DECEMBER 2014
Ask employees to verify their names, addresses and Social Security Numbers before preparing W-2s. Employee names should be reported in capital letters exactly as reported on their Social Security cards— do not use nicknames or titles such as Dr., Mr., etc. Compound names do not require a hyphen; insert a blank space for the hyphen.
Finalize the last payroll of the year for 2014. Wages earned in 2014, and paid with a check dated in 2015, will be reported in 2015.
Confirm that no one exceeded the annual withholding limits of $7,254.00 for Social Security (excluding Medicare tax) or $1,016.36 for State Disability Insurance. If someone has exceeded the limits, make adjustments or refunds before making the final payroll tax deposit for tax year 2014.
Reconcile payroll data to the general ledger. Verify that all manual or voided payroll checks have been properly recorded.
Record other employee taxable income such as personal use of company vehicles, relocation expense reimbursements, company-paid education assistance, and gifts (such as gift certificates).
Determine if you need to report Employer Sponsored Health Coverage. (Refer to the chart on page 6 of this newsletter.)
CHECKLIST FOR YEAR-END PAYROLL PROCESSING
Print quarterly and year-end reports. Print W-2s. Verify that wages reported on the quarterly tax returns agree with the amounts reported on the W-2s. Verify that the Employer Identification Number is correct on all forms.
Make a year-end backup of your data. Close 4th quarter and year-end payroll. Load new tax tables for 2015, if needed, or verify that you are operating under the most current version available of your software. Ask employees to complete new W-4 forms to report changes, if there is a filing status change in 2015. Employees who claimed 10 or more exemptions or exempt in 2014 must turn in a new W-4 form by February 15th (or employer must start withholding as Single-0). Employee W-2 copies should be in employees’ possession, postmarked or available on a website by February 2, 2015.
If you file 250 or more W-2 forms, you must report to the Social Security Administration by filing the W-2 forms electronically.
continued on page 2
Beginning with the next issue, By the Book will move to digital for-mat only. If you received this issue in both print and digital forfor-mat, we already have your email address. If you received only the print version and wish to continue receiving By the Book in the future, please send your email address to mail@bpfcpa.com.
CHECKLIST FOR YEAR END PAYROLL PROCESSING - cont.’d
Copy A of the W-2 Forms and Form W-3, filed by paper, must be postmarked by March 2, 2015. Mail them to the Social Security Administration, Data Operations Center, Wilkes Barre, PA 18769-0001. If sending by Certified Mail, use zip code 18769-0002 and keep the receipt.
Forms filed electronically are due March 31, 2015.
SUGGESTED RETENTION SCHEDULE FOR
BUSINESS RECORDS
A business handles a tremendous volume of records. Whether you use a simple filing system or sophisticated electronic equipment to record your data, the basic problems remain—what records do you need, why do you need them, and how long should you keep them?
The following list is designed to help you determine what records to keep and how long to keep them. These time periods represent a consensus and are not absolutes to be followed without question.
4 to 5 years
Bills of material
Bond, paid-interest coupons Cash slips
Claims, closed by company Correspondence, general
Customer account records, closed Delivery receipts
Freight bills Inspection records Manifests
Petty cash records Purchase orders Receiving reports Remittance statements Requisitions Sales slips Service reports Shipping tickets Time cards
5 to 6 years
Complaint recordsCorrespondence: license, purchase and traffic Credit memos
Employees’ daily time reports Monthly trial balance
Price exceptions and adjustments Safety reports
6 to 7 years
Bank deposit slips Bank reconciliations Bank statements Cancelled checks
Claims, closed against company Credit files
Employee records (terminated) Inventory records
Invoices, copy of order Invoices, paid
Payroll
7 to 8 years
Accounts, charged off Commission statements Cost account records Entertainment records Expense reports, employees
Purchase orders for capital expenditures Sales sheets
Specification sheets
8 to 9 years
Agreements, leases (after expiration) Salary and rate changes
Vouchers, cash Vouchers, numeric copy
9 to 10 years
Voucher register Voucher, A-Z copy
10 years
Claims, workers’ compensation Employee tax withholding statements Insurance claims (after settlement) Vouchers, capital
17 years
Agreements, licensesPermanent
Accident reports Agreements, deedsApplications filed with regulatory agencies Articles of Incorporation
Auditor reports continued on page 7
payroll taxes
rate
maximum subject to tax
maximum deduction
Federal
Employer
FICA 6.2% $118,500 $7,347
FICA Medicare 1.45% All wages - no limit Unlimited
Total FICA 7.65%
FUTA 0.6% $7,000 $42.00*
Employee
FICA 6.2% $118,500 $7,347
FICA MEDICARE 1.45% All wages - no limit Unlimited
Additional Medicare
(no employer match) .90% Wages over $200,000 Unlimited
Total FICA 7.65% to 8.55%
State
Employer SUI (State Unemployment Insurance) 1.5% to 6.2%Rates will vary $7,000 Amount will vary
ETT
(Employment Training Tax) (Some employers are exempt)0.1% $7,000 $7.00
Employee SDI
(State Disability Insurance) 0.9% $104,378 $939.40
TABLE OF 2015 TAX RATES
The maximum wage base and maximum annual deduction will change for FICA. The state SDI rate has remained the same; however, the maximum wage base has increased. An additional Medicare tax for employees earning more than $200,000 was added in 2013 and
remains in effect. The following table highlights important rates for the coming year. Please call our office or visit www.bpfcpa. com if you have any questions.
sales tax
Fresno County City of Clovis Madera County Merced County** Tulare County**
8.225% 8.225% 8.00% 7.50% 8.00%
standard mileage rate for 2015
57.5 cents per milecalifornia minimum wage
Current rate is $9.00 per hour. Rate increases to $10.00 per hour January 2016. * The base rate is 0.6%. An additional amount may be added; to be announced.
CHECKLIST FOR 1099-MISC REPORTING
If the following conditions are met, businesses must generally report nonemployee compensation on Form 1099-MISC: • You made the payment to someone who is not your employee • You made the payment for services in the course of your trade
or business
• You made the payment to an individual, partnership, estate, or attorney
• You made payments to the payee of $600 or more during the calendar year
Generally, payments to corporations are not reported on Form 1099. A limited liability company (LLC) can be taxed as a corporation or a partnership. To determine if you need to issue a 1099 to a LLC, you should request that the LLC complete Form W-9, Request for Taxpayer Identification Number and Certification, and make your determination based on the information the LLC provides on the W-9 form.
You should have a Form W-9 on file for each 1099 recipient. Provide the payee with Form W-9, Request for Taxpayer Identification Number and Certification. Update your vendor files to include the vendor name, address, and tax identification number (TIN). When entering an address, do not use a number (#) sign (for example, enter “APT B” rather than “APT #B”). Enter all information in capital letters.
Verify you are reporting the name the vendor uses with the IRS; the vendor’s trade name may differ from the one on its tax returns.
If the vendor doesn’t fill out the W-9 form, there are two steps to obtain the information:
• First, warn the vendor you won’t be able to issue their initial check until they supply the information.
• Second, inform them if you do not receive at least their TIN, you will need to start backup withholding on their checks. Backup withholding is 28% of any payment that is reportable. If you don’t withhold, IRS may apply penalties to your company for failure to withhold or failure to obtain that information, as well as having to pay the amount that should have been withheld. Use the IRS TIN matching program—it is free and allows you to verify TINs online. For details, refer to IRS publication 2108A. It is available online at www.irs.gov by typing ”2108A” in the search box. Technical support is available at 1-866-255-0654.
If a Social Security Number is to be used as the TIN, use this person’s name on the top line in the “recipient” box with the business name underneath. Social Security Numbers are to be typed in a 000-00-0000 format.
Amounts should be presented without dollar signs or commas. Add a decimal followed by the cents. Leave the box blank if the amount is zero.
Report on preprinted forms, not photocopies. Be sure to order forms in advance, or if you only need a few, they are available from most office supply stores. You cannot use forms printed from the IRS website. Do not use prior year forms to report current year information.
Recipient copies (Copy B) are due or need to be postmarked by February 2, 2015.
Returns can be filed on paper or electronically. Employers that file 250 or more 1099s are required to submit to the IRS electronically using the IRS FIRE (Filing Information Returns Electronically) system. Paper returns are due to the IRS March 2, 2015. Electronic files are due to the IRS by March 31, 2015. If you fail to file a correct information return by the due date and cannot show reasonable cause, you may be subject to a penalty. The penalty applies if you do not file timely, do not include all information required to be shown on a return, or include incorrect information on a return. The penalty also applies if you file on paper when you were required to file electronically, report an incorrect TIN, do not report a TIN, or neglect to file paper forms that are machine readable. The amount of the penalty is based on when you file the correct information return. The penalty is:
• $30 per information return, if you correctly file within 30 days (by March 30, if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses). • $60 per information return, if you correctly file more than 30
days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses). • $100 per information return, if you file after August 1 or you
do not file required information returns; maximum penalty $1,500,000 per year ($500,000 for small businesses). continued on page 5
The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on Form W-2 does not mean that the coverage is taxable. The value of the employer’s excludable
contribution to health coverage continues to be excludable from an employee’s income, and is not taxable. This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage.
Employers that provide ”applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). However, federally recognized Indian tribal governments are not subject to this requirement.
For certain employers, types of coverage, and situations, there was initial transitional relief from the requirement to report the value of coverage on the 2012 Forms W-2. This will apply to future calendar years, until the IRS publishes additional guidance. Any guidance that expands the reporting requirements will apply only to calendar years that start at least six months after the guidance is issued.
Health care coverage reporting is required for employers who filed 250 or more W-2s in the previous year. If you filed 250 or more W-2s in 2013, you are required to report health care coverage on
the 2014 W-2s.
W2 REPORTING FOR EMPLOYER-SPONSORED HEALTH COVERAGE
The value of the health care coverage will be reported in Box 12 of the W-2 form, with Code DD to identify the amount. There is no reporting on the W-3 form of the total of these amounts for all the employer’s employees.
In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. An employer is not required to issue a W-2 form solely to report the value of the health care coverage for retirees, other employees, or former employees to whom the employer would not otherwise provide a Form W-2.
The law excludes from reporting health reimbursement accounts, health savings accounts, dental or vision care that is not integrated into a group plan, long-term care insurance, workers’ compensation, and specific disease or hospital/fixed indemnity plans.
We have included a chart on the following pages that details the types of coverage employers must report on the Form W-2. Certain items are listed as ”optional” based on transition relief provided by IRS Notice 2012-9.
The chart reviews the reporting requirements for Box 12, Code DD, and has no impact on requirements to report these items elsewhere. For example, while contributions to Health Savings Arrangements (HSA) are not to be reported in Box 12, Code DD, certain HSA contributions are reported in Box 12, Code W (see the IRS publication General Instructions for Forms W-2 and W-3).
For more information, see “General Instructions
for Certain Information Returns” available at
www.irs.gov.
CHECKLIST FOR 1099-MISC REPORTING - cont.’d
Businesses may request a 30-day extension to file 1099s with the IRS using Form 8809; however, the extension does not permit additional time for providing the 1099 to the recipient.
Beginning with the next issue, By the Book will move to digital for-mat only. If you received this issue in both print and digital forfor-mat, we already have your email address. If you received only the print version and wish to continue receiving By the Book in the future, please send your email address to mail@bpfcpa.com.
form w-2 reporting of employer-sponsored health coverage
Coverage Type Form W-2, Box 12, Code DD
Report Do Not Report Optional
Major Medical X
Dental or vision plan not integrated into another medical or health plan X
Dental or vision plan which gives the choice of declining or electing and
paying additional premium X
Health Flexible Spending Arrangement (FSA) funded solely by
salary-reduction amounts X
Health FSA value for the plan year in excess of employee’s cafeteria plan
salary reductions for all qualified benefits X
Health Reimbursement Arrangement (HRA) contributions X
Health Savings Arrangement (HSA) contributions (employer or employee) X Archer Medical Savings Account (Archer MSA) contributions (employer or
employee) X
Hospital indemnity or specified illness (insured or self-funded), paid on
after-tax basis X
Hospital indemnity or specified illness (insured or self-funded), paid through
salary reduction (pre-tax) or by employer X
Employee Assistance Plan (EAP) providing applicable employer-sponsored healthcare coverage
Required if employer charges a COBRA premium
Optional if employer does not charge a
COBRA premium On-site medical clinics providing applicable employer-sponsored healthcare
coverage
Required if employer charges a COBRA premium
Optional if employer does not charge a
COBRA premium Wellness programs providing applicable employer-sponsored healthcare
coverage
Required if employer charges a COBRA premium
Optional if employer does not charge a
COBRA premium
Multi-employer plans X
Domestic partner coverage included in gross income X
Governmental plans providing coverage primarily for members of the military
and their families X
Federally recognized Indian tribal government plans and plans of tribally chartered corporations wholly owned by a federally recognized Indian tribal
government X
Self-funded plans not subject to Federal COBRA X
Accident or disability income X
Long-term care X
Liability insurance and supplemental liability insurance X
Worker’s compensation X
Automobile medical payment insurance X
Credit-only insurance X
Excess reimbursement to highly compensated individual, included in gross
income X
Payment/reimbursement of health insurance premiums for 2%
form w-2 reporting of employer-sponsored health coverage
Other Situations Form W-2, Box 12, Code DD
Report Do Not Report Optional
Employers required to file fewer than 250 Forms W-2 for the preceeding calendar year (determined without application of any entity aggregation rules
for related employers) X
Forms W-2 furnished to employees who terminate before the end of a
calen-dar year and request, in writing, a Form W-2 before the end of that year X
Forms W-2 provided by third-party sick-pay provider to employees of other
employers X
FORM W-2 REPORTING OF EMPLOYER-SPONSORED HEALTH COVERAGE – cont.’d
BUSINESS SUPPORT SERVICES
SUGGESTED RETENTION SCHEDULE FOR BUSINESS RECORDS -cont.’d
Permanent, cont.’d
Bylaws
Capital stock and bond records Contracts and leases
Corporate stock records Engineering & research projects Financial statements
Insurance policies, all types
Labor contract and collective bargaining records Ledgers and journals: cash, general, customer
journal, payroll, plant, etc.
Minutes: executive, directors and stockholders Patents, records and assignments
Pension records Plant surveys Proxies
Real estate records
Taxes: federal, state, property, sales and use Taxes: audit reports
Tax and legal correspondence
Other
Certificates of insurance — Period of coverage, plus 4 years Depreciation schedules — Life of asset, plus 4 years Insurance claims — 3 to 5 years after settlement
Our Business Support Services department offers customized services on a monthly, quarterly, annual, or as-needed basis to ensure your business records and procedures enable your business to operate in an effective and efficient manner. Regardless of the size of your organization, the record keeping process is time consuming and constantly changing to meet new regulations. Current record keeping ensures an accurate picture of the condition of any business. Utilizing our Business Support Services for your ongoing or one-time tasks could provide more time for your office to concentrate on areas that can generate growth for your business, and could prove to be more profitable than hiring a full-time bookkeeper or accountant.
Our services include:
• Financial statement and general ledger • Bank reconciliations
• Accounts payable and receivable • Payroll tax returns
• Resolution of payroll tax issues • Sales and use tax returns and audits • Property tax returns and audits • Workers’ compensation audits
• Analysis and development of procedures • Staff training
UPCOMING DUE DATES
FEB.
02
02
MAR.
MAR.
31
W-2
Copies B, C and 2, Wage and Tax Statement, should be in employees’ possession, postmarked or available on a website
1099s
Recipient copies should be
postmarked or available on a website
941
Employer’s Quarterly Federal Tax Return
943
Employer’s Annual Tax Return for Agricultural Employees
940
Annual Federal Unemployment Tax Return
DE9
Quarterly Contribution Return and Report of Wages
DE9C
Quarterly Contribution Return and Report of Wages (Continuation)
Paper Filings Due
W-2
Copy A, Wage and Tax Statement, due to the Social Security Administration
W-3
Transmittal of Wage and Tax Statements
1099
Copy A, due to the Internal Revenue Service
1096
Annual Summary and Transmittal of U.S. Information Returns
Electronic Filings Due
Electronic transmissions of
W-2s and 1099s
2014 FUTA CREDIT REDUCTION
In 2009, California’s unemployment insurance program ran out of funds, and California borrowed from the federal government to pay its unemployment benefits. Once a state carries a federal loan balance for two consecutive years, and if the entire loan amount is not repaid by November 10 of the second year, the state is deemed to be a Credit Reduction State and is charged a tax credit. California has been classified as a Credit Reduction State.
For 2014, the additional tax has been raised to 1.2%. This requires the preparation of Schedule A with Form 940 and an additional tax due of 1.2% of taxable FUTA wages. This brings the effective FUTA tax rate to 1.8% for 2014.
Example: The standard FUTA rate is 0.6% on the first $7,000.00 of wages.
Basic Computation $7,000 x 0.6% = $ 42.00
Credit Reduction
Computation $7,000 x 1.2% = $ 84.00
Total tax due $126.00
All California employers will need to check Box 2, Part 1, complete Schedule A and enter the amount on Line 11, Part 3.
LEGAL HOLIDAYS FOR 2015
Thu
JAN.
01
Mon
JAN.
19
Mon
FEB.
16
Thu
FEB.
12
Tue
MAR.
31
Mon
MAY
25
Fri
JUL.
03
Wed
NOV.
11
Mon
SEP.
07
Th & Fr
NOV.
26-27
Mon
OCT.
12
Fri
DEC.
25
New Year’s Day 2015
Martin Luther King, Jr. Day
Presidents’ Day
Lincoln’s Birthday
Cesar Chavez Day*
* IRS offices are open on this legal holiday
Memorial Day
Independence Day (observed)
Veterans Day
Labor Day Thanksgiving & day after
Columbus Day Christmas Day
To ensure the timeliness of your 2015 tax payments and reports, please refer to the chart below. If a payment or report due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. For specific payroll tax deposit or report requirements, refer to the Employer’s Tax Guide
(Circular E), the California Employer’s Guide (DE 44), and the EFT Information Guide (DE 27). To obtain a federal guide, visit the www.irs.gov website. To obtain a state guide or for more information, call 1-888-745-3886 or visit the website:
www.edd.ca.gov/taxrep/taxform.htm#publications.
New Mileage Rates for 2015
The standard mileage rates have changed for Federal and California purposes. The new rates for 2015 will be:
•
57.5 cents
per mile for business use •23 cents
per mile for medical expenses•
23 cents
per mile for moving expenses •14 cents
per mile driven in service of abusiness support
services staff:
Jayne Massie, Manager Carol Fenzke
published by:
Baker, Peterson & Franklin, CPA, LLP 970 W. Alluvial Fresno, CA 93711 TEL: (559) 432-2346 FAX: (559) 432-5831 EMAIL: mail@bpfcpa.com www.bpfcpa.com PRSRT STD U.S. POSTAGE PAID FRESNO, CA PERMIT NO. 1242
Baker, Peterson & Franklin, CPA, LLP 970 W. Alluvial
Fresno, CA 93711
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