you have further questions on the differences between federal wages and Massachusetts wages on Form W-2.

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.

This week’s question comes from Eric, an HR manager. I know there are changes to flexible spending arrangements (FSAs) because of health care reform. How does health care reform affect reimbursements for over-the-counter medicines in FSAs? Answer: The Patient Protection and Affordable Care Act (PPACA) made changes to reimbursements for over-the-counter medicines in the following types of accounts:

• Flexible Spending Arrangements (FSAs),
• Health Reimbursement Arrangements (HRAs),
• Health Savings Accounts (HSAs), and
• Archer Medical Savings Accounts (Archer MSAs).

Over-the-Counter Medicines Generally Are No Longer Reimbursable

Generally, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eyeglasses, contact lenses, co-pays and deductibles.

Change Is Effective for 2011

The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan.

IRS Provides Guidance on New Rules

The Internal Revenue Service (IRS) recently released Notice 2010-59 to provide guidance to employers and employees on the impact of PPACA and how it revises the definition of medical expenses as it relates to over-the-counter drugs.

Rev. Rul. 2003-102 Obsoleted

In conjunction with this change, the IRS also released Rev. Rul. 2010-23, which obsoletes Rev. Rul. 2003-102. This ruling provided guidance on employer reimbursements of amounts paid by an employee to purchase nonprescription medicines or drugs.

Employees Need to Plan for Changes When Making 2011 Elections

Vision Payroll recommends employees start to plan now to account for the impact of these changes on how they will make their elections under these types of plans.

Many employers are aware of the new requirement under the Patient Protection and Affordable Care Act (PPACA), soon to be implemented, that an employer’s health insurance costs be included on an employee’s Form W-2.

Reporting Health Care Costs on Form W-2 Does NOT Make Them Taxable

Many have misunderstood this requirement to mean that an employer’s health insurance costs are taxable to the employee. To help clarify this, the Internal Revenue Service (IRS) recently released the following explanation:

Starting in tax year 2011, the [PPACA] requires employers to report the value of the health insurance coverage they provide employees on each employee’s annual Form W-2. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee’s income and it is not taxable.

Health Care Costs That Were Already Taxable Are Still Taxable

In some circumstances, the employer’s cost of health insurance is included in an employee’s income, e.g., certain S corporation shareholders. This change does not affect the taxability of employer’s costs that were already taxable.

Vision Payroll Is Ready to Implement This Change

Contact Vision Payroll if you have any further questions on Form W-2.

This week’s question comes from Beverly, a small-business owner. We pay health insurance costs for our employees. I heard there was a change in reporting health insurance costs under the new law. Are health insurance costs required to be reported on Form W-2? Answer: Under the Patient Protection and Affordable Care Act (PPACA), beginning in the 2011 tax year (reported to Social Security Administration (SSA) in 2012), employers will be required to start including the aggregate cost for “applicable employer-sponsored coverage” for each employee on that employee’s Form W-2, Wage and Tax Statement. There is no requirement to include this information on the 2010 Form W-2, to be reported to the SSA in 2011. Contact Vision Payroll if you have any further questions on Form W-2.

As one of the health care reform provisions of the Patient Protection and Affordable Care Act (PPACA), a tax credit is available to help offset the employer health care cost of offering employee benefits. On May 17, 2010, the Internal Revenue Service (IRS) provided new detailed guidance especially helpful for small businesses. With this information, small employers could determine their tax credit qualification and the estimated credit amount.

Do you understand the tax credit qualification process? Do you know the three steps in the determination process? Are you aware of the employer considerations for the credit?

For detailed information on these processes, employer considerations and much more, be sure to read the featured article by the HR pros at MyHRSupportCenter, New IRS Guidance on the New Health Care Tax Credit. If you’re not yet signed up or would like a free trial of MyHRSupportCenter, contact Vision Payroll today.

The recently enacted Patient Protection and Affordable Care Act (the Act) will expand information reporting requirements starting in 2012. §9005 of the Act amends §6041 of the Internal Revenue Code of 1986 (IRC) so that payments to corporations that were previously exempted from reporting will now be subject to reporting on Form 1099. Additionally, information reporting will now be required for purchases of property. Therefore, businesses that pay a single entity $600 or more in a calendar year for purchases of goods and services will be required to report those payments on Form 1099.

Under the law, the IRS was granted the authority to issue so-called legislative regulations to “prevent duplicative reporting of transactions.” Since under a different provision also effective in 2012 payment processors will be required to report gross amounts paid to companies using debit and credit cards, IRS Commissioner Douglas H Shulman indicated in a recent speech that transactions that use credit or debit cards might be exempted from these reporting requirements.

Vision Payroll strongly recommends that businesses begin their implementation plan now to be ready to report under the new requirements and to be ready to reconcile the forms received from their customers. Vision Payroll is ready now to work with businesses on their implementation plan and will assist them in filing the necessary forms.

Under the Patient Protection and Affordable Care Act of 2010, employers must provide a nursing mother a reasonable break time to express breast milk for up to one year after her child’s birth. There is no quantified limit on the number of breaks to be allowed or the duration of such breaks. Employers must provide “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public” for mothers to use. Nothing in this amendment requires this break time to be compensated, although other federal and state laws may require compensation. Employers with fewer than fifty employees are exempt if the “requirements would impose an undue hardship” either through the relative difficulty or expense of complying with the law. As in other sections of the Fair Labor Standards Act (FLSA), state laws may provide rules that are more beneficial to the employee and must be followed. Due to the vagueness of the law and possibility of conflicts with other statutes, Vision Payroll strongly recommends that affected employers consult with a competent labor law attorney to ensure compliance.