Employers Veterans Tax Credits Extended

With a great Veterans Hospital right here in Johnson City, TN,  employers who hire veterans will want to know that the IRS has extended the deadline for those  employers to file certification forms to claim veterans tax credits.

Under the Returning Heroes and Wounded Warriors Work Opportunity Tax Credits, employers who hire vetereans from Nov. 22 2011 to May 22, 2012 have until June 19, 2012 to qualify to claim  credits. In general, employers must submit form 8850 to the designated local agencies no later than 28 days after the individual begins work.

For profit employers can receive up to $9,600 per veteran under the program. Tax exempt groups can receive up to $6,240 per vet. These tax exempt employers can take the credit from Social Security withholdings. (Note this credit is different than the current payroll tax credit that applies to all employees.)

The amount of wages that an employer cantake inot account in computing their credit differes depending on the various categories of qualified veterans.  These amounts are:

  • $6,000 for a veteran who is a member of a family receiving assistance under the supplemental nutrition assistance program for at least 3 months . This category also includes veterans who is certified as having aggregate periods of unemployment of at least four weeks but less than 6 months in the year before being hired.
  • $12,000 for qualified vets who are disabled certified as having a hire date not more than one year after discharge or release from active duty.
  • $14,000 for individuals certified as veterans with aggregate periods of unemployment of 6 months or more in the year before being hired.
  • $24,000 for individuals who are qualified as disabled vets with aggregate periods of unemployment of 6 months or more in the year before being hired.
For more information on this topic, visit the IRS website.



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New 401K Reporting Rules Begin July 1, 2012 – Affects Employers in Tennessee

After numerous delays, new U.S. Department of Labor regulations are now set to go into effect July 1, 2012 that will require much more detailed information be conveyed to employers and employees about 401(k) and other employer sponsored benefit plans. After a period of study, the Labor Department determined that the majority of companies offering 401(k) plans do not clearly understand the fees they’re paying to firms who provide and administer their retirement plans. It was even determined that often times many employers are under the impression that their plan is free.

The new rules will require more regular written reporting and disclosure of fees connected with 401(k) plans as well as 408(b)(2) and other employer sponsored plans. The new rules are designed to promote much more transparency and let participants, both employers and particularly employees, understand all their plan fees, know what they are getting for their fees, and compare those fees more easily.

401(k) plan administrators, brokerage houses, investment firms, etc., will now have to create disclosures following user-friendly, uniform guidelines.  These disclosures will tell a clear story to employers and employees of all direct and indirect fees and expenses. Many financial firms that provide 401(k) and other employer sponsored retirement plans have been gearing up to put the new reporting requirements into place. Overall,  investment firms that offer retirement plans seem to feel the new requirements will be good for participants and plan sponsors, even though small business owners will find it to be more work in the beginning. However, because the disclosures must include both direct and indirect costs, many in the industry admit that they are scrambling to understand the new rules and determine how to clearly determine and define those costs.

To some, this is a decision that is long overdue. There has always been concern that some vendors charge high, even unreasonable, fees associated with their deferred compensation plan products and services.

Company management, also referred to as the plan sponsors, may also be under some new pressures because with these new regulations requiring that they share all plan costs with employees.  They will have to justify their plan choices. Employers should be ready to ask some tough questions of their plan providers as they relate to costs and performance, because chances are, once employees see and understand their plan fees, they will be asking those sames kinds of questions of their employers.  As plan sponsors, employers can be held liable for overall mismanagement of their employees deferred compensation plans.

Some plan providers readily concede that higher fees will significantly reduce the long-term investment returns on an employee’s savings plan. Keep in mind that Time & Pay works with a professional adviser that has always clearly defined all their fees and charges a fee much lower than the norm. Read more here about our 401(k) administration program.

As we noted above the implementation of this ruling has been delayed numerous times.  It appears this time the schedule is set. The Advi$or will keep you posted.

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Payroll Tax Break Extended – Tennessee Employers Affected

Congress passes payroll tax cut extension through 2012

On February 17, Congress passed H.R. 3630, the “Middle Class Tax Relief and Job Creation Act of 2012” (the Act) and the President has signed it into law. The Act extends the 2-percentage-point payroll tax cut through the end of 2012, and also repeals a number of estimated tax shifts for large corporations. Employers will now be able to better plan for payroll tax compliance

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers—one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax). For remuneration received during 2011 the “payroll tax holiday period,” namely calendar-year 2011, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010  reduced the employee OASDI tax rate under the FICA tax by two percentage points from 6.2% to 4.2%. Similarly, for self-employment income for tax years beginning in 2011, the Act reduced the OASDI tax rate under the SECA tax by two percentage points from 12.4% to 10.4%.

In December of 2011, when Congress couldn’t agree on how to fund a full-year extension of the payroll tax cut that applied for 2011, it passed the “Temporary Payroll Tax Cut Continuation Act of 2011” providing for a two-month extension of the payroll tax cut that applied for 2011, and a parallel extension of a lower SECA tax rate on self-employment income. More specifically, under the TTCA, the reduced employee OASDI tax rate of 4.2% under the FICA tax, and the equivalent employee portion of the RRTA tax, was extended to apply to covered wages paid in the first two months of 2012. The TTCA also provided for recapture of any benefit a taxpayer may have received from the reduction in the OASDI tax rate, and the equivalent employee portion of the RRTA tax, for remuneration received during the first two months of 2012 in excess of $18,350 (i.e., two-twelfths of the 2012 wage base of $110,100). The recapture would have been accomplished by a tax equal to 2% of the amount of wages (and railroad compensation) received during the first two months of 2012 that exceed $18,350. The recapture provision would have applied only if the temporary payroll tax cut terminated on Feb. 29, 2012.

For tax years beginning in 2012, the TTCA also provided that the OASDI rate for a self-employed individual remained at 10.4%, for self-employment income of up to $18,350 (reduced by wages subject to the lower OASDI rate for 2012).

The new law provides that the “payroll tax holiday period” is now extended for  calendar years 2011 and 2012.  Thus, the 2-percentage point payroll tax reduction and the 2-percentage point reduction in the OASDI tax under the SECA tax for the self-employed will apply through Dec. 31, 2012. As a result, for 2012, employees see a reduction in their payroll taxes to 4.2% on wages up to $110,100 (wage base for 2012) and self-employed individuals will pay only 10.4% Social Security self-employment taxes on self-employment income up to $110,100.  This will result in the maximum savings for 2012 will be $2,202 (2% of $110,100) per taxpayer. If both spouses earn at least as much as the wage base, the maximum savings will be $4,404.

As a result of this new law, the Act repeals the TTCA recapture provisions applying to taxpayers with wages exceeding $18,350 over the first two months of 2012. The IRS has issued new 941 forms for the year 2012 as well as working on releasing the 2012 W-2 with language that will reflect this tax cut.

The new law also extended unemployment benefits for those who have been unemployed for more than the standard 28 weeks.

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Tennessee Unemployment Ins. Rates to Remain Same….For Now!

Tennessee employers, take note: State Unemployment Insurance rates will not be adjusted at the beginning of this year as a result of the Unemployment Insurance Trust Fund  balance.

At the beginning of the new year, Tennessee adjusts emloyer’s unemployment insurance rates based on the balance of the state’s Unemployment Insurance Trust Fund. If the fund balance shows an increase, to a certain mandated level, UI rates can be reduced. If the fund balance decreases, UI rates can be increased to help increase the fund balance. According to the state, rate calculations will remain under table 1, the table indicating the highest that rates can be adjusted due to low trust fund balances.

Rates range from .5% to 4.5% for employers who have a positive balance in their individual unemployment insurance accounts, 5% to 10% for those businesses who have a negative balance.

Tennessee is the only state that adjusts a business’s unemployment insurance tax rate two times a year. In the beginning of the year, UI tax rates are adjusted based on state’s UI Trust Fund balances. Mid year  (July 1), UI tax rates can be adjusted again due to the claim “experience” (the value of claims for benefits by former employees) of the individual business. In both instances, businesses are notified of rate changes retroactively, usually in February and August. This is important information for payroll service bureaus like Time & Pay who concentrate on payroll tax compliance.

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E-Verify Implemented in Tennessee

Many private Tennessee employers and all governmental entities are now required by law to demonstrate that they are hiring and maintaining a legal workforce according to a new Tennessee Lawful Employment Act law signed by Governor Bill Haslam. Tennessee entities must verify employee eligibility either by utlizing the E-Verify program or by requesting all newly hired employees to provide one of the following identity and employment authorization documents:

> A valid Tennessee driver’s license or photo identification
> A valid driver’s license or photo identification from another state where the license requirements are at least as strict as those in Tennessee
> A birth certificate issued by a U.S. state, jurisdiction or territory
> A U.S. government issued certified birth certificate
> A valid, unexpired U.S. passport
> A U.S. certificate of birth abroad
> A certificate of citizenship
> A certificate of naturalization
> A U.S. citizen identification card
> A lawful permanent resident card

Other proof of employee’s immigration status and authorization to work in the United States

The implementation dates for the new law are structured to occur in phases:
> January 1, 2012 – All state and local government entities and private employers with 500 or more employees must enroll and participate in E-Verify or request and maintain an identity / employment authorization document from a newly hired employee.
> July 1, 2012 – All private employers with 200 to 499 employees must enroll and participate in E-Verify or request and maintain an identity / employment authorization document from a newly hired employee.
> July 1, 2013 – All private employers with 6 to 199 employees must register and utilize E-Verify or request and maintain an identity / employment authorization document from a newly hired employee

Private employers with 5 or less employees are exempt from these new provisions. However, private employers with six or more employees to whom this law applies to must also collect one of the employment authorization documents types listed above for “non-employees” as well. The law defines “non-employee” as “any individual other than an employee, paid directly by the employer in exchange for the individual’s labor or services.”

Human Resource departments need to note that the law also specifies that employers must maintain records of results generated by the E-Verify program for three years after the date of the employee’s hire or for one year after the employee’s employment is terminated, whichever is later. Employers must also maintain records of any employment authorization documents for one (1) year after the employee or non-employee ceases to provide labor or services for the employer, whichever is later.

In the event of any alleged violations of the law, the Tennessee Department of Labor and Services is authorized to request documentation establishing the employer’s compliance with the law, and the employer is required to supply the documentation within thirty days. If the Department determines the employer has violated the new law, a final order for violation of the law shall be issued and may include fines and/or business license suspension.

Additional employment laws currently enacted in Tennessee include:

-HB 111 prohibits contractors from contracting with state agencies within one year of the discovery that the contractor employs illegal immigrants. Contractors must also attest that they do not employ illegal workers.

-HB 729 creates the criminal offenses of flagrantly employing, knowingly employing or knowingly encouraging or inducing an illegal alien to enter the state for the purpose of employing such illegal alien. Fines can amount to $50,000. Farmers are exempt from the new rule and are not required to have business licenses. Suspensions would be lifted once the company proves it no longer has any illegal immigrants as employees. Subsequent offenses occurring within three years would mandate license suspensions for one year. Employers who check identification and are misled by an illegal immigrant will not be considered to be in violation.

-SB 903 prohibits the use in the state of a federal individual taxpayer identification number as a form of identification to prove immigration status. It also provides that for purposes of an application or offer of employment, no person in this state shall accept an individual taxpayer identification number as a form of identification and any person, including any contractor, in this state who is presented with an individual taxpayer identification number by a potential employee or subcontractor as a form of identification or to prove immigration status shall reject such number and shall request the lawful resident verification information.

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A while back, the state came to our office to audit our payroll records. When the auditor found out Time & Pay did our payroll, she stopped, packed her briefcase and informed us there was no need for the audit. She was very confident we were compliant.
-K B – GR&P Co. Bristol, TN

“As a former customer of one of those big national firms, not only does Time & Pay perform better in the payroll processing area with better products and services, but you are also way ahead of them in the customer service area. It is a pleasure working with your staff knowing that any help we need is readily available.”
-C – Comprehensive Community Services, Johnson City, TN

Time & Pay is a  godsend for a small business like mine. I no longer have to worry about paying my employees or my payroll taxes accurately or on time!  Time & Pay takes care of everything for me!
-B M – Stellar Studios, Johnson City, TN

“Time & Pay does a great job handling both our corporate and independent store accounts. The flexibility of their on-line capabilities gives us the information we need when we need it. Their response to our diverse needs has been excellent.”
-B G – HobbyTown USA, Omaha, Nebraska

“After working with one of the national firms, the transition to Time & Pay was easy and beneficial. Their products and services exceeded what we were getting, were more cost effective, and their customer service goes above and beyond. We are very happy we made the change.”
-R V – Mountain Treasure Corral, Kingsport, TN

“As a new company to Johnson City, we were glad to find a local quality payroll service provider. We had used a national provider in Florida and were well aware of the advantages of outsourcing. Time & Pay offers all that the big national firms provide and more, including local, prompt and courteous customer service!”
-K H – JD Squared, Johnson City, TN

“We had been doing payroll in-house for years and was looking for a cost effective alternative. Your systems and services have been able to provide us with information and reports we were not able to produce with our old system. You have freed our time to concentrate on more important accounting aspects of our business. With the excellent services you provide, we would not consider any other payroll processing system.”
-Kwick-Way Transportation Co, Gray, TN

“Having Time & Pay as a payroll service has been a wonderful partnership. Their customer service, punctuality and attention to detail have surpassed our expectations and we are glad to have them as a partner in conducting all of our payroll functions. I would highly recommend their services to companies, large and small.”  
-T W – Little Things, LLC, Chattanooga, TN

“Time & Pay saved us from hiring another employee to do our payroll. Along with providing great payroll services, they have given us the ability to easily track our labor cost for job costing.”
-J K – American Calendar, Greeneville, TN

“We had been doing our payroll in-house. When we reviewed your products and services, we found them to be both affordable and cost-effective. The transition to Time & Pay went very smoothly. We are very confident our payroll tax issues and confidentiality issues are now a thing of the past.”
-S T – D & S Dental, Johnson City, TN


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