2010 Year End Bulletin

2010 Year End Bulletin

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ARE ALL OF YOUR EMPLOYEES CURRENT WITH THEIR FORM W-4??

Employees Exempt from Withholding: An employee who certified to his employer on Form W-4, Employee’s Withholding Allowance Certificate, that he had no income tax liability for 2009 and anticipated no income tax liability for 2010 was entitled to an exemption from withholding for 2010. If the employee expects to incur income tax liability in 2010, a new Form W-4 must be given to the employer by February 15, 2011.
 
Change in Exemptions: If an employee loses an exemption at the beginning of the New Year for any reason, they should also file a new Form W-4 for 2011. An employee who wishes to make changes to their current withholding should also file a new Form W-4.
 

 

EMPLOYERS – HAVE YOU TOLD YOUR EMPLOYEES ABOUT THE EARNED INCOME CREDIT (EIC)?

 
For 2010, you are encouraged to notify the following employees that they may be able to claim the EIC on their 2010 returns:
 
Employees with one qualifying child and wages less than $35,535
 
The employee’s copy of Form W-2 that is prepared by Tricom Funding has the required statement about the EIC on the back of the form.
 
California Employers: California enacted a law effective 1/1/2008 which states that the information you provide on the back of W-2’s is not sufficient notification of earned income credit. Please refer to the memo and hand out that will be provided by the Accounting Department for more details.
 

REPEAL OF ADVANCED EARNED INCOME CREDIT

 
As part of H.R. 1586 (the Education, Jobs and Medicaid Assistance Act), the bill that President Obama has recently signed into law, the Advanced Earned Income Tax Credit (AEITC) will be repealed effective for years beginning after December 31, 2010. The Earned Income Tax Credit (EITC) was designed to supplement the earnings of low-income workers by allowing tax credits to those who qualify. Qualified employees claim the credit as a lump sum when they file their federal income tax return. Employees who are eligible for the EITC and have one qualifying child were able to choose to receive their credit throughout the year as smaller payments added to each paycheck.
 
Receiving payments in advance is an unpopular choice with taxpayers and is being repealed in 2011. The EITC program will continue to operate, but qualified workers must claim the credit by filing a tax return. The decision to remove the AEITC program is based on recent findings that it is underutilized by eligible employees and abused by employers and employees alike. Government research suggests that only 3% of qualified employees participate in the program and that 20% of claimants have invalid Social Security Numbers. Tricom will simply cease to allow for this credit for any employees who were receiving this credit in 2010. No action is necessary on the employers’ part.
 

TRICOM HAS FRAUD PROTECTION

 
For those clients that process payroll using Tricom’s payroll account, you have very strong payroll fraud protection. Not only do Tricom’s checks have several levels of security, but Tricom is on a positive pay system. Each check that is presented for payment is verified with actual check registers to ensure the check was actually processed by Tricom.

Each day, exceptions are checked and verified. Any fraud checks are rejected as fraud. Once this occurs, the client is notified. Even though these checks will never be honored, it is important to report this fraud to your local law enforcement agency. Typically, the employer will receive a collection call from the vendor where the check was cashed looking for payment. Tricom will provide you with an affidavit of forgery. This affidavit, along with a copy of the police report, will generally satisfy the victim of the fraud.
 
If you have any questions about this process, please contact Mary Jo Heim at 262-509-6214. If you are currently not processing your full service payroll with Tricom’s fraud protected accounts, please contact Rick Gehrke at 262-509-6303.
 

TRICOM CAN MAIL YOUR W-2’S FOR YOU

 
Tired of running to the post office to buy books of stamps? Tired of licking and sticking all those stamps on every employee’s W-2? Tricom Funding will mail all W-2’s from our office upon request. We will either mail ALL W-2’s, including internal, or we will ship them all to you. If you would like us to mail them, please contact someone in Tricom’s Accounting Department to arrange this. You will be charged for the dollar amount of the postage on your Weekly Activity Payment Report after the W-2’s have been mailed.
 

YEAR END PAYROLL ADJUSTMENTS & W-2 INFORMATION

 
Any adjustments to payroll records for 2010 must be in our office no later than Wednesday, December 29, 2010. If you know you are going to have adjustments but do not believe you will have them to us by this date, please contact Mary Jo Heim (extension 214) by December 29th. Adjustments turned in to Tricom Funding after this date may cause delays in processing your W-2’s and other year-end reports. Since the IRS requires W-2’s to be distributed by January 31st, it is extremely important that we process adjustments early in order to meet this deadline.
 
The following information must be included on Form W-2:
  1. Group-term life insurance cost for coverage over $50,000
  2. Personal use of company auto
  3. Third-party sick pay
  4. Auto or expense account allowance not accounted for by employee
  5. Participation in a pension or deferred compensation plan
  6. Cost of fringe benefits (e.g. health insurance premiums) provided to a >2% shareholder of an S Corporation.
 
If you or your employees are affected by any of the above items, please contact Mary Jo Heim by December 17th so we can properly account for them on the W-2’s.
 

HOLIDAY BONUS RUNS:

 
All holiday internal payroll bonuses will be debited from your account. Please turn any holiday bonus requests into your payroll processor 24 hours prior to your regular payroll schedule. This will allow us extra time to accommodate any special calculations.
 

NEW TAX RATES FOR 2011

 
As in past years, there are several new tax rates going into affect on January 1, 2011. The following is a list of states that have made us aware of changes in their rates: California, Kentucky, Maine, Michigan, and New Mexico.
 
The California disability rate for 2011 is 1.20% (2010 rate was 1.1%) on the first $93,316 of wages. New Jersey has reduced the additional employee tax that was added in 2010 (Family Leave Insurance ) to decrease the cumulative employee taxes (excluding withholding) from 1.045% to .985%.
 
It is currently unknown as to whether the Bush tax rate changes that were due to expire at the end of the year will be rescinded or extended. Please look for further information from Tricom on this when the information becomes available.
 
The Social Security Administration has not increased the taxable wage base for 2011. The Medicare taxable wage base was eliminated in 1994; therefore all earned income will be subject to Medicare tax. The tax rates for Social Security and Medicare remain unchanged at 6.2% and 1.45% respectively. The effect of this change is illustrated as follows:
 
  2010 2011    Increase
 Social Security Tax       $6621.60     $6621.60   $0.00
 Medicare Tax  Unlimited  Unlimited  
 
You may want to inform your employees when they receive their first paycheck for 2011 that the taxes withheld on their check may have changed due to changes in the federal and state tax tables.
 

MINIMUM WAGE INCREASES FOR 2010

 
There are nine states and two cities that adjust their hourly minimum wage rate every January 1 for inflation. Those increasing their rates are Arizona ($7.35), Montana ($7.35), Ohio ($7.40), Oregon ($8.50), Vermont ($8.15), Washington ($8.67), Colorado ($7.36), and San Francisco, California ($9.92). Florida ($7.25) and Missouri ($7.25) expect to stay the same. Santa Fe, New Mexico has yet to announce its Minimum Wage for 2011.
 

WHAT DO I NEED TO DO WITH MY YEAR END REPORTS?

 
During the month of January, Tricom Funding will send several reports and forms to your office that will need your attention. Most of you will receive these in a shipment separate from your normal overnight package, so please watch for it. Below we have listed the major reports and forms and what to do with them when you receive them:
 
  • Employee’s Form W-2: We will use the four-to-a-page laser W-2 forms. Unless you notify us that you would like Tricom to mail your W-2’s directly from our office, we will stuff all employees W-2’s in non-sealed envelopes and ship them to you for stamping and mailing. If you do not want your W-2’s in envelopes, please call Mary Jo Heim (extension 214) as soon as possible. If we do not hear from you, you will receive your W-2’s in envelopes.
  • Employer Copy D Form W-2: You will receive a disk with employer copies of W-2’s. These will not qualify as duplicate W-2’s for your employees. They are just meant as a record for you to see total W-2 wages for your employees. Also, if you are ever audited or receive a tax notice you may need this copy.
  • Payroll History Reports: To reduce the amount of unneeded paper in your office, we will not be sending year-end history reports unless you specifically request them. You can refer to your W-2 copies for yearly wages. Our Help Desk is also available to run individual employee histories when needed. To request a year-end history report for all employees, please contact a member of Tricom’s Accounting Department.
  • Tax reports: We will forward you copies of all tax reports that are filed with the federal, state and local governments. These are your copies and should be retained by you. You may need these in the future for audits or evidence of filing.
  • W-2 reproductions: If an employee has a request for a reproduction of a W-2 form, please fax a duplicate W-2 request form to our office and we will mail the reproduction out within 5 business days.
  • If you have any questions regarding W-2 reproductions, please contact the Help Desk. Please note that you will be charged .46 cents per W-2 that we mail for you. No W-2 reprints will be available prior to January 25, 2011.
 

VALID SOCIAL SECURITY NUMBERS

 
The IRS has announced that it will begin to impose upon employers a $50 penalty for each Form W-2 where the employee’s name and social security number do not match the Social Security Administration database. Employers can call SSA’s nationwide toll-free number for employers (800-772-6270), weekdays from 7:00 am to 7:00 pm ET, to verify up to five employee names and social security numbers. The SSA also has a website where you can verify up to 10 SSNs at one time. The website is www.ssa.gov/ employer/ssnv.htm.
 
If you need assistance with this process, please contact Mike Auchter (ext. 213) or Erica LeTourneau (ext. 239). However, the IRS has stated that as long as the employer has a completed W-4 with the invalid social security number, signed by the employee, they will abate this penalty. Also keep in mind that our Pay Card vendor will be unable to set up pay cards for employees with invalid Social Security numbers.
 

2011 UNEMPLOYMENT RATES

 
Please fax a copy of your 2011 unemployment rates to Mary Jo Heim as soon as you receive them. You should receive rates from the states of all employees except New Jersey. (These rates changed 7/1/10.) We need to enter your 2011 rates into our system before January 1st in order to withhold proper unemployment amounts.
 
State 2011 2010   State 2011 2010
Alabama $8,000 $8,000   Montana   $26,300   $26,000
Alaska   $34,100   Nebraska   $9,000   $9,000
Arizona $7,000 $7,000   Nevada  $26,600  $27,000
Arkansas $12,000 $12,000   New Hampshire  $12,000  $10,000
California $7,000 $7,000   New Jersey  $29,600  $29,700
Colorado $10,000 $10,000   New Mexico   $21,900   $20,800
Connecticut $15,000 $15,000   New York $8,500   $8,500
Delaware  $10,500  $10,500   North Carolina     $19,700
Washington DC  $9,000  $9,000   North Dakota   $25,500   $24,700
Florida  $7,000  $7,000   Ohio   $9,000   $9,000
Georgia  $8,500  $8,500   Oklahoma   $18,600   $14,900
Hawaii  $34,200  $ 34,900   Oregon   $32,300   $32,100
Idaho   $ 33,300   Pennsylvania   $8,000   $8,000
Illinois   $12,740   $12,520   Puerto Rico   $7,000   $7,000
Indiana   $9,500   $7,000   Rhode Island   $19,000   $19,000
Iowa $24,700   $24,500   South Carolina   $10,000   $7,000
Kansas   $8,000   $8,000   South Dakota   $11,000   $10,000
Kentucky   $8,000   $8,000   Tennessee  $ 9,000   $9,000
Louisiana   $7,700   $7,700   Texas   $9,000   $9,000
Maine   $12,000   $12,000   Utah   $28,600   $ 28,300
Maryland   $8,500   $8,500   Vermont   $13,000   $10,000
Massachusetts   $14,000   $14,000   Virginia   $8,000 $8,000
Michigan   $9,000   $9,000   Washington   $37,300   $36,800
Minnesota   $27,000   $27,000   West Virginia   $12,000   $12,000
Mississippi   $14,000   $7,000   Wisconsin   $13,000 $12,000
Missouri  $ 13,000   $13,000   Wyoming  $22,300  $22,800
 
Sixteen States increased their Wage Limit for 2011. Four states (shown in gold ) decreased their Wage Limit for 2011. Those states without information have not decided as of printing date.
 

HOW MUCH POSTAGE WILL I NEED?

 
To help you prepare your office with the appropriate amount of postage for mailing, feel free to contact the Accounting Department after January 25th for the total number of W-2 Forms being shipped to your office. However, Tricom can mail ALL W-2’s for you from our office. Please see the middle of page 2 of this bulletin for details. W-2 shipments will begin January 20-26th.
 

DECEMBER FINANCIAL STATEMENTS

 
Due to the volume of W-2’s and government forms that need to be filed by January 31, 2011, we will be unable to complete December financial statements for everyone during January. We encourage you to send your information as early as possible. Your accountant at Tricom Funding will then contact you to work out an approximate schedule as to when you will receive your statements.

Please note that your corporate tax returns (for most of you) will be due on March 15, 2011. This means your tax accountant will probably be requesting your year-end Financial Statement by the beginning of February. Therefore, the sooner we receive your information, the better we will be able to schedule completion of your statements.
 

VENDOR RELATIONSHIPS

 
Tricom has partnered with ten different vendors to assist in our clients’ business needs. We have developed vendor partnerships in the following areas:
 
  • Employee Benefit Plans
  • Drug Testing
  • Pay Cards
  • Employee, Customer Tracking Software
  • Flexible Benefit Plans
  • 401K Plans
  • Background Checks
  • Unemployment Claim Monitoring
  • Worker’s Compensation Insurance
 
Please contact Mary Jo Heim (ext. 214) with any questions or for contact information on any of these vendors.
 

EMPLOYERS IN THREE STATES LOSE FULL FUTA CREDIT FOR 2010

 
Three states — Indiana, Michigan and South Carolina — were unable to pay back outstanding federal loans for their unemployment insurance (UI) programs by the November 10, 2010 deadline. This means that the Federal Unemployment Tax Act (FUTA) rate will increase to 1.4% for Michigan employers (it was 1.1% because they missed their payment for the second year in a row) and 1.1% for Indiana and South Carolina Employers (from .8%).  These additional taxes will be due on January 31, 2011 along with the Federal 940 Form.

For more information on the FUTA tax credits and how the loan payments work please see “Beyond the Numbers” on Tricom’s website, written by Julie Ann Blazei. Tricom will notify all effected clients to explain the tax increases and work to collect this additional tax prior to its due date. If you have any questions, please feel free to contact one of our Accounting professionals.
 

HIRE ACT TO EXPIRE AT YEAR END

 
Please keep in mind that the credits you may be currently receiving (No employer social security on qualified employees) will end at the end of the year. You will again be charged 6.2% Social Security tax on Employee wages beginning with checks dated after 12/31/2010. Tricom will have the listing of affected employees and will “turn on” this tax for 2011. Keep in mind that there will be credits available to employers on their 2011 corporate tax return (those that are filed in 2012) for employees that were hired under the Hire Act and have been employed for one year.
 

Questions?

Your year-end payroll tax specialists are: Mary Jo Heim, CPA, Erica LeTourneau, Michael Auchter, Nate Allerheiligen, and Kelly Fitzsimmons. Please feel free to contact them by phone at 1-888-4-TRICOM (487-4266) or by fax at 1-866-782-0706.
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