Vision Payroll

This week’s question comes from Franz, a small-business owner. We provide health insurance for our employees. We heard that we can get a credit on our tax return this year. What is the Small Business Health Care Tax Credit? Answer: the Small Business Health Care Tax Credit takes effect in 2010 and is available to many small businesses and tax-exempt employers. To determine if your business or tax-exempt organization qualifies, follow these steps:

1. Determine the number of employees who work at least forty hours per week, but don’t count owners or family members. These employees are considered full-time employees.
2. Determine the number of full-time equivalent employees by dividing the total number of hours worked by employees who work less than forty hours per week by 2080. Again, do not count owners or family members.
3. Calculate the sum of the numbers calculated in steps 1 and 2. If the sum is less than twenty-five, continue to step 4. If the sum is twenty-five or more, stop. Your business does not qualify for the credit.
4. Divide the total annual wages paid to the employees counted in steps 1 and 2 by the sum calculated in step 3. If the quotient is less than $50,000, continue to step 5. If the quotient is $50,000 or more, stop. Your business does not qualify for the credit.
5. Determine if your business pays at least half of the insurance premiums for your employees at the single (employee-only) coverage rate. If you do, your business may qualify for the credit. If you don’t, stop. Your business does not qualify for the credit.

Over the next several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. These details will help employers more accurately determine qualifying employers and average annual wages and also calculate and claim the credit.

This week’s question comes from Andrew, a company president. We know that we can receive a payroll tax exemption and income tax credit under the HIRE Act if we hire certain unemployed workers. We need qualified employees to sign an affidavit to prove they are eligible. When will the HIRE Act affidavit form be available? Answer: The Internal Revenue Service (IRS) has released a draft Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit. Under the HIRE Act, employers may avoid paying social security tax on qualified employees and receive an income tax credit for retaining those employees. Employers are required to obtain a signed affidavit from qualified employees. A final Form W-11 is expected to be released by the IRS during the week of April 4, 2010. Contact Vision Payroll with further questions on the HIRE Act.

This week’s question comes from Sean, an HR director. We are in the process of hiring some employees who would allow us to claim exemption from paying the employer’s share of social security taxes because of the HIRE Act. Some employees are hesitant due to the impact on their future social security benefits. How does the HIRE Act affect employees’ future social security benefits? Answer: Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are allowed not to pay certain employment taxes. Although employers may be exempt from paying the taxes, there is no impact on any employee’s future social security benefits. Contact Vision Payroll if you have further questions on the HIRE Act.

This week’s question comes from Donna, an HR Director. I read how we can get a payroll tax credit for hiring unemployed workers. How do we know if an employee qualifies us for the new payroll tax credit for hiring unemployed workers? Answer: The Internal Revenue Service (IRS) has released IR-2010-033, Two New Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers. In it, the IRS explains that under the HIRE Act, employers will be required to “get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period.” The IRS will provide a form that employers may use to obtain the certification from employees. Contact Vision Payroll if you have any questions on the new credits.

This week’s question comes from Dawn, an HR manager. We are terminating someone today. I thought the COBRA subsidy expired at the end of February. Now I hear that it’s been extended again. Has the COBRA premium subsidy been extended? Answer: On Tuesday, President Barack Obama signed into law, HR 4691 (PL 111-144), which extended the COBRA premium subsidy to include workers involuntarily terminated in March 2010. Benefits were also extended to certain workers who lost coverage due to a reduction of hours and then were involuntarily terminated. Furthermore, work continues on HR 4213, which would extend coverage to employees who are involuntarily terminated during 2010. Contact Vision Payroll if you need further information on the COBRA subsidy extension.

This week’s question comes from Jason, an HR director. We mailed a Form W-2 to an employee who terminated employment during 2009. The Form W-2 was returned by the post office with no forwarding address. What should we do with a returned Form W-2? Answer: If the post office returns a Form W-2 as undeliverable, the employer should keep a copy of the Form W-2 until April 15 of the fourth year after the year of issue. Therefore, an undeliverable Form W-2 for 2009 should be kept until April 15, 2013. An undeliverable Form W-2 should not be sent to the Social Security Administration (SSA). Employers who can store electronically and reproduce an undeliverable Form W-2 need not keep the undelivered form. Customers of Vision Payroll need not keep copies since they can be reproduced from their ViewChoice CD. We recommend two copies of the ViewChoice CD with one stored on-site for easy access and one stored off-site for disaster recovery. Contact Vision Payroll if you have further questions.

This week’s question comes from Joe, a restaurant owner. We have many employees whose native language is Spanish. They are better able to understand forms in Spanish than they are in English. The regular 2010 Form W-4 is available in English, but we can’t find the Spanish version. When will Form W-4 in Spanish be available for 2010? Answer: The 2010 Form W-4, Employee’s Withholding Allowance Certificate was released last December. The Spanish equivalent, Formulario W-4(SP), Certificado de Exención de la Retención del Empleado, is generally not available until March or April. Therefore, expect the 2010 Formulario W-4(SP) to be available sometime in the next two months. Contact Vision Payroll if you have any further questions on Formulario W-4(SP).

This week’s question comes from Madeleine, an office manager. One of our employees lost her 2009 Form W-2 and now needs it to file her tax return. How do I get a duplicate Form W-2? There are two ways to get a duplicate Form W-2. The first is to print a copy from your year-end ViewChoice CD and the second is to request a printed copy for pickup at Vision Payroll. There is a nominal fee for this service. Contact Vision Payroll if you would like to arrange for a printed copy of a Form W-2 for pickup.

This week’s question comes from Jonathan, an HR director. I compared my Form W-2 to my last pay stub and there are differences between the amounts listed on the Form W-2 and the amounts on my last pay stub. How do I reconcile my W-2 to my last pay stub? Answer: The amounts on the Form W-2 may differ from gross pay on your last pay stub for several reasons. The Vision Payroll web site contains a document that helps employees reconcile their Form W-2 to their last pay stub. Contact Vision Payroll if you have any further questions.

This week’s question comes from John, a homeowner. I read about the need for household employers to file Schedule H. I own a home and hire people to do work there, but am not sure if I need to file Schedule H. How do I know if someone is a household employee? Answer: According to the Internal Revenue Service (IRS), “If you hired someone to do household work and you were able to control what work he or she did and how he or she did it, you had a household employee. This is true even if you gave the employee freedom of action. What matters is that you had the right to control the details of how the work was done.” The IRS also lists the following types of workers who commonly do household work:

• Babysitters
• Caretakers
• Cleaning People
• Drivers
• Health Aides
• Housekeepers
• Nannies
• Private Nurses
• Yard Workers

Furthermore, “[i]f a worker is your employee, it does not matter whether the work is full or part-time or that you hired the worker through an agency or from a list provided by an agency or association. Also, it does not matter if the wages paid are for work done hourly, daily, weekly, or by the job.”

Publication 926, Household Employer’s Tax Guide contains further information. Consult Publication 926 or contact Vision Payroll if you have further questions.