Payroll Tips, Training, and News for Small Business

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Arizona Raises Minimum Wage for Payroll

arizona payroll minimum wageArizona employers paying workers the minimum wage will pay more per hour when the minimum wage increases to $7.65 on January 1, 2012. However, small businesses that are not covered by the federal Fair Labor Standards Act and gross less than $500,000 in annual revenue are exempt.

Employers can pay employees who earn tips or gratuities $3.00 less than the minimum wage, as long as the tips and wages earned add up to not less than the minimum wage. The employer must keep accurate payroll records of the wages and tips earned.

The 30-cent increase, from $7.35 to $7.65, represents a 3.8% increase for Arizona minimum wage earners. Arizona is one of 10 states that tie their minimum wage to increases in the cost-of-living index.

You can download the required 2012 Arizona minimum wage poster from the Industrial Commission of Arizona.  The poster includes more details about Arizona payroll rules.

Montana Raises Minimum Wage for 2012

montana minimum wage for payrollThe minimum wage in Montana will be raised to $7.65 effective Jan. 1, 2012. The current minimum wage is $7.35. Minimum wage earners working full-time will now earn approximately $15,912.00 gross payroll per year in Montana.

However, businesses not covered by the Fair Labor Standards Act that also gross $110,000 or less can pay employees $4.00 per hour.

If an employee produces or moves goods between the states or is covered by the FLSA, they must be paid whichever is greater: the federal minimum wage or the Montana minimum wage.

Montana is one of 10 states that tie the minimum wage to changes in the cost of living, according to the Consumer Price Index.

Employers are required to post the current minimum wage for their employees. To stay in compliance, print out the 2012 Montana Minimum Wage Poster.

DECOR Notices To Employers Reinstated In 2011

DECOR notices are issued by the government when the information on an employee’s payroll and working forms is incorrect. Small business owners may receive such notices and not understand what they are. Simply put, the IRS and the Social Security Administration must attempt to make contact with the employee as quickly as possible. If the Social Security Administration cannot reach the employee, the employer will be contacted.

Notices to employers were suspended for two years while new regulation was being passed regarding privacy laws. Because of the potential regulation, notices were not sent between 2007 and 2009. In April of 2011, notices to employers were reinstated and sent to employers for the 2010 tax year. Employers should expect to receive notices for any employee whose information does not match information obtained by the SSA from now on. Employers will not receive notices regarding the tax years for which the DECOR notices to employers were suspended.

Employers are contacted because they must verify and submit the correct employee information for payroll purposes to the SSA and the IRS. If there is a discrepancy, the employer is considered the first contact to verify information. If the information is not verified or there is a discrepancy that is not easily cleared up, the IRS may ask to speak with the employer as well as the employee. To lower the number of notices received, employers should ensure the W-2s have all the necessary information. Checking mailing addresses and verifying Social Security numbers is the first line of defense.

While sending in complete and thoroughly checked W-2s is the easiest way to prevent DECOR notices, human error may still occur. If a notice is received by an employer, the problem can be quickly alleviated by cross-checking the employee information on file with the notice. Typographical errors are the most common cause of such notices and can be fixed by simply submitting the correct information. If all the information matches, the next step is to suggest the employee contact their local SSA office to verify information.

Documenting all correspondence and conversations with the employee in question regarding the issue is prudent.  The IRS may need the information to clear up the issue or reach out to the employee. While a notice from the IRS can seem troubling, most cases are fairly simple to resolve.

Ohio Minimum Wage Increases in 2012

ohio payrollOhio’s minimum wage will increase on Jan. 1, 2012, to $7.70 per hour for employers who gross more than $283,000 per year.

For companies grossing less than $283,000, the minimum wage is $7.25, the same as the federal minimum wage. This wage of $7.25 also applies to minimum wage workers in Ohio who are age 14 or 15.

The minimum wage for tipped employees is also increasing to $3.85 per hour.

The 30-cent increase from the current $7.40 per hour is due to changes in the federal Consumer Price Index. Ohio is one of 10 states that tie minimum wage increases to the CPI, a measurement of inflation.

Refer to Ohio’s 2012 minimum wage poster for more information.

Florida Minimum Wage to Increase in 2012

florida ups minimum wage for payrollThe Florida minimum wage will be increasing to $7.67 on Jan. 1, 2012, from the current minimum wage of $7.31. This represents a 4.9% increase for Florida minimum wage earners.

Payroll wages for employees earning tips is also increasing. The new rate will be $4.65 per hour, a change from the current $4.29.

Florida is one of 10 states that automatically tie minimum wage increases to increases in the Consumer Price Index (CPI). Full-time employees earning the minimum wage in Florida will now make $15,953.35 gross payroll wages annually.

IRS Issues Updated 940 Form for 2011

The IRS has issued an updated Form 940 to reflect two changes this year with FUTA, the federal unemployment program.

In Part 1 of Form 940, employers must now mark whether they live in a credit reduction state, one of 21 states that borrowed from FUTA to help fund their state’s unemployment. States that have not repaid their loans have had their FUTA credit reduced by varying amounts. Employers in these states will need to fill out Schedule A to figure the additional FUTA tax that is due. What is Schedule A (Form 940)? It’s a supplement that you attach to Form 940, and it helps employer determine their annual FUTA tax.

In Part II of the 940, employers are now asked to break down their FUTA wages for the first and second halves of the year. This is due to the expiration of the 0.2% FUTA surtax on July 1, which changed the effective FUTA tax rate from 0.8% to 0.6%. For more background, read the article “FUTA Surtax Set to Expire, Adding Confusion for Payroll Managers.”

The annual FUTA return is due January 31, 2012.

2011 Circular E Documents Important Tax Deadlines

It’s important for employers to know quarterly deadlines, what employee tax forms are required, and how to prepare and file them. Some forms are paper, and others must be filed electronically. Circular E is the go-to guide for all employer responsibilities at tax time. To get started, download W-4 Forms here. The circular can be found here.

Order forms from the IRS by calling: (800) 829-3676 or download them from the IRS website.

Deadlines and Form Filing:

January 31

Form W-2: to your employees and Form 1099 to any independent contractors you paid over $600. Form 1099 is not reproducible and must be ordered by calling the IRS.

File Form 941: The Employer’s Quarterly Federal Tax Return, for the fourth quarter of the previous calendar year is due and any non-deposited income, social security, and Medicare taxes.

Form 944: Don’t file this Employer’s Annual Federal Tax Return, which is meant for very small businesses, unless the IRS has notified you in writing requesting you do so.

Form 940: File the Employer’s Annual Federal Unemployment (FUTA) Tax Return.

Form 945: File the Annual Return of Withheld Federal Income Tax to report any non-payroll income tax withheld in the previous year.

February 15

Form W-4: Obtain Employee’s Withholding Certificate from employees who claimed exempt from withholding last year. Last year’s Form W-4 expires February 16 for employees claiming exemption.

February 28

Paper Forms 1099 & 1096: File Copy A of all paper IRS Forms 1099 with Form 1096, Annual Summary and Transmittal of US Information Returns.

Paper Forms W-2 & W-3: File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the SSA.

Paper IRS Form 8027: Employer’s Annual Information Return of Tip Income and Allocated Tips.

March 31

Electronic IRS Forms 1099 & 8027 due. www.socialsecurity.gov/employer File electronic Forms W-2 with SSA. For instructions and electronic filing of Forms W-2, visit: www.irs.gov/efile

April 30, July 31, October 31,and January 31

Deposit FUTA tax due if it is more than $500.
File Form 941 and deposit any non-deposited income, social security, and Medicare taxes.

December 1

Exempt and nonexempt employees must submit a new Form W-4 if their marital status has changed or will change for the next year.

Electronic Filing and Payment

For e-file visit: www.irs.gov/efile
Federal Tax Payment System (EFTPS) visit: www.eftps.gov or call Customer Service at 1-800-555-4477.

Cost of Living Adjustment Announced

After two years with no Cost-of-Living Adjustment (COLA), the Social Security Administration (SSA) has determined a cost of living increase of 3.6% for the year 2012. This announcement was made on October 19, 2011, but Social Security beneficiaries will not see the COLA reflected in their benefits until those payable for January 2012.

A modern picture of the nation’s economy can be glanced from the COLAs for the past decade since 2002. Anyone interested in gaining a better overall picture can do so by viewing the COLAs of 1975 to 2012.

On October 20, 2011, the Internal Revenue Service (IRS) announced the dollar limitations on applicable pension and retirement plans in light of the 2012 COLA. Within the Internal Revenue Code (IRC), mandatory adjustments to the limits placed upon benefits and contributions, due to annual cost-of-living increases, are described under Code §415.

The annuity amounts to be adjusted are those received by retirees of the Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS), as well as beneficiaries under the Federal Employees Compensation Act (FECA). The 2012 COLA amount has lent to a 3.6% increase for CSRS retirees, a 2.6% increase for FERS retirees, and a 3.9% increase for FECA beneficiaries.

New Law Offers Tax Credits for Hiring Unemployed Veterans

unemployed_veteransPresident Obama signed into law two new tax credits for businesses hiring unemployed veterans.

Effective Nov. 21, 2011, employers can apply for the Returning Heroes Tax Credit and the Wounded Warriors Tax Credit offering:

  • up to $5,600 for hiring long-term unemployed veterans (more than six months);
  • up to $2,400 for hiring short-term unemployed veterans (four weeks – six months); and
  • up to $9,600 for hiring vets with service-related disabilities who have been unemployed for six months or longer in the past year.

To receive a tax credit for hiring veterans, business owners must apply with their state workforce agency within 28 days of hiring by filing Form 8850, Pre-Screening Notice and Certification for Work Opportunity Tax Credit (WOTC).

These new credits are scheduled to expire after Dec. 31, 2012. (Note: WOTC credits for other targeted groups are still due to expire. For more information, read our article on the Work Opportunity Tax Credit.)

Photo Credit: S. Braswell

CLASS Long-Term Care Program Suspended

long term careThe plan to provide long-term care insurance through the workplace as part of health care reform has been officially suspended, the Dept. of Health and Human Services said in a letter to Congress.

The Community Living Assistance and Services and Supports Act, also known as the CLASS Act, was part of President Obama’s overall plan to overhaul health care. The program would have provided a lifetime benefit of at least $50 per day in case of illness or disability, but has been canceled due to the lack of a viable financial plan.

The issue of long-term care is not likely to go away, however. By the year 2020, an estimated 15 million Americans will require some form of long-term care, but less than three percent currently have a long-term care insurance policy, said HHS Secretary Kathleen Sebulius in her letter to Congress.