Preparing For Year-End: 2016 Payroll Compliance, Updates, and ACA - PowerPoint PPT Presentation

Preparing For Year-End: 2016 Payroll Compliance, Updates, and ACA Filing

Year End Check List – Key Items Below are some items to consider, each company should hold a planning session with key leaders to define a list catered to their needs. Schedule bonus payrolls (more on this later)  Review holiday processing schedule with payroll department,  processor and bank Issue payroll to terminated employees in current year if next check  date is 2016 Capture census data for deferred compensation plan (like 401k)  Update state unemployment rates and wage limits for 2016  Schedule your 2016 check dates  Mail or distribute W2 and ACA 1095C or 1095B to employees  Send reminder to employee to update their W4 if required or  desired Review year end carryover PTO based on company policy  2

What Can Clients Do? 3

Helping the Client Help Themselves Remind clients to carefully review the employee data in the payroll system and notify their  payroll vendor of any changes/corrections. The key elements are name, address, SSN and YTD earnings. Payroll Providers will typically send a W2 verification report in the month of November and  ask clients to review and notify of any corrections. Provide any missing tax identification numbers (applied for does not count as a number).  There are 42 states that will do accept payments, allow the filing of a return or apply an amendment with a missing or applied for tax identification number. If you are using a payroll provider, make sure they are set up as Third Party Administrator  for any states that require it. DC, IA, IN, LA, MA, MI, MN, NM, NV, OH, PA, WI  Also very important to make sure a power of attorney is provided. Many taxing authorities  will not allow payroll companies to file, make payments, obtain rates or do amendments without a POA on file. Ensure all manual checks have been entered before year end.  Ensure all third party sick that will be included on the W2 is entered prior to year end.  All voided wages are added and related amendments completed before year end.  4

Bonus Payrolls Bonuses are called supplemental wages and can create different taxing situations.  If a bonus is included with regular wages, withhold taxes on the combined amount using the normal payroll process  If the bonus is paid separately, a flat 25 percent should be withheld for amounts under $1 million.  Amounts that exceed $1 million should be taxed at 39.6% or the highest rate of income tax for the year. This applies regardless of the employee W4.  See - https://www.irs.gov/publications/p15/ar02.html and Supplemental Wages for full details and examples 5

Bonus Payrolls - Continued Impact of bonus payrolls on 941 liabilities and due dates  First the basis - IRS payment frequencies  Payment frequency is determined by a look back period from July to June.  Liabilities over $50,000 will have a semi weekly payment schedule  Liabilities under $50,000 will have monthly payment schedule  Amounts under $2,500 in a quarter can still be paid by attaching a check to the return  Anytime liabilities exceed $100,000, the payments are due the next business day 6

Bonus Payrolls - Continued When trouble starts  Client runs a bonus payroll and the liability exceeds $100,000 and the • client does not make the payment on the next day Client runs a regular payroll and then a bonus payroll that creates a tax • liability greater than $100,000 in the same deposit period. Even if the amounts separately are less than $100,000, the amounts are due the day after the bonus payroll run. ‒ If check date falls on Wednesday, Thursday or Friday – due the next Wednesday ‒ If check date falls on a Saturday, Sunday, Monday or Tuesday – due the next Friday ‒ Dates typically moved by one day when a federal holiday is on the due date. Client wants to backdate the bonus payroll and the taxes are  considered due in the past. Penalties  2% up to 5 days late, 5% 6 to 15 days late, 10% if more that 15 days • late 15% if not paid within 10 days of notice and demand by the IRS • 7

Agencies That Will Not Accept Payments and/or Filings for Applied for Status: AL SUI/SWT, AR SWT, AZ SWT, CA SUI/SWT, CO SUI, CT SUI, DC SUI, DE SUI/SWT, FL SUI (will accept but with penalty), GA SWT, HI SUI/SWT, IA SUI/SWT, ID SUI (filing and payments are placed in suspense account), IN SUI (will accept but with penalty), IN SWT, KS SWT, KY SWT, LA SUI/SWT, MA SUI/SWT, MD SWT (filings and payments are placed in suspense account), ME SUI/SWT, MI SUI, MN SUI/SWT, MO SWT, MS SWT, NC SWT, NE SWT, NJ SUI/SWT, NM SUI/SWT, NV SUI, NY SUI (will penalize and will not post), NY SWT, OH SUI, OK SWT, PA SWT, PR SUI/SWT, RI SWT, SC SUI/SWT, TN SUI (penalizes), TX SUI, UT SWT, VA SWT, VT SUI (will accept but penalizes $100), VT SWT, WA SUI (will accept but with penalty), WI SUI, WY SUI, WY w/comp, US Virgin Island SUI/SWT, Denver CO, Philadelphia, PA 8

What Can Payroll Companies Do? 9

How Payroll Companies Assist the Clients Collect any missing pre-load data from clients that started during  the year Remind clients of wiring requirements for over limit bonus payrolls  Remind clients to review the SSN verification reports  Answer FUTA reduction credit questions in states impacted  Work with clients to complete all amendments prior to year end.  Explain the dangers of backdated payrolls to clients  Review how “Employer Cost of Health Benefits” is added for W2s  (Box 12 code DD) • 10

Other Things Payroll Companies Can Do  Force balance accounts with missing pre-load data  Review YTD reports from tax systems to identify and fix any issues  Rate exchanges with states  Frequency updates  Delete POAs when clients move to another payroll company 11

FUTA Credit Reduction What is it? FUTA taxes are calculated on the first $7,000 of wages.  If an employer has paid and filed their unemployment taxes in their  state, a credit can be taken of 5.4% when they file their federal 940 unemployment form. If a state takes a loan with the federal government to cover their  state unemployment costs and that loan is not repaid timely, the credit is reduced. The amount of the reduction increases each year a state is unable to  repay their loan. For each year the reduction is increased by 0.3% Additional credit reduction may apply in the 3 rd and 5 th year if  certain criteria are not met. DOL lists the FUTA credit reduction states on November 10  2015 states include CA (1.5%), CT (2.1%), OH (1.5%), VI (1.5%) (1.5%  = $105 per employee, 2.1% = $147 per employee) 12

FUTA Credit Reduction - Continued  How does it impact the 940? The reduced credit increases the amount • owed when filing the 940. The increased tax is consider due with the • 4th quarter liability. The reductions are recorded on the 940 • schedule A by state. 13

2016 Changes and No Changes  Social Security wages subject to tax $118,500 (unchanged from 2015)  401(k) limits 18,000 with $6,000 catch up for over 50 (unchanged from 2015)  Standard Mileage Allowance – not yet released for 2016 (2015 is 57.5 cents per mile) 14

2016 State Wage Base Changes CO wage base for SUI is NY wage base for SUI is   changing to $12,200.00 changing to $10,700.00 IA wage base for SUI is OK wage base for SUI is   changing to $28,300.00 changing to $17,500.00 KS wage base for SUI is PA wage base for SUI is   changing to $14,000.00 changing to $9,500.00 KY wage base for SUI is VT wage base for SUI is   changing to $10,200.00 changing to $16,800.00 MN wage base for SUI is WA wage base for SUI is   changing to $31,000.00 changing to $44,000.00 MT wage base for SUI is WY wage base for SUI is   changing to $30,500.00 changing to $25,500.00 NV wage base for SUI is  changing to $28,200.00 NJ wage base for SUI and SDI  is changing to $32,600.00 15

2016 State Minimum Wage Changes AK min wage is changing to MI min wage is changing to   $9.75 $8.50 AR min wage is changing to MN min wage is changing to   $8.00 $9.50 in August of next year CA min wage is changing to NE min wage is changing to   $10.00 $9.00 CT min wage is changing to NY min wage is changing to   $9.60 $9.00 (12/31/2015 for some reason they always do it one DC min wage is changing to  day before the changeover) $11.50 in July of next year RI min wage is changing to  HI min wage is changing to  $9.60 $8.50 VT min wage is changing to  MD min wage is changing to  $9.60 $8.75 in July of next year WV min wage is changing to  MA min wage is changing to  $8.75 $10.00 16

P atient Protection and A ffordable C are A ct (PPACA) is also known as the A ffordable C are A ct (ACA) or Obamacare 17