Employee benefits almost as important as their salary

According to the 2011 Mercer Workplace Survey, health benefits play an increasingly pivotal role in the employer-employee relationship. 91% of employees participating in the survey agreed that getting health benefits through work is just as important as getting a salary. Almost as many (76%) say that benefits make them feel appreciated by their company.

An increased emphasis on benefits, especially when managed by a payroll service provider, can be a differentiating strategy, leading employees toward more personal accountability and greater overall satisfaction.

Payroll services can help avoid costly 1099 mistakes

Classifying a worker as independent contractors provides many small businesses with needed flexibility. Unfortunately not all workers can be classified in such a way and according to IRS payroll laws, they need to be reclassified as a W-2 employee, not a 1099 subcontractor. Yet even as the economy grows more reliant on temporary or flexible 1099 labor, regulators are becoming increasingly vigilant about getting employers to classify these mislabeled workers.

I was working with a payroll services client in Raleigh last week and learned that six months ago their business triggered an IRS audit because of a misclassified carpenter subcontractor. The penalties were significant.

When these reclassifications are enforced, small businesses have to start withholding federal income, Social Security, Medicare, and unemployment taxes. Adding to the cash flow strain is the possible payment of fees and penalties for previous misclassifications. Additionally, such firms would have to start paying for the same employee benefits and workers’ compensation that they currently do for full-time employees.

As I’ve said before, federal and state governments are facing budget deficits, and tax regulators see a huge pool of potential back taxes, fees, and penalties to be gleaned from the detection of employee-classification errors. The IRS estimates that 15% of all employers have misclassified a total of 3.4 million employees as independent contractors, resulting in an estimated annual revenue loss of $3.4 billion dollars.

If you’re unsure of the specific rules that regulate 1099 subcontractor or independent contractor classifications, seek help with a payroll service such as Ashgrove Payroll. As the state departments of revenue continue to share more and more information with the IRS, the odds of being detected continue to increase.

Employers must report health plan costs in 2012

The IRS released new guidance on the requirement that employers provide information to employees on the cost of employer-provided group health plan coverage (Notice 2012-9). The guidance comes in the form of 39 questions and answers. The IRS made this requirement optional for all employers for 2011, to give employers and payroll service providers more time to update payroll systems.

Employer-sponsored coverage includes coverage under any group health plan that an employer makes available to the employee and that is excludible from the employee’s gross income, but it excludes long-term-care coverage, any coverage under a separate dental or vision policy, or similar coverage (e.g. disability insurance, supplemental liability insurance, etc.). It also excludes amounts contributed to an MSA , HSA, or salary reduction contributions to a health flexible spending account.

The total reportable cost  includes both the portion of the cost paid by the employer and the portion paid by the employee, regardless of whether the employee paid through pretax or after-tax contributions.

Employee Discontent Widening

Employees continue to feel stuck in their jobs and want to find new employment elsewhere, according to a new poll of more than 1,000 employees in North America by the Manpower Group.

84% of the workers polled said they plan to look for a new position in 2012, which is the same level of discontent in the workplace in 2010. In 2009, 60% of employees said they planned on looking for something new.

Only 5 percent said they intend to remain in their current position.


National Payroll Week — September 3-7, 2012

National Payroll Week recognizes all of the hard work by America’s 156 million wage earners and the payroll service companies who pay them. Together, through the payroll withholding system, they contribute, collect, report and deposit approximately $1.7 trillion, or 71.9%, of the annual revenue of the U.S. Treasury. Think about that for a minute, $1.7 trillion on an annual basis. It’s what keeps the US government alive.

Submission of Certain Wage Statements are Waived by Wisconsin Department of Revenue

Effective for tax year 2011 and forward, the Wisconsin Department of Revenue will automatically waive the requirement of employers to submit Federal Form W-2 and the Wisconsin Form 9b to the department if you have no Wisconsin withholding to report, and if you submit Federal form W-2, 1099-R and 1099 -Misc to the IRS.

The department receives this information from the IRS.

What this means for you
As an employer, if you:

  • Have no Wisconsin withholding to report, you are not required to have an active withholding tax account number (WI Employer ID Number).
  • Have an inactive withholding tax account number and you are required to report Wisconsin wages on Federal Form W-2, you may continue to use the withholding tax account number in the Form W-2 box titled “Employer’s State ID Number.”
  • Have never had a withholding tax account number and you are not required to withhold, you may use your FEIN to report Wisconsin wages on a Federal Form W-2 in the box titled “Employer’s State ID Number.”
  • Have never had a withholding tax account number and you will report Wisconsin withholding, register at www.revenue.wi.gov/businesses.

For more information on withholding tax, please click the following link for: Wisconsin Employer’s Withholding Tax Guide (Publication W-166).

Voluntary tax disclosure program

The North Carolina Department of Revenue is making it easier for individuals and businesses to resolve payroll tax as well as other tax obligations with the state. The agency is making changes to the Voluntary Disclosure Program (VDP) that will allow more taxpayers to participate.

VDP was established more than 10 years ago to promote compliance among small business and individual taxpayers who discover—on their own—they have not filed necessary tax returns and paid taxes due. In exchange for taxpayers voluntarily coming forward, NCDOR waives penalties in certain circumstances and allows taxpayers an expedited process for filing certain tax types.

Previously a taxpayer who had ever been registered or had filed a return for a particular tax (ex: payroll tax, sales tax) would not be eligible for VDP for that tax type. Now, taxpayers who may have previously registered and submitted returns may qualify to participate.

Beginning Nov.1, taxpayers will only be required to file past due returns and pay taxes due for a back period of three years for taxes filed annually, or 36 months for those that do not have an annual filing frequency (ex: sales tax)—unless they collected but failed to remit the tax. Prior to the VDP changes, taxpayers were required to file and pay at least four years or 48 months of returns.

For detailed information about eligibility and participation visit www.dornc.com/practitioner/voluntary.html, call NCDOR Discovery & Special Projects at 1-877-919-1819 ext. 10215 or email Cale.Johnson@dornc.com.

2012 Federal and Banking Holidays

Your payroll processing may be delayed if your payroll schedule coincides with one of the upcoming federal holidays. In January, Monday the 2nd, and Monday the 16th banks will be closed.