Archive for December, 2010

2010 Tax Bill Passed

Friday, December 31st, 2010

Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 has now passed and was signed by the President on December 17, 2010.

This bill has many provisions but a key item is the reduction to the employees Social Security tax withholding.  Millions of workers will see their take-home pay rise during 2011 because the law provides a two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2% to 4.2% of wages paid.  Also this law maintains the income-tax rates that have been in effect in recent years.

2010 Tax BillEmployers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, 2011.

Notice 1036, released today, contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes.  Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use will be available on the IRS website in a few days.

The IRS recognizes that the late enactment of these changes makes it difficult for many employers to quickly update their withholding systems.  For that reason, the agency asks employers to adjust their payroll systems as soon as possible, but not later than January 31, 2011.

For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2011.

PCS customers need not worry.  The adjustment is ready to take effect with your first check date in 2011.

As always, the IRS urges workers to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer.  For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms.  Publication 919, How Do I Adjust My Tax Withholding?, provides more information to workers on making changes to their tax withholding.

For complete details view the IRS Newsroom Article IR-2010-124.

Submitted By:

The Payroll Control Systems Tax Team

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.

2011 Tax Changes

Friday, December 31st, 2010

2011 Tax ChangesMinnesota Tax Changes
Minnesota has activated the Federal Loan Interest Assessment part of the State Unemployment rate. This assessment goes into effect when the Minnesota UI Trust Fund borrows federal funds to pay UI benefits. The assessment pays for the interest on the federal loan and is 2% percent of the total MN State Unemployment Tax, (total MN SUI Tax X 2% = assessment).

Federal Tax Changes
Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits.  See Federal Notice 1036 for and the IRS Newswire IR-2010-124 for complete details.

The new law also maintains the income-tax rates that have been in effect in recent years

Quick List of Federal Tax Changes

  • Two percent FICA cut on the employee side along with a two percent reduction in SE tax up to the $106,800 limit
  • Withholding tax rates stay at current levels through 2012
  • Marriage penalty is fixed through 2012 (i.e. no penalty)
  • No itemized deduction phase-out through 2012
  • Capital Gain and Qualified Dividends remain through 2012 (15% rate)
  • AMT patched through 2012
  • Estate Tax $5Mper person, $10M for couples and a top rate of 35%
  • Option to have zero estate tax with carryover basis in 2010 or follow the new rules
  • 100% bonus depreciation deduction for assets placed in service between 9\8\2010 and 12\31\2011 (this means full write-off)
  • 50% bonus depreciation for 2012
  • After 2011 Section 179 set at $125,000
  • Research credit extended though 2011
  • 15 year life for qualified leasehold improvements
  • 15 year life for restaurant buildings and improvements

Important Rates and Limits

  • Social Security Wage Base: $106,800
  • Employee Social Security Rate: 4.2%
  • Employer Social Security Rate: 6.2%
  • 401(k)/403(b) Elective limit: $16,500
  • Catch-up Contributions age 50+: $5,500

Mileage Rates

  • $0.51 Business miles
  • $0.19 Medical or Moving
  • $0.14 Charitable

Provided By:

The Payroll Control Systems Tax Team

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.

Federal Unemployment Tax Act (FUTA) and Credit Reductions

Friday, December 31st, 2010

Tax BillDue to the hard economic times currently being experienced across the United States, more states are becoming subject to the FUTA Credit reduction.  This article will briefly discuss Credit reduction and how this may affect your business.

Federal Unemployment insurance tax is a flat rate of 6.2% on the first $7000 in employee wages.  However, the federal government provides a 5.4% tax credit to companies that pay their state unemployment taxes on time.  This results in an effective federal unemployment tax of 0.8% on the first $7000 in wages or $56 per employee per year.

According to federal law, states with a high rate of unemployment and difficulty meeting their benefit obligations can borrow money from the FUTA account to pay benefits. If loans taken out during one year are not repaid by the end of the following calendar year, the FUTA credit for employers in those states is reduced from the 5.4%.  The extra FUTA taxes paid are applied against the state’s loan balance.

A state with an outstanding loan can avoid a credit reduction for its employers by repaying the loan by November 10th of the year the reduction is scheduled to take effect.  If the loan is not repaid by that date, a credit reduction of 0.3% goes into effect, with employers in that state having their maximum credit reduced to 5.1% (5.4% – 0.3%) and their effective FUTA tax rate increased to 1.1% (0.8% + 0.3%) or $77 per employee in the first year of reduction.  Each year a loan remains unpaid, the credit reduction increases by 0.3%, although there are limits for states that have made an effort to keep their balances in check.

Michigan was a credit reduction state in 2009 because it failed to repay amounts that it borrowed from the FUTA account.  As of February 2010 twenty seven states had outstanding loans from the FUTA account.  The states that are projected to be subject to a FUTA credit reduction in 2010 are Michigan, Indiana, and South Carolina.

How will this affect your company?  If you were required to pay state unemployment in any of the above states during 2010 you should expect to pay additional Federal Unemployment taxes on the wages paid in these states when the 940 return is filed for 2010 (due January 31, 2011).  The amount would be 0.3% of the FUTA taxable wages paid in Indiana and South Carolina, and 0.6% of the FUTA taxable wages paid in Michigan.  This information will appear on the Schedule A form which is filed with the 940 return.

Provided By:

The Payroll Control Systems Tax Team

Background Screening – Criminal Records 101

Friday, December 31st, 2010

Background Check - CautionBy:  Tony Lipinski
Sr. Solutions Consultant
12/16/2010

First off, I have been in the screening industry for 13 years and have a degree in Sociology with an emphasis in criminology. So hopefully, the information I’m providing will help you decide what is best for your enterprise. Please don’t construe this article as legal advice, it is simply a recap of best practices I have from my experience within the industry. You may also wish to review another related article which backs up my conclusions.

A National Background Check in the United States does not exist and is a misnomer. There is not any source currently; including the FBI NCIC, which has access to all records in the United States. The information is forwarded to the FBI from jurisdictions throughout the US.  In many cases, information is not forwarded properly which means it will not show up or can be incomplete.  For this reason, we highly suggest that the reporting jurisdiction is searched if an arrest record or incomplete / partial information is found.  This will help to ensure the accuracy of those records.

Best sources for “Best Practice” for a Due Diligence employment screening:

1) Fingerprinting – We can fingerprint and send the request for processing via the FBI NCIS database. However, it has to fall under a statute for processing. These checks run through Trusted Employees can take one to three weeks for complete results.

2) National Criminal SuperSearch – This is the database most screening companies, (Including Trusted Employees), access which contains information forwarded from jurisdictions throughout the United States. Each screening company may call this product something different like “national criminal records search”.  The limitations for this search are that it does not cover every jurisdiction in the U.S. and what is provided varies from state to state. We suggest using this search as a tool to locate records outside of the jurisdictions already searched. In addition, we suggest adding the originating jurisdiction where a record is located to ensure accuracy.  This is requirement in order to be compliant with the Fair Credit Reporting Act (FCRA) which all Reporting Agencies, including screening providers, must follow.  For Trusted Employees, this search is completed within minutes of submission.

Please note that the MN BCA statewide and Department of Corrections are the sources of information on the National Data base search with regard to MN records. The MN BCA is like the FBI NCIC search in that it is dependent upon the reporting of  jurisdictions within the state.  If a jurisdiction does not submit or submits incorrect information, the record will not show up or could be erroneous. Schools K-12 and Tenant screening in MN are required by law to conduct a MN BCA search.  Typically, over half the records do not show up on the statewide criminal search when compared to a full county by county criminal search.

3) County Criminal Search – Trusted Employees suggests conducting a County Criminal Search to ensure our customers are doing thorough due diligence. The county courts hold the records of any broken state law in the county where the infraction occurred. At Trusted Employees we provide all of the counties in MN as one search as we have access to all 87 counties. We have the same capability in about 20 other states which have a similar comprehensive search available. In states like Illinois and California that do not have a comprehensive search available, we search the counties of residence. For example, if someone is from Chicago, we search Cook County, IL.   For Minnesota and most of the Midwest, Trusted Employees completes County Criminal Searches within 12-24 hours. The rest of the U.S. may take two to three business days.

4) Statewide Criminal Search – In most cases, including MN, Statewide criminal searches are a repository of information from the county to the state. If the county does not forward the information to the state repository, it will not be reported. In addition, not all statewide criminal searches are available to non-criminal justice agencies. Trusted Employees completes this search within minutes for Minnesota.  Other States may require special forms can take up to several weeks.

5) Federal Criminal Records Search – Federal criminal records include breaking a Federal Law such as money laundering, drug trafficking, internet crimes, bank robbery, crimes crossing a state line and crimes on Federal property. There are 94 Federal Districts in the US and these districts do not report to the States or counties and the States and counties do not forward to the Federal Court system. Trusted Employees searches the Federal districts within the state of residence. For example, Minnesota has one Federal District so we search that Federal District Court,  Wisconsin has 2 Federal Districts so we research both districts, and so on.  Trusted Employees typically completes this search within one to three business days.

The National Criminal SuperSearch, County Criminal, Statewide Criminal and Federal Criminal are all searched by name and cross-referenced with date of birth. We may also cross-reference driver’s license, address, and physical description if the name is common. The record will be located under the name of the arrest.  Social Security Number is not on any criminal records as the records are public.

Social Security Trace – This is a tool we use to locate any additional possible names or addresses as reported to credit agencies. If someone has a record to hide, they may not provide all names used or addresses on their application / release so this is a good tool to locate additional information which is returned instantly via Trusted Employees.

Our goal at Trusted Employees is providing our customers with the best search for their business at the best possible price. Our suggestions for those of you wishing to implement a cost effective background screening program within your enterprise are as follows:

  • Social Security Trace – Locates additional names and addresses not provided
  • Criminal Search – Searches counties of residence for records
  • National Criminal SuperSearch – National criminal records database search of 400 million various state and local agencies
  • National Sexual Offense History – we search all 50 states + DC for reported sex offenders

For Financial / Professional positions, we recommend adding a Federal Criminal Search.

I hope this information is useful as you review your internal policies and screening providers. Feel free to contact me if you have any other questions about National Criminal searches or conducting background screening in general.

Tony Lipinski
Sr. Solutions Consultant
Trusted Employees
10505 Wayzata Blvd, Suite 200
Minnetonka, MN 55305-1502
www.trustedemployees.com
tlipinski@trustedemployees.com
PH 952 259-3019 / 888 389-4023
FAX 952 545-3973 / 888 389-4024

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.