Payroll Tips, Training, and News for Small Business

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Payroll Tips, Training, and News

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Find Out If You Qualify For Health Care Tax Credit

Find out if you qualify for the health care tax credit.

This article was updated on 12/8/2015 to reflect current figures.

Did you know you can get a tax credit for adding employee health coverage to your payroll program? If you’re a small business owner and provide health insurance to your employees, you may qualify for the Small Business Health Care Tax Credit. Do you know if you qualify? provides an easy way to find out.

It’s worth your time to see if you qualify. Qualified employers can take up to 50% credit, and tax-exempt employers can take up to 35%.

The tax credit is a part of the Affordable Care Act (ACA). The ACA sets standards for employers to offer insurance to employees. The standards vary based on how many employees you have.

If you have 50 or few employees you do not have to offer insurance. You can choose to offer coverage.

Do you offer health care coverage to your employees? You may be eligible for the tax credit if you:

If you qualify for the credit, you can include the amount as part of the general business credit on your business income tax return. Use Form 8941, Credit for Small Employer Health Insurance Premiums to claim your credit.

Need some help tracking payroll taxes? Try our easy-to-use online payroll software for free today!

Payroll Alert: HSA Contribution Limits Higher For 2012

Attention payroll managers: the IRS is increasing the maximum contribution to health savings accounts (HSAs) for 2012. This change includes a $50 increase to limits for a single-person plan and $100 for family plans. Out-of-pocket limits are also increasing for High-Deductible Health Plans (HDHP).

The IRS left the HSA contribution limits alone for the current 2011 calendar year, but is now adjusting for inflation.

The IRS establishes limits on four categories related to HSAs:
1. The amount of money someone can contribute to their HSA
2. The catch-up amount for people age 55 and older
3. The minimum medical insurance plan deductible to qualify for an HSA
4. The maximum out-of-pocket limit of a medical insurance plan
Here are the HSA limits for 2012:

Single contribution limit to HSA: $3,100
Family contribution limit to HSA: $6,250
Catch-up for age 55+: $1,000
Minimum single HDHP deductible: $1,200
Minimum family HDHP deductible: $2,400
Max. single HDHP out-of-pocket limit: $6,050
Max. family HDHP out-of-pocket limit: $12,100

For more information on the coming 2012 changes, read the IRS notice.

Payroll News: Employers Discriminating Against the Unemployed?

unemployment and payrollWould you add an employee to your payroll if they’re currently unemployed?

There’s a growing backlash against employers who advertise that unemployed applicants “Need not Apply.” The practice may even become illegal if lawmakers have anything to do with it, according to an article by Top Echelon Contracting. Consider the following developments:

  • New Jersey just passed a law saying that job ads can’t discriminate against unemployed applicants.
  • At the federal level, the Equal Employment Opportunity Commission (EEOC) held a hearing on the prevalence of banning unemployed job applicants and whether the practice actually discriminates. The EEOC is asking whether the practice creates a “disparate impact” against certain protected classes with a higher unemployment rate, disproportionately affecting groups such as African-Americans, Hispanics, and disabled individuals.
  • Rep. Hank Johnson (D-Ga.) introduced The Fair Employment Act of 2011 to amend the Civil Rights Act, “making it illegal for companies to make hiring decisions based on a candidate’s employment status,” according to the article.

What’s the takeaway? If you want to add employees to your payroll program, be careful what you advertise, or you may wind up in hot water. And consider that the biggest recession since the Great Depression has yielded a rich field of job candidates — many of whom are ready to work hard, regardless of their current job status.

Your Papers, Please? Payroll Update on Form I-9

1-9 form payroll papersDo you have your paperwork all in order for the employees on your payroll?

The Dept. of Homeland Security (DHS) and Immigration and Customs Enforcement (ICE) are cracking down more on illegal aliens, and auditing more American employers in the process. In 2010, the departments removed more than 390,000 illegal aliens and audited more businesses than ever before.

Since January 2009, the ICE has “audited more than 3,200 employers suspected of hiring illegal labor, debarred 225 companies and individuals, and imposed approximately $50 million in financial sanctions,” according to the Homeland Security Newswire.

All American businesses should be concerned, especially if they don’t have Employment Eligibility (I-9) paperwork on file for the people on their payroll. All employers, as well as agricultural recruiters and referrers-for-a-fee, are required by federal law to verify the identity and employment authorization of each person they hire for employment in the U.S.

When you add new employees to your payroll, make sure to verify each new hire before they start working. They should complete the Form I-9 and show proper identification within the required three days. For more information on hiring paperwork, read the training article What is a Form I-9?

You can also no longer accept expired documents from new hires as proof of citizenship. Other changes include the documents you can accept from new hires. For more information, read the final rule on Employment Eligibility Verification from the U.S. Citizenship and Immigration Services.

What’s a DECOR Notice? Another Payroll Mystery Solved

DECOR-notices-and-IRS and W2If you receive a letter from Social Security and it’s marked “DECOR,” it has nothing to do with your personal style.

DECOR stands for “Decentralized Correspondence,” and it may mean you have a payroll issue to clean up regarding an employee’s W-2.
The Social Security Administration is sending out “no-match” DECOR notices to employers, notifying them of discrepancies with employee W-2s for the 2010 tax year. The notices could indicate any of the following issues:

    • Typographical errors
    • Unreported name changes
    • Inaccurate/incomplete employer records
    • Misuse of a Social Security number

Social Security suspended mailing employers DECOR notices for the 2008-2009 tax years, but are now mailing notices for the 2010 tax year only.

If you receive a DECOR notice, that means the SSA is putting the employee’s earnings in an Earnings Suspense File (ESF) instead of posting the earnings to the employee’s earning record. To rectify the problem, the SSA may ask you or your payroll department to:

    • Double-check your records to ensure the info you gave to the SSA matches your payroll and employment record.
    • Ask your employees (if they still work for you) to see their Social Security card to verify their Social Security number. Note: If they lost their card, a new one may take several weeks to arrive.
    • Contact the Social Security Administration at 1-800-772-6270 with your questions about any employees.
    • Correct errors by preparing a Form W-2c and sending it to SSA with a covering Form W-3c transmittal. Do not include additional correspondence.
    • Encourage the employee to contact their local Social Security office and straighten out any discrepancies on their end.
    • If you can’t resolve the issue with the employee, document and keep records of your efforts in accordance with federal record-keeping laws.
    • Use the Social Security Number Verification Service (SSNVS) for employees on your payroll to avoid future problems.

To learn more about DECOR notices, refer to the Social Security Administration website.

Payroll Managers: Note Changes to 2011 Form 941


The IRS made several tweaks and changes to Form 941, Employer’s Quarterly Federal Tax Return for 2011, and the updated form is now available. As you sit down to figure out your quarterly payroll taxes, here’s a quick look at the changes:

Change in employee Social Security contribution rate for 2011. The tax rate for employees is now 4.2% for 2011 as a result of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The employer’s contribution rate remains unchanged at 6.2%. (Luckily, the updated form has a reminder about the reduced tax rate that you can’t miss.)

A new line added for reporting tax due on tips that were unreported. Section 3121(q) Notice and Demand is a place for reporting Social Security and Medicare tax on previously unreported or under-reported tips. For more information, see instructions for Form 941, Section 5e.

The qualified employer’s Social Security tax exemption, which expired on December 31, 2010, is no longer an option.

The ending of the advance earned income credit. While the earned income credit is still available to taxpayers, the government eliminated the advanced option for earned income credit as of Dec. 31, 2010. Note: remind your employees that if they received the advanced EIC in 2010, they need to report this credit on their 2010 federal income tax return.

COBRA premium assistance credit. If you helped a former employee on your payroll make their COBRA payments, you may qualify to take a tax credit.

Electronic funds transfer for federal payroll tax deposits. By now, I hope you know about the requirement for employers to file all federal tax deposits electronically. if not, get up to speed by reading the previous blog article “Changes Ahead for Employers Making Federal Payroll Tax Deposits.

A block of greyed-out lines (6a-d) “reserved for future use.” Sounds like another payroll mystery to be solved…

Here is a link to the 2011 Form 941 and instructions for filling it out.

If you have any comments about the new form, please feel free to share.

Deadline Approaches to Electronically Submit W-2s for Payroll


Are you ready to prepare your W-2s for 2015? If your payroll department is filing your Social Security wage file electronically, your deadline is fast approaching. Social Security has set the due date for electronic wage filers. Forms W-2 and W-3 must be submitted by March 31st.

Who is required to file W-2s electronically?

If you have more than 250 employees on your payroll, you must file electronically. However, any business owner can file electronically if they want, even if they have fewer than 250 employees. (In fact, the SSA would prefer it.) When you file electronically, make sure you do not also submit redundant paper forms to Social Security.

How do I file electronically?

You can sign up for an account at the SSA’s Business Services Online. The site will walk you through the steps of confidentially filing W-2s for everyone on your payroll. You need to install the Adobe Acrobat Reader (version 5 or later.) From there, you can manually submit your payroll information or upload an electronic wage file.

Payroll software may save you time and help with accuracy when it’s time to prepare your W-2 forms. Try our convenient, affordable online payroll … and the first month is free!

Article updated 11/17/2015

Remember Payroll Tax Deadlines with Calendar Connector

remember payroll tax deadlines calendar pictureAttention small business owners — the IRS has a new tool to help you remember not to forget to pay your taxes! If you have trouble recalling when to make your monthly payroll tax deposit, try the IRS Calendar Connector, a nifty little program you can download quickly from the IRS website. Calendar Connector will remind you of whatever tax deadlines you tell it to, including payroll tax deposit deadlines. You first need to download Adobe Air for the IRS program to work, but then you can be up and running in minutes. You can even check in with the Calendar Connector when you’re offline.

Tailor Your Payroll Tax Deadlines Calendar

Tailor the program settings according to your own business needs. For example, are you a monthly or bi-weekly depositor for your business payroll taxes? Do you need to remember the date that your 1099s are due, or when to file the 1040 (as if you could forget that?) Calendar Connector will help you recall any weekly, monthly, or annual payroll tax deposit due dates for your small business.

You can choose what types of taxes you get to see: all taxes due, general taxes, employer taxes, or excise taxes. Set the program to automatically update any IRS changes and start as soon as your computer starts up  Here’s the best part — Calendar Connector is free. So now there’s no way you can forget to make that payroll tax deposit!

If you want to take the hassle out of payroll tax filing altogether, why not try Patriot Software’s Full Service Payroll. Patriot’s payroll services automatically file all federal, state and local payroll taxes on your behalf.

Photo credit: Ronaldo Taveira

Payroll Mystery Solved: Code CC in Box 12 of the W-2

payroll mysteriesNote: Code CC was only used on the 2010 Form W-2. 

Whether you’re an employer or an employee, you may be wondering: what the heck is “code CC” in Box 12 of the W-2?

Here’s your answer: the special “code CC” on the 2010 W-2 has to do with the HIRE Act (Hiring Incentives to Restore Employment), which was signed into law in last year.

With the HIRE Act, employers could take a payroll tax exemption of their 6.2% share of Social Security if they added a new qualified employee to their payroll during the period of March 19 – December 31, 2010.

To claim the payroll tax exemption, employers must follow some very specific instructions (including having the employee fill out an affidavit). These employers can also receive a retention credit through the HIRE Act if they retain the employee on their payroll for a certain length of time.

Any amount reported using code CC in box 12 on the employee’s W-2 is required for IRS information only; it doesn’t mean additional payroll wages are being reported for the employee.

Mystery solved! To learn more, read the training article about the HIRE Act.

IRS Corrects Error Regarding Hire Act, Payroll Tax Deposits

payroll tax newsIf you have received a notice lately about the HIRE Act and your 941 payroll tax liability, you may be relieved to know that even the IRS makes mistakes sometimes.

Here is some background. The 2010 HIRE Act — Hiring Incentives to Restore Employment — was meant to encourage certain employers to add to their payroll by forgoing their 6.2% share of Social Security on wages for the period March 19 – December 31, 2010. Because the HIRE Act did not exist until the end of the first quarter of 2010, the IRS didn’t have the revised 941 form ready in time for first-quarter 941 payroll tax reporting.They advised employers to instead claim any HIRE Act wages from March 19-31, 2010, on their second-quarter payroll tax period ending June 30, 2010.
The updated form had a special line-item (line 12e) to report any HIRE Act wages that were not reported in the first quarter. But due to a computer glitch, the IRS mailed some employers erroneous CP207 notices that proposed penalties for failure to pay payroll taxes. Some employers also received CP276B notices asking them to review their records.

The good news is that the IRS has recognized their error and reversed mistaken penalty assessments on business owners.