Archive for October, 2010

Are You Missing Out?

Sunday, October 31st, 2010

HIRE ActThroughout the week, we’re in contact with many prospects and customers of PCS and we have the opportunity to ask them if they’ve been taking advantage of the HIRE Act.  In almost every case, we’re met with a blank stare and the response, HIRE Act?  What’s that?

The HIRE Act is arguably the highest POSITIVE impact legislation for business launched in 2010.  Eligible new hires are EXEMPT from Employer Social Security Tax for the 2010 tax year (for wages paid after March 18th of 2010) – a savings of 6.2% of eligible employee taxable wages.

However, most businesses aren’t aware the “holiday” on this tax is available.  Indeed, even though PCS has sent out multiple notifications, only 25% of our customers have taken the steps necessary to take advantage of the savings which can be as much as $7,621.60 per eligible employee.

THE DETAILS

On March 18, 2010 President Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act .  The HIRE Act provides tax credits for employers willing to expand their workforce by hiring individuals who are unemployed or only working part time. This law provides two opportunities for tax savings:

  • Social Security Tax Holiday – Employers who hire unemployed workers this year (after February 3, 2010 and through December 31, 2010) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employees’ shares of Medicare taxes would also still apply to these wages.
  • General Business Tax Credit* – In addition, for each worker retained for at least a year, businesses may claim a general business tax credit, up to $1,000 per worker, when they file their 2011 corporate income tax returns.  The employee must be hired after February 3, 2010 and be employed for at least 52 consecutive weeks. Wages during the last 26 weeks must be at least 80 percent of the wages paid for the first 26 weeks.
    *PCS does not apply this credit as it is a credit on your business tax return.

The credit is available for eligible new hires made between February 3, 2010 and December 31, 2010. All credits must be applied to 2010 check dates. The maximum credit for each employee is $6,621.60 (Social Security wage max $106,800 x 6.2%).

An employee is eligible if he/she:

  • Begins employment between February 3, 2010 and December 31, 2010. Additionally, only the wages earned with a check date of March 19, 2010 to December 31, 2010 are eligible for the credit.
  • Has not been employed for more than 40 hours during the previous 60 days. The individual must sign a W-11 Form Affidavit of Employment, under penalty of perjury, attesting to the employer this fact. To get the W-11 form, click here.
  • Is not hired to replace another employee unless the previous employee was separated from employment voluntarily or for cause. Additional restrictions may apply for seasonal employment.
  • Is not related to the employer in one of the following ways: son, daughter, or descendant of either; stepson or stepdaughter; brother, sister, stepbrother, stepsister; father, mother, or ancestor of either; stepfather or stepmother; niece or nephew; aunt or uncle; or the following in-laws: son, daughter, father, mother, brother, or sister.

Businesses, agricultural employers, tax-exempt organizations, tribal governments and public colleges and universities all qualify to claim the payroll tax exemption for eligible newly-hired employees. Household employers and federal, state and local government employers, other than public colleges and universities, are not eligible.

WHAT YOU NEED TO DO

1.      Ask all new hires if they have worked for anyone more than 40 hours during the 60 day period ending on the day they began employment with you.  If they have not worked during this time frame, have them sign the affidavit Form W-11 and keep it on file.

2.      Look back at all new hires since February 3rd of 2010 that have received payroll checks dated after March 18th, 2010.  Find out if they would qualify based on the above criteria and if so, have them complete the Form W-11.  If you find that you have eligible employees, but have not been taking advantage of the HIRE Act, you will need to amend the affected 941 returns filed to date.

HOW TO CLAIM THE TAX EXEMPTION

If you are a PCS Client: Contact your Client Account Manager, they will guide you through the process.

If you are not a PCS Client: Form 941, Employer’s QUARTERLY Federal Tax Return, revised for use beginning with the second calendar quarter of 2010, will be filed by most employers claiming the payroll tax exemption for wages paid to qualified employees. The HIRE Act does not allow employers to claim the exemption for wages paid in the first quarter but provides for a credit in the second quarter. The instructions for the new Form 941 explain how this credit for wages paid from March 19 through March 31 can be claimed on the second quarter return.

The HIRE Act requires that employers get a signed statement from each eligible new hire, certifying under penalties of perjury, that he or she was not employed for more than 40 hours during the 60 days before beginning employment with that employer. Employers can use new Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, released last month, to meet this requirement. Though employers need this certification to claim both the payroll tax exemption and the new hire retention credit, they do not file these statements with the IRS. Instead, they must retain them along with other payroll and income tax records.

These two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify as long as they are replacing workers who left voluntarily or who were terminated for cause and otherwise are qualified employees. Family members and other relatives do not qualify for either of these tax benefits.

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Pay As You Go? Ask Your Agent

Sunday, October 31st, 2010

Pay As You Go Workers CompensationIf your Workers Compensation Policy renews in the next 90 days, ask your agent about utilizing a Pay As You Go policy at renewal.  Pay As You Go Workers Compensation policies are becoming one of the more popular choices at renewal because they increase cash flow and minimize audit exposure annually.

There is no down payment and premiums are paid “as you go” based on the classifications of your employees and the compensation they receive each pay period.  Since the data is accumulated and transmitted to the carrier throughout the entire year directly from PCS, you will have virtually no audit exposure if you’ve classified your employees properly.

To determine if a Pay As You Go policy is right for your company, you first need to find out if you fit the “appetite” of the insurance carriers that participate in this program.  High risk classifications may be excluded as well as smaller policies under $2,000 in annual premium.  Finally, mods over 1.3 are excluded.  For a listing of acceptable classifications, click here.

Our program is different in that it allows you to use your current agent.  So if you qualify, the next step is to have your agent contact our Program Manager, Scott French for a quote.

Scott French
Workers Compensation Program Manager
918-764-1630 Direct
918-289-2932 Direct Fax
http://www.onthemarkworkcomp.com/index.htm

Have your agent identify them self as representing a Payroll Control Systems Client and that they are calling to get a quote for our Pay As You Go Workers Compensation program.  Quotes can usually be obtained within 48 hours with the necessary submission information.  The carriers involved in the program are Liberty Mutual, Travelers and AmTrust.

To recap, here are the benefits of the program:

  • Zero down vs. Down payment or deposit,/li>
  • Pay as you go vs. Installment plans with monthly service fees
  • Premiums are based on actual payroll vs. Best guess
  • Improved cash flow
  • No audit surprises
  • “A” rated carriers
  • Personalized care from your agent

To see more, visit our website by clicking here.

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Tax Credits Provide Relief for U.S. Businesses

Sunday, October 31st, 2010

TaxBreak Tax CreditsBy:   Shannon Scott, President, TaxBreak-National Tax Credit

Most of you have heard the term “tax credit”, but did you know it can decrease your tax burden and put more cash back into your business?  Each year large and small companies forfeit millions of dollars because they do not take advantage of the tax credits available to qualifying employers. Many of these credits go unclaimed due to the complexity and time-consuming factors that impact the process.  There are many types of tax credits available to your company on the Federal, State and local level.  For the restaurant industry, the federal hiring credits such as the Work Opportunity Tax Credit (WOTC), Empowerment Zone (EZ) and Renewal Community (RC) credits can result in huge dividends.  These credits are available by simply doing what you do every day; hiring employees.

These tax credits can provide up to $9,000 per employee in Federal Income Tax Credits based on the category for which the employee qualifies.  These credits can be taken in the year earned, carried back one year or carried forward 20 years.  The WOTC rewards employers hiring individuals who are members of targeted economic groups while the EZ and RC are zone based credits.  To qualify for a zone credit, an employee simply has to live and work in one of the 81 designated zones in the United States.  Most companies believe they are taking advantage of this program through their regular tax deductions; however, that is simply not the case.  If your new hires are not completing and signing an IRS Form 8850 upon hire, you are not processing these tax credits.

These programs, although very beneficial, can be almost impossible to administer in house.  Processing and qualifying these credits takes a very good understanding of how tax incentives are applicable to a particular industry, location or employee base.  In some cases, extensive background and address history research must take place in order to verify these credits.  Tax credit processing companies throughout the United States assist you in identifying these credits and calculating the amount for which an employee qualifies.  Most of these companies work on a contingency fee basis, so there is no financial risk to your company and the fees are tax deductible.

Taking a proactive approach in identifying these credits can significantly increase your tax credit yield.   The application process will help you screen your new hires and identify their tax credit potential.  After all, this program was put in place to encourage you to hire these employees.

Recent tax law changes have increased the use of these credits to businesses who could previously not take advantage of the incentives along with extending the program itself.  The WOTC credit was extended for 3.5 years with liberalized rules for hiring disabled veterans and workers in “outward migration counties.”  Under the pre-2007 Small Business Act law, most general business credits, such as WOTC, could not offset a taxpayer’s Alternative Minimum Tax (AMT) liability.  With the enactment of the 2007 Small Business Act, this changed for credits earned after January 1, 2007.  The WOTC credits earned after January 1, 2007 offset AMT.  A taxpayer is subject to AMT whenever their tentative minimum tax exceeds their regular tax.

There are many good resources available for learning more about the types of credits and how these credits can help reduce your tax burden.  Information can be found on most search engines along with the IRS Website (www.irs.gov).  Tax time is fast approaching and it is not too late to help reduce your 2010 tax liability.

For more information:

Call George Shamblin gshamblin@taxbreakllc.com or Todd Griffin email tgriffin@taxbreakllc.com

866-499-6355
www.taxbreakllc.com

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

IRS Updates on Forms, Limits and Credits

Sunday, October 31st, 2010

IRS RatesIR-2010-103, Oct. 12, 2010

WASHINGTON — The IRS today issued a draft Form W-2 for 2011, which employers use to report wages and employee tax withholding. The IRS also announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan, making that reporting by employers optional in 2011.

The draft Form W-2 includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan.  The Treasury Department and the IRS have determined that this relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement. The IRS will be publishing guidance on the new requirement later this year.

Although reporting the cost of coverage will be optional with respect to 2011, the IRS continues to stress that the amounts reportable are not taxable. Included in the Affordable Care Act passed by Congress in March, the new reporting requirement is intended to be informational only, and to provide employees with greater transparency into overall health care costs.

IR-2010-108, Oct. 28, 2010

WASHINGTON — The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2011. In general, these limits will either remain unchanged, or the inflation adjustments for 2011 will be small. Highlights include:

  • The elective deferral (contribution) limit for employees who participate in section 401(k), 403(b), or 457(b) plans, and the federal government’s Thrift Savings Plan remains unchanged at $16,500.
  • The catch-up contribution limit under those plans for those aged 50 and over remains unchanged at $5,500.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in  an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $56,000 and $66,000, unchanged from 2010. For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $90,000 to $110,000, up from $89,000 to $109,000. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $169,000 and $179,000, up from $167,000 and $177,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $169,000 to 179,000 for married couples filing jointly, up from $167,000 to $177,000 in 2010. For singles and heads of household, the income phase-out range is $107,000 to $122,000, up from $105,000 to $120,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $56,500 for married couples filing jointly, up from $55,500 in 2010; $42,375 for heads of household, up from $41,625; and $28,250 for married individuals filing separately and for singles, up from $27,750.

For More information, click here.

Changes to Flexible Spending Arrangements (FSA, FLEX 125, HSA, MSA)

Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements or health reimbursement arrangements 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, eye glasses, contact lenses, co-pays and deductibles. 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. A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions for 2011.

For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and our questions and answers.

Source: www.irs.gov

IR-2010-103, Oct. 12, 2010

Small Business Health Care Tax Credit

This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers.

Source: www.irs.gov

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Online Scams that Impersonate the IRS

Sunday, October 31st, 2010

Online ScamsFS-2010-9, January 2010

WASHINGTON — Consumers should protect themselves against online identity theft and other scams that increase during and linger after the filing season. Such scams may appropriate the name, logo or other appurtenances of the IRS or U.S. Department of the Treasury to mislead taxpayers into believing that the scam is legitimate.

Scams involving the impersonation of the IRS usually take the form of e-mails, tweets or other online messages to consumers. Scammers may also use phones and faxes to reach intended victims. Some scammers set up phony Web sites.

The IRS and E-mail

Generally, the IRS does not send unsolicited e-mails to taxpayers. Further, the IRS does not discuss tax account information with taxpayers via e-mail or use e-mail to solicit sensitive financial and personal information from taxpayers. The IRS does not request financial account security information, such as PIN numbers, from taxpayers.

Object of Scams

Most scams impersonating the IRS are identity theft schemes. In this type of scam, the scammer poses as a legitimate institution to trick consumers into revealing personal and financial information — such as passwords and Social Security, PIN, bank account and credit card numbers — that can be used to gain access to and steal their bank, credit card or other financial accounts. Attempted identity theft scams that take place via e-mail are known as phishing. Other scams may try to persuade a victim to advance sums of money in the hope of realizing a larger gain. These are known as advance fee scams.

Who Is Targeted

Anyone with a computer, phone or fax machine could receive a scam message or unknowingly visit a phony or misleading Web site. Individuals, businesses, educators, charities and others have been targeted by e-mails that claim to come from the IRS or Treasury Department. Scam e-mails are generally sent out in bulk, based on e-mail addresses (urls), similar to spam.

How an Identity Theft Scam Works

Most of the scams that impersonate the IRS are identity theft scams. Typically, a consumer will receive an e-mail that claims to come from the IRS or Treasury Department. The message will contain an enticing or intimidating subject line, such as tax refund, inherited funds or IRS notice. Usually, the message will state that the recipient needs to provide the IRS with information to obtain the refund or avoid some penalty. The message will instruct the consumer to open an attachment or click on a link in the e-mail. This may lead to an official-looking form to be filled out online or send the taxpayer to a seemingly genuine but bogus IRS Web site. The look-alike site will then contain a phony but genuine-looking online form or interactive application that requires the personal and financial information the scammer can use to commit identity theft.

Alternatively, the clicked link may secretly download malware to the consumer’s computer. Malware is malicious code that can take over the computer’s hard drive, giving the scammer remote access to the computer, or it could look for passwords and other information and send them to the scammer.

Phony Web or Commercial Sites

In many IRS-impersonation scams, the scammer sends the consumer to a phony Web site that mimics the appearance of the genuine IRS Web site, IRS.gov. This allows the scammer to steer victims to phony interactive forms or applications that appear genuine but require the targeted victim to enter personal and financial information that will be used to commit identity theft.

The official Web site for the Internal Revenue Service is IRS.gov, and all IRS.gov Web page addresses begin with http://www.irs.gov/.

In addition to Web sites established by scammers, there are commercial Internet sites that often resemble the authentic IRS site or contain some form of the IRS name in the address but end with a .com, .net, .org or other designation instead of .gov. These sites have no connection to the IRS. Consumers may unknowingly visit these sites when searching the Internet to retrieve tax forms, publications and other information from the IRS.

Frequent or Recent Scams

There are a number of scams that impersonate the IRS. Some of them appear with great frequency, particularly during and right after filing season, and recur annually. Others are new.

  • Refund Scam — This is the most frequent IRS-impersonation scam seen by the IRS. In this phishing scam, a bogus e-mail claiming to come from the IRS tells the consumer that he or she is eligible to receive a tax refund for a specified amount. It may use the phrase “last annual calculations of your fiscal activity.” To claim the tax refund, the consumer must open an attachment or click on a link contained in the e-mail to access and complete a claim form. The form requires the entry of personal and financial information. Several variations on the refund scam have claimed to come from the Exempt Organizations area of the IRS or the name and signature of a genuine or made-up IRS executive. In reality, taxpayers do not complete a special form to obtain their federal tax refund — refunds are triggered by the tax return they submitted to the IRS.
  • Lottery winnings or cash consignment — These advance fee scam e-mails claim to come from the Treasury Department to notify recipients that they’ll receive millions of dollars in recovered funds or lottery winnings or cash consignment if they provide certain personal information, including phone numbers, via return e-mail. The e-mail may be just the first step in a multi-step scheme, in which the victim is later contacted by telephone or further e-mail and instructed to deposit taxes on the funds or winnings before they can receive any of it. Alternatively, they may be sent a phony check of the funds or winnings and told to deposit it but pay 10 percent in taxes or fees. Thinking that the check must have cleared the bank and is genuine, some people comply. However, the scammers, not the Treasury Department, will get the taxes or fees. In reality, the Treasury Department does not become involved in notification of inheritances or lottery or other winnings.
  • Beneficial Owner Form — This fax-based phishing scam, which generally targets foreign nationals, recurs periodically. It’s based on a genuine IRS form, the W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. The scammer, though, invents his or her own number and name for the form. The scammer modifies the form to request passport numbers, information that is often used for account security purposes (such as mother’s maiden name) and similar detailed personal and financial information, and states that the recipient may have to pay additional tax if he or she fails to immediately fax back the completed form. In reality, the real W-8BEN is completed by banks, not individuals.

Other Known Scams

The contents of other IRS-impersonation scams vary but may claim that the recipient will be paid for participating in an online survey or is under investigation or audit. Some scam e-mails have referenced Recovery-related tax provisions, such as Making Work Pay, or solicited for charitable donations to victims of natural disasters. Taxpayers should beware of an e-mail scam that references under-reported income and the recipient’s “tax statement,” since clicking on a link or opening an attachment is known to download malware onto the recipient’s computer.

How to Spot a Scam

Many e-mail scams are fairly sophisticated and hard to detect. However, there are signs to watch for, such as an e-mail that:

  • Requests detailed or an unusual amount of personal and/or financial information, such as name, SSN, bank or credit card account numbers or security-related information, such as mother’s maiden name, either in the e-mail itself or on another site to which a link in the e-mail sends the recipient.
  • Dangles bait to get the recipient to respond to the e-mail, such as mentioning a tax refund or offering to pay the recipient to participate in an IRS survey.
  • Threatens a consequence for not responding to the e-mail, such as additional taxes or blocking access to the recipient’s funds.
  • Gets the Internal Revenue Service or other federal agency names wrong.
  • Uses incorrect grammar or odd phrasing (many of the e-mail scams originate overseas and are written by non-native English speakers).
  • Uses a really long address in any link contained in the e-mail message or one that does not start with the actual IRS Web site address (http://www.irs.gov). The actual link’s address, or url, is revealed by moving the mouse over the link included in the text of the e-mail.

What to Do

Taxpayers who receive a suspicious e-mail claiming to come from the IRS should take the following steps:

  • Avoid opening any attachments to the e-mail, in case they contain malicious code that will infect your computer.
  • Avoid clicking on any links, for the same reason. Alternatively, the links may connect to a phony IRS Web site that appears authentic and then prompts for personal identifiers, bank or credit card account numbers or PINs.
  • Visit the IRS Web site, www.irs.gov, to use the “Where’s My Refund?” interactive tool to determine if they are really getting a refund, rather than responding to the e-mail message.
  • Forward the suspicious e-mail or url address to the IRS mailbox phishing@irs.gov, then delete the e-mail from their inbox.

Consumers who believe they are or may be victims of identity theft or other scams may visit the U.S. Federal Trade Commission’s Web site for identity theft, www.OnGuardOnline.gov, for guidance in what to do. The IRS is one of the sponsors of this site.

More information on IRS-impersonation scams, identity theft and suspicious e-mail is available on IRS.gov.

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Joe’s Jottings

Sunday, October 31st, 2010

Joe ReillyHappy Halloween, everyone!

The approaching “celebration” of things that scare people brings to mind real life circumstances that scare business owners!  Our observations have shown us that one of the most frightening aspects of buying business services, insurance, etc., is “putting all your eggs in one basket.”  In other words, if you choose to be tied to a single vendor for all of your outsourced needs, and one or more of those needs is not being met (or worse, is a disaster), you’re locked in because of the “single source” agreement!

This is why PCS has chosen to work with selected service providers in each area of insurance and business outsourcing.  We have found that not all providers perfectly match the needs of all customers.  So, if four of five strategic partners are meeting your needs perfectly, but the fifth is not, it’s a simple matter of making a single change.  There is no “upheaval” in the areas progressing smoothly, and, there is no need to be tied to a “less than perfect” solution.  If you’d like to check out our partners and recommended vendors, click here.

Payroll Control Systems can help you find the right solution for all of your business services needs!  If I can be of help in any way, please call me at 763-513-5951, or on my cell phone, 763-567-8387.

We do appreciate your business!

Joe Reilly
Founder and CEO