Archive for January, 2011

Joe’s Jottings – Happy New Year!

Tuesday, January 25th, 2011

Joe ReillyHappy New Year!

Welcome to 2011!!  From all accounts, this year is going to be better than the last few… hopefully!

In looking at our average customer “headcount,” there is a slight “uptick” in the numbers, which is a very positive sign.  In talking with new clients, many are talking about hiring… not a huge increase in hiring, but an increase.  According to surveys that we watch, there appears to be little movement in salaries.  However, people seem to be anxious to get back to work regardless of the going pay scales.  And yet, there seems to be a mildly positive air about the future!

We hope your future looks bright as well!!  We welcome any feedback, so if you have any comments regarding what you see happening in 2011, please send them to us.  If appropriate, we will share them with our other customers (without indicating the source of the comments, for privacy purposes.)  Please send them to me at jreilly@pcspayroll.com.  I’d enjoy hearing from you!

Best wishes for a prosperous, healthy and happy 2011!

Joe Reilly
CEO & Founder
Payroll Control Systems
www.pcspayroll.com

New 2011 IRS Tax Calendar

Tuesday, January 25th, 2011

IRS Tax CalendarThe New 2011 IRS Tax Calendar for Small Business and Self Employed is available in both English and Spanish (Publication 1518SP), and is filled with useful information to address your business concerns. Each month highlights a different tax topic. Tax reminders and instructions are shown by date, and you can add your own notes such as state tax dates or business appointments. In addition to the monthly topics, you’ll find online resources along with a list of Forms and Publications, and a tear-out sheet of quick reference items.

Find the online version at:

www.irs.gov (search: tax calendar) or just click here.

Here are a few of the highlights contained in the new tax calendar:

Hiring Incentives to Restore Employment (HIRE) Act

Two new tax benefits are now available to employers hiring individuals who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enacted into law on March 18, 2010.

Payroll Tax Exemption for Hiring the Unemployed:
The payroll tax exemption provides employers with an exemption from their 6.2 percent share of social security tax on wages paid to qualifying employees. This provision is effective for wages paid from March 19, 2010 through December 31, 2010.

Business Credit for Retention of Certain Newly Hired Individuals in 2010:
This is a general business credit to encourage retention of new hires. The employer may claim the credit for each qualified employee who remains an employee for 52 consecutive weeks, provided that the employee’s pay does not decrease significantly in the second half of the year. The amount of the credit is the lesser of $1,000 or 6.2 percent of wages (as defined for income tax withholding purposes) paid by the employer to the retained qualified employee during the 52 consecutive week period. The credit cannot be carried back but may be carried forward.

Go to www.irs.gov, search: HIRE Act.

Health Care Tax Credit

Health coverage legislation enacted this year includes a Small Business Health Care Tax Credit to help small businesses and small tax-exempt organizations provide health insurance coverage to their employees. Small businesses and tax-exempt organizations providing health insurance coverage will qualify for a special tax credit.

Included in the health care reform legislation, the Patient Protection and Affordable Care Act encourages small business employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small business employers paying at least half the cost of single coverage for their employees.

Go to www.irs.gov, search: Health Care Tax Credit.

The American Recovery and Reinvestment Act (ARRA) of 2009 contains several tax provisions that affect businesses including the following.

COBRA Changes

The Recovery Act outlines changes to the health benefit provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985. The provision affects former employees and other potential COBRA payers such as insurance carriers.

ARRA provides a 65 percent subsidy for up to 15 months of the cost of COBRA coverage for an employee who was involuntarily terminated from his/her job from September 1, 2008, through May 31, 2010. The former employee must have been enrolled in an employer provided health plan at the time of involuntary termination to qualify for the credit.

The eligible former employee must pay 35 percent of the total premium and the former employer claims the remaining 65 percent of the total premium as a credit on Line 12a of Form 941, Employer’s Quarterly Federal Tax Return. The credit was first available with the first quarter Form 941 due April 30, 2009. The credit is subject to verification requirements, so the former employer must keep adequate documentation to support the credit claimed.

The COBRA subsidy is available to people who become eligible for COBRA coverage as a result of a reduction in hours occurring between September 1, 2008, and May 31, 2010, followed by an involuntary termination between March 2, 2010 and May 31, 2010. Individuals who did not take COBRA coverage after the reduction in hours or who signed up but later dropped it, get another chance to sign up for COBRA coverage.

Go to www.irs.gov, search: COBRA.

Earned Income Tax Credit

Help your employees increase their take-home pay at no cost to you!

Please help the IRS alert your employees about a valuable tax credit that could put up to $5,600 in their pockets.  If you have employees who earned less than $48,000 in 2010, they may qualify for the Earned Income Tax Credit, or EITC. However, IRS estimates that up to one in four qualifying individuals will fail to claim and receive the credit. With your assistance, we can reduce that number.

However, before taxpayers can receive EITC, they must first file federal income tax returns, even if they are not otherwise required to file. Some states have a similar tax credit, increasing the dollars due these employees.

IRS has several resources to help you inform your employees about EITC. Go to the EITC employer page for links to technical information, communication toolkits and marketing materials. Corporate Voices, a leading nonprofit nonpartisan organization that represents the private sector on working family policy issues, also publishes a downloadable employer EITC guide which you can access by clicking here.

Some relatively inexpensive ways you can alert your employees about EITC include:

  • Posters in employee break rooms
  • Messages on your company intranet site
  • Articles in your company newsletter
  • A link from your intranet site to EITC information on www.irs.gov
  • E-mail messages to your workforce
  • Stuffers with your Form W-2 mail-out
  • Leveraging other internal communication channels
  • Including EITC information in new employee orientations

Article Provided By:

The PCS 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.

Impact of OTC Regs on FSAs and HRAs

Tuesday, January 25th, 2011

Over the Counter Drugs and MedicinesHealth care reform requires that expenses for OTC (Over the Counter) medicines and drugs (other than insulin) purchased on or after Jan. 1, 2011 will only be considered medical care if they are “prescribed”. The guidance clarifies that the “new” rule does NOT apply to items that are not medicines or drugs, including equipment such as crutches, supplies such as bandages and diagnostic devices such as blood sugar test kits. These items WILL continue to qualify as medical care if they otherwise meet the definition.

Example: On Jan 2, 2011 Carol goes to her physician who recommends that she take two aspirin and call him in the morning. Carol goes out and purchases a bottle of aspirin for $5.76. On Jan 3, 2011, she submits the receipt for aspirin to her flex administrator. The administrator must deny the claim because Carol did not obtain a prescription for the aspirin. A general physician recommendation (oral or otherwise) does not satisfy the definition of a prescription and will not qualify. (Refer to the Q&A as to what constitutes as a valid prescription.)

Eligible OTC Items Reimbursable 1/1/2011 Without a Prescription:

  • Blood pressure monitors
  • Catheters
  • Contact lens solution / case
  • Crutches
  • First aid supplies
  • Insoles
  • Pregnancy tests
  • Reading glasses
  • Test Strips
  • Wrist / ankle braces / supports

Eligible OTC Items Reimbursable 1/1/2011 With a Prescription:

  • Acid controllers
  • Allergy & sinus products
  • Antibiotic products
  • Anti-diarrhea / laxatives
  • Anti-fungal / anti-itch products
  • Anti-gas products
  • Aspirin
  • Cold sore remedies
  • Cough, cold and flu products
  • Digestive aids
  • Hemorrhoid preparations
  • Medicated ointment / creams
  • Sleep aids
  • Vitamins / supplements

Ineligible Items (No Change)

  • Cosmetics
  • Cotton balls
  • Deodorant
  • Feminine hygiene products
  • Lip Balms
  • Lotions, anti-aging creams
  • Mouthwash
  • Oral anesthetics
  • Q-tips
  • Shaving cream / razors
  • Soap / shampoo
  • Teeth whitening kits
  • Toothpaste
  • Vitamins for general health

Questions & Answers on Over-the-Counter (OTC) Medicines and Drugs after the Health Care Reform Rule Change

When does the new rule take effect? Effective January 1, 2011 health care reform requires that OTC medicines and drugs (other than insulin) must be “prescribed” in order to qualify as medical care for purposes of Health FSAs, HRAs and HSAs (the “OTC” rule).

What types of OTC items are not affected by the new OTC rule? The new rule does not apply to OTC medical supplies and equipment, such as contact lens solution, bandages, crutches or durable medical equipment or diagnostic devices such as blood sugar test kits. These items may continue to be purchased and reimbursed out of your FSA account without a prescription.

What types of OTC medicines and drugs are affected by the new OTC rule? Existing guidance provides that a “medicine or drug” includes any item that is “generally accepted as falling within the category of medicine and drugs”. Examples of OTC medicine and drugs affected by the new rule include allergy & sinus medications, cough, cold & flu medicines, laxatives and aspirin.

What substantiation is required when I purchase my OTC medicine or drug after January 1, 2011? A participant is able to provide either of the following: (1) a receipt from the pharmacy that identifies the individual to whom the prescription is being issued, the cost and the RX number; OR (2) any other manual substantiation without an RX number (for example a cash register receipt that identifies the medicine or drug, amount and date purchased), provided a prescription from an authorized issuer is ALSO provided.

If my receipt does not include an RX number what other type of substantiation may I provide to assure my OTC medicine/drug is reimbursed from my FSA account? In addition to a sales receipt that identifies the medicine or drug, cost and date purchased, you must also provide a valid prescription. A valid prescription is required to meet the legal requirements of the state in which the medical expense is incurred. Most administrators will require the following information be included on the prescription in order for it to be valid:

  1. The name(s) and address of the patient(s)
  2. The name and quantity of the drug or device prescribed and the directions for use
  3. The date of issue

Will my physician write me a valid prescription for an OTC medicine or drug if it is available over-the-counter? The new rule may cause a great deal of confusion for participants as well as physicians and pharmacists. It is recommended that you consult with your physician as to their willingness to assist you in complying with the new OTC rule.

What if my plan runs off-calendar year? For plans that run on a fiscal plan year rather than a calendar plan year, the new rule is applicable for any OTC medicines and drugs purchased on or after January 1, 2011. Informal remarks from Treasury officials suggest that current participants cannot change their election solely as a result of this new rule.

What if my current plan runs calendar year but includes a 2 ½ month grace period? Expenses for OTC medicines and drugs purchased during the two-and-a-half month period following the end of a plan year must be accompanied by a valid prescription if the item is purchased on or after Jan 1, 2011.

Additional Links to Information:

IRS Issues Guidance Explaining 2011 Changes to FSAs

Affordable Care Act: Q & A on OTC Medicines and Drugs

IRS Bulletin 2010-39

IRS Bulletin 2011-3

Contributed By:

Chris Erickson
Benefit Extras
chris@benefitextras.com
952.435.6858 direct
www.benefitextras.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.

Small Business Health Care Tax Credit

Tuesday, January 25th, 2011

Health Care Tax CreditIf you are a small business and you pay at least 50 percent of your employee’s health insurance premiums, you may be eligible for a tax credit of up to 35% of the premiums you have paid.

On December 2nd, 2010, the IRS has released final guidance for small employers eligible to claim the new small business health care tax credit for the 2010 tax year. Today’s release includes a one-page form and instructions small employers will use to claim the credit for the 2010 tax year.

New Form 8941, Credit for Small Employer Health Insurance Premiums, and newly revised Form 990-T (draft) are now available on IRS.gov. The IRS also posted on its website the instructions to Form 8941 and Notice 2010-82, both of which are designed to help small employers correctly figure and claim the credit.

More About the Small Business Health Care Tax Credit
Included in the Affordable Care Act enacted in March, the small business health care tax credit is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have

The new guidance addresses small business questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements, including religious institutions that provide coverage through denominational organizations, small employers that cover their workers through insured multi-employer health and welfare plans, and employers that subsidize their employees’ health care costs through a broad range of contribution arrangements.

In general, the credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

Small businesses can claim the credit for 2010 through 2013 and for any two years after that. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations.

The maximum credit goes to smaller employers – those with 10 or fewer full-time equivalent (FTE) employees – paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year.

Important note: Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.

How to Claim the Tax Credit

  • If your business is eligible, use Form 8941 to figure the credit and then include the amount of the credit as part of the general business credit on your tax return.
  • Tax-exempt organizations must use Form 8941 to figure their refundable credit, and then claim the credit on Line 44f of Form 990-T. Though primarily filed by those organizations liable for the tax on unrelated business income, Form 990-T (draft) will also be used by any eligible tax-exempt organization to claim the credit, regardless of whether they are subject to this tax.

Links to Additional information:
Frequently Asked Questions
Affordable Care Act
IRS Notice 2010-82
Form 8941
Instructions to Form 8941
Form 990-T – Draft of 2010 Form
IRS Press Release

Contributed By:

The PCS 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

Partner Corner – Sunbelt M & A Group

Tuesday, January 25th, 2011

Sunbelt (www.SunbeltElite.com) is one of the largest business sales firms in the country, helping business sellers and buyers since 1978.  Sunbelt offers sell-side, buy-side and exit planning strategies.

If you are considering selling your business, Sunbelt has the manpower and sales process to directly outbound call to the parties we identify as strategic acquisition candidates both nationally and internationally.  Sunbelt also uses a dozen business for sale websites including their own top-ranked proprietary site along with direct mail and targeted email campaigns.  They also have over 300 offices worldwide to reach out to the market for additional interest in your business.  No one has more reach than Sunbelt.

For those interested in buying a business, Sunbelt will help you identify all viable candidates, develop memorandums and negotiate terms allowing you to focus on managing your current business affairs.  Our marketing process finds hidden deals that are not listed on the open market and our multi-tiered screening process ensures you are in front of motivated sellers.

Sunbelt also provides exit planning services guiding business owners through a systematic exit planning process developed over 25 years.  You decide when you wish to leave your business, what amount of cash you need when you exit and to whom you want to transfer the business.

As an example of how Sunbelt can assist buyers and sellers, they recently brokered the sale of Canamer International, Inc. a Winona, MN based manufacturer and distributor of large covering products and client of PCS.

Canamer, established in 1973 by Paul B. Double, specializes in cover and lining systems. For the last three decades they have been providing reliable and cost effective covering solutions to their customers. One of the highlights of their services is the covering they provided during the reconstruction of 35W Bridge in Minneapolis. Paul B. Double commented on the sale “The efforts made by Sunbelt to match my company with a buyer were greatly appreciated. While there were a number of qualified lookers their persistence ultimately resulted in a match that met my needs and to enjoy transitioning the company with a new owner who values my input and to see my baby reach new heights.”

The company was acquired by David Packard a multi-business owner who saw an incredible opportunity in this niche industry. Commented Mr. Packard “Canamer International has been a leader/ innovator in the agriculture industry since 1973; it just needed a little energy and leadership to point it in the right direction. With our patents, continuous innovation, and service at our customer’s facility, we are very hard to compete with (foreign or domestic). We have several exciting projects in the works, as well as some new faces in our sales department that should make 2011 a great year.”

Sunbelt’ s challenge in finding the right buyer for Canamer was two-fold, first being location (Winona, MN) and second, convincing potential buyer that the vast transfer of knowledge wasn’t as frightening of an undertaking as it first appeared. Although Canamer had a fully capable staff to assist with the training and transition, Mr. Packard had the foresight to hire an outside manager to help learn and grow the business.

Sunbelt’s role as a business broker was instrumental in bringing both the parties together and successfully negotiating the sale. The sale process involved Sunbelt confidentially scouting for the right buyer due to the unique nature of the business. The lead brokers in the transaction, Mike Wheelock and Nacia Dahl, met with over 100 potential buyers to find the right acquirer who could bring the company to the next level.

The seller and buyer report the transition has gone well and sales have doubled over the past three months.

For more information:

Sunbelt M & A Group
1300 Godward Street, Sixth Floor, Suite 6000
Minneapolis, MN 55413
www.SunbeltElite.com
651.484.2677 Office
Contact Sunbelt

Review Your 2011 Payroll Calendar

Tuesday, January 25th, 2011

2011 CalendarNow that we are in the new year, it’s a good idea to review your payroll calendar for the full year so that you can make sure each payroll check date and all pay period dates are exactly as they should be.

To run the calendar report for the full 2011 year, go to Reports and select the “Calendar” report.  In the report properties, select the override date range and put in the 2011 start and end dates.  Run the report to view all check pay dates and pay period begin and end dates.

If you would like step by step instructions on how to run this report, please visit our Client Resources area of our website by clicking here and scrolling to the bottom of the page.  Or, you can go directly to the PDF by the version of software you are using by clicking on the links below:

2011 Calendar Verification
For M2 Users
For M3 Users
For Payentry Users

If you want any dates changed or added, please submit the request(s) to your Client Account Manager.

Submitted By:

The PCS Client Services Team