The Internal Revenue Service has released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011. The IRS has recognized 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 Jan. 31, 2011.
According to the IRS 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.For full details of the announcement, click here.
Affordable Care Tax Provisions
The Affordable Care Act was enacted on March 23, 2010 and contains some tax provisions that take effect this year and more that will be implemented during the next several years. The IRS has provided a list of provisions now in effect and will provide additional details as they become available. For information on the Affordable Care Tax Provisions click here.
Break Time for Nursing Mothers
The Patient Protection and Affordable Care Act, known as the Affordable Care Act, amended section 7 of the Fair Labor Standards Act (FLSA) to require employers to provide reasonable break time to nursing mothers. The U.S. Department of Labor has now published the following resources to further clarify this new law:
In a recent survey, “The Total Financial Impact of Employee Absences”, conducted by Mercer and Kronos employee absences made up a total of 36% of payroll expenses. This includes both planned and unplanned absences and vacations.
“The Mercer survey, conducted among 455 organizations, found that direct costs (such as pay provided to an employee for time not worked) and indirect costs (such as replacement labor expenses and lost productivity) of employee absence average 35.8 percent of base payroll. Most of these costs (26.6 percent) are attributed to “planned” absences, such as vacations which have likely been approved in advance.
However, “unplanned incidental” absences—such as casual sick days—account for 6 percent of payroll. These type of absences result in the highest net loss of productivity per day “i.e., work that is missed or postponed by not being covered by others” according to the survey. While the direct costs of incidental employee absences are just 2 percent of payroll, the total costs (including the indirect costs of replacement labor) were three times as high at 6 percent, according to Mercer. About one third of respondents use paid time off (PTO) banks that combine vacation and incidental sick days to help manage incidental unplanned absences. “
To help manage and reduce these costly absences it is important to put proper procedures in place. Make sure you have policies in place to explain what constitutes an acceptable absence, the steps that need to be taken to inform superiors, and consequences for abuse of the policy. Even if all of this is in place, it must be enforced consistently in order for it to be effective. The last step of this process is to communicate the policy to employees. They must know what you expect from them and what they can expect from you. A good way to do this is by having an employee handbook with all these policies customized to your organizations needs. Find out more with the HRSentry Handbook Kit.
With the end of the year approaching quickly it is time to wrap up the year end payroll and benefits checklists. I have provided some general tips and reminders on how to get it out of the way as fast and stress-free as possible.
Payroll:
* Send a reminder to all your employees to review the information on their pay stubs. Social Security Numbers and Names on your W2s must match the employee’s SS card. If their Social Security Numbers don’t show up on their paystubs you can send them a notice with the information asking them to verify it. (Also remind them to fill out a new W4 if they have had a change in their family status).
* Eliminate returned W2s by asking employees to verify their addresses on their pay stubs so you have ample time to make changes.
* Review Taxable Fringe Benefits that must be posted into payroll for W2 reporting. Capture all information (ex: personal use of company car, relocation, etc).
* Create a list of outstanding checks to insure you comply with your State Escheat Laws (unclaimed property).
* Send reminders to any employees who have a W5 on file to fill out a new one (W5s expire on Dec 31).
* Check third party sick pay postings to make sure you have captured all information required.
Benefits:
* Compile Census information for retirement plan testing (highly compensated).
* Review list of which employees have life insurance over $50,000 to report taxable imputed income for Taxable group term life insurance.
* Verify Flexible Spending Accounts balances to confirm that employees will have total amount deducted by end of calendar year.
These are just a few examples of processes you can begin now to help your year end go a little smoother. There are several other items you must do at year end. For a complete list, log into HRSentry and search for Year End Checklist. u If you would like to purchase HR Made Simple to improve your compliance and reduce stress, you may do so here.
Do you question whether you have Independent Contractors that may really be an employee? Do you understand what an invalid W4 is? Are you classifying your employees as exempt or non-exempt? Do you wonder if you are taxing your employees correctly on separate paychecks? What are supplemental taxes anyway? Do you know what a W5 is for? If you answered no to any of these questions you could be risking exposing yourself to costly fines and lawsuits.
Sign up today for a free webinar on the basics of payroll to answer these questions and more. The webinar will take place on Tuesday, October 21st from 2:00 – 3:00PM, presented by HRSentry’s Director of Operations, Brenda JM Sabin,CBP. This webinar will walk you through the basics of payroll. From making the decision on whether someone is an independent contractor or an employee, to identifying invalid W4s and how long to keep your I-9 forms.
For attending this webinar you will receive a free white paper titled “Payroll -Back to Basics”.
The following week on October 28th from 2-3pm we will cover Taxation of Fringe Benefits
Payroll – Protecting Your Organizations Bottom Line
The payroll department handles your organization’s largest asset – your employee’s wages and the taxes. Being in compliance with the ever-changing IRS tax laws can seem overwhelming at times. Employees wanting you to do things “their way” can be a compliance nightmare. A simple thing as accepting an invalid W4 can put your organization at risk. Learn about W4s, W5s, W9s, 1099s, Independent contractors vs employees, new hires, I-9 updates and taxation of fringe benefits. Do you know the tax laws on tuition reimbursement? relocation? company vehicles? What about health insurance if you offer it to domestic partners or civil union couples? Not taxing benefits correctly can lead to huge fines and penalities when you get audited by the IRS!
HRSentry is offering a free webinar on Payroll Basics and Taxation of Benefits. For more information and to register for this webinar being held on Sept 16th (Tuesday) from 2-3 pm click here. The webinar will be presented by Brenda Sabin, CBP.
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