Year-End Fringe Benefit Reporting and Other Reporting Requirements

Transcription

1 and Other Reporting Requirements November 2013

2 TO: RE: All Business Clients Year-End Fringe Benefit Reporting and Other Reporting Requirements DATE: November 20, 2013 Certain fringe benefits paid for or provided by an employer to its employees must be reported to the government as taxable compensation to the employee on year-end wage reports. Common examples of such fringe benefits are the personal use of employer provided vehicles, health insurance paid on behalf of a more than two percent shareholder of an S Corporation, and group term life insurance in excess of $50,000. Also, nonaccountable reimbursements and expense allowances must be included in Form W-2 wages. This memo serves as a reminder of your additional year-end reporting requirements and includes worksheets designed to identify and capture information such as personal use of company automobiles, personal flights on employerprovided aircraft, employer-provided vacations, and certain gifts to report as additional wage compensation. Please forward this memo to the appropriate personnel at your business responsible for ensuring proper reporting of wage and compensation information to the government. You will need to provide the information to your payroll data processing service if you use one. Alternatively, you may provide the information to your contact at CohnReznick LLP and we will assist in ensuring proper and required reporting. Also, you may elect to adopt a November 1 to October 31 fiscal year for fringe benefit reporting purposes. In other words, you may use the November 2012 to October 2013 period to quantify fringe benefits paid for the January 2013 to December 2013 reporting period. Company Owned Vehicles The Internal Revenue Service requires taxpayers to provide certain information relating to the business use of a vehicle. The information must be provided on a vehicle-by-vehicle basis in order to comply with the regulations. Employers providing vehicles to employees must obtain the information from the employees. Employees must be taxed on any personal use of the vehicle. This amount must be included in gross income and must be reported on the employee s W-2 Forms. This amount is subject to the Federal Insurance Contributions Act ( FICA ) and the Federal Unemployment Tax Act ( FUTA ); Federal Income Tax Withholding ( FITW ) is optional. The information that must be reported (also a determining factor as to the inclusion on the W-2 Form of the employee) is very specific. For each automobile owned or leased by your company, please complete the information on the enclosed worksheet (one form per auto). Please forward the completed worksheet(s) to your payroll-processing center or to us by December 13, Also note that the business standard mileage rate is 56.5 cents per mile for January 1 to December 31, The business standard mile rate is an acceptable and simplified method provided by the IRS and is used for determining deductible costs of operating an automobile for business purposes. Special Instructions for Employers Who Prohibit Personal Use of Vehicles by Employees If you prohibit personal use of employer-provided vehicles by your employees, you should maintain a written policy statement setting forth such prohibition. If you do not maintain such a statement, you provide vehicles to your employees for business use only and the vehicles remain on business premises during non-working hours, you may initiate a written policy statement that will satisfy your substantiation requirements. 1

3 Other Employer Paid Fringe Benefits Dependent Care Assistance Non-highly compensated employees may exclude the first $5,000 ($2,500 for married employees filing separately) of dependent care assistance during the year from FITW, FICA and FUTA as part of a qualified cafeteria plan under IRC Sec Highly Compensated Employees ( HCEs ) may also exclude dependent care assistance from their wages if the following two conditions are met: (1) the benefits provided under the program do not favor HCEs; and (2) the program meets the requirements of IRC Sec. 129(d). HCEs are employees that either: (1) were a 5% owner at any time during this year or the preceding year; or (2) received more than $115,000 in pay for the preceding year. Any dependent care assistance provided during the year that exceeds the $5,000 income exclusion cap is subject to FITW, FICA and FUTA and must be reported as taxable wages on the employee s Form W-2 in boxes 1, 3, and 5. The total amount of dependent care assistance received must be reported in box 10 of Form W-2. Long Term Care Insurance Cost of premiums paid by the employer for the employee s qualified Long Term Care ( LTC ) insurance coverage is exempt from FITW, FICA and FUTA and is not reported as taxable wages on the employee s Form W-2. However, after tax dollars deducted from an employee s pay and used to purchase LTC insurance coverage are subject to FITW, FICA and FUTA and must be reported as taxable wages on the employee s Form W-2. Additionally, an employer cannot exclude contributions to the cost of LTC insurance from an employee s wages subject to FITW if the coverage is provided through a flexible spending or similar arrangement. Other Fringe Benefits Additionally, other fringe benefits that you provide for your employee(s) may also be taxable on the employee s Form W-2. If you do provide and pay for other fringe benefits (i.e., dependent care assistance, long term care insurance, medical, life insurance, group term life insurance, disability insurance, unreported COBRA payments made on behalf of former employees, third party sick pay and taxes withheld, unsubstantiated employee expense reimbursements), please complete the attached worksheet (one for each employee) detailing these other benefits. Please forward the completed worksheet(s) to your payroll-processing center or to CohnReznick if we prepare your W-2 s by December 13, Forms W-2/W-3 and Forms 1099/1096 and Back-up Withholding Requirement Form W-2/W-3 Forms W-2 must be furnished to employees no later than January 31, (An employer meets the furnished requirement if the form is properly addressed and mailed on or before this date.) Form W-3 (with Copy A of Forms W-2 attached) must be filed by February 28, If you are required to file 250 or more Forms W-2, you must file them electronically unless the IRS grants you a waiver. You may request a waiver on Form 8508, Request for Waiver From Filing Information Returns Electronically. Submit Form 8508 to the IRS at least 45 days before the due date of Form W-2. The due date for Forms W-2 filed electronically with the government is March 31, You may be charged a penalty if you fail to file electronically when required. You are encouraged to file electronically even if you are filing fewer than 250 Forms W-2. All employers who are not on a computerized payroll service are cautioned on the above since noncompliance penalties are severe. As in previous years, all employers must report all sick pay that is paid to employees by third parties. Any employee who receives sick pay from a company paid insurance policy (including the New Jersey Disability Fund) must pay FICA taxes (Social Security and Medicare taxes) on the benefits. The employer must include these FICA taxes in the payroll tax 2

4 deposits. The insurance company should notify you as to the taxable amount. State Workers Compensation benefits are not subject to these provisions. Please be aware of potential other items which may have to be included on Form W-2, such as taxable fringe benefits (i.e., employer provided automobiles, employer contribution to long-term care, dependent care assistance). Please refer to the first two pages of this memo regarding company owned vehicles and other employer paid fringe benefits. Beginning in 2012, the aggregate cost of employer-sponsored coverage had to be reported on Form W-2. However, under a transition rule employers filing fewer than 250 Forms W-2 for the previous calendar year (for example, employers filing fewer than Forms W-2) were not required to report the cost of coverage on the 2012 Forms W-2. In addition, if an employee s employment was terminated during the year and the employee requested a Form W-2 before the end of 2012, the aggregate cost of employer-sponsored coverage did not have to be reported on that Form W-2. These transition rules will continue to apply for Starting in 2013, employers must withhold an additional 0.9% Medicare tax on each employee s wages that exceed $200,000 during the year. This additional Medicare withholding tax is reported on a separate line (line 5d) on Form 941, but is combined with the regular Medicare tax withholding and reported in box 6 on Form W-2. Do not include the 0.9% additional Medicare tax in amounts reported in box 12 of Form W-2 using Codes B and N. Form 1099/1096 All taxpayers are generally required to file Form 1099 with the federal government and furnish a copy to the corresponding state taxing authority if they pay $10 or more of interest or dividends or pay an unincorporated business (i.e. any individual as well as any partnership including LLCs and LLPs) $600 or more for rents or services rendered. Gross royalty payments must be reported if they total $10 or more. Payments for legal services (including payments to corporate entities) must be reported on Form 1099-MISC if $600 or more. Report the attorney s fee in box 7 and gross proceeds regarding settlements in box 14. The form must be filed with the government authorities by February 28, If you file electronically (required if you file 250 or more Forms 1099), the due date is March 31, Copy A of all 1099 Forms must be submitted to the IRS with Form 1096, Annual Summary and Transmittal of US Information Returns. A separate Form 1096 must be used for each different type of 1099 form filed. The recipients must be furnished with their copies by January 31, To prepare a Form 1099, you will need the following information: 1. Name and address of payee. 2. Payee s identification number. 3. Amount paid in Type of payments made (outside services, rents, commissions, etc.) If you desire our assistance to prepare Forms 1099 and 1096, please mail, fed-x or a PDF with the information listed above to our office by January 17, Forms for Pension or Profit Sharing Plan Distributions (including Keogh Plans) Whenever a distribution from a Retirement Plan is made, an applicable Form 1099-R must be given to the recipient and filed with the IRS. If your third party administrator is not preparing all necessary 1099 Forms and you would like us to prepare them, please provide us with the information listed below by January 17, 2014, and we will prepare the form(s) for filing by the plan trustee. 3

5 To prepare a Form 1099-R for a retirement plan distribution, you will need the following information: 1. Name and address of payee. 2. Payee s identification number. 3. Amount paid in Type of payments made (early distribution, rollover distribution, normal distribution, etc.). 5. Withholding on distribution Federal and/or state (need dates deposited with government unit). Forms 1099-R are to be furnished to all payees by January 31, Form 945 for withholding payments needs to be filed by January 31, However, if you made deposits on time in full payment of the taxes for the year, you may file Form 945 by February 10, Backup Withholding Failure to comply will subject the payer to penalties Backup withholding is required for payments to unincorporated entities and proprietors unless you obtain the Social Security number or Federal ID number of the payee. This rule applies only to trade or business entity payers (including selfemployed individuals). The backup withholding is a flat 28 percent rate for Form W-9 is used to obtain a taxpayer s (payee s) identification number. If you need this form, you can obtain it from the IRS website ( or from your CohnReznick professional at Deferred Compensation Plans and IRC 409A Reporting Requirements Employers may establish deferred compensation plans under which an employee may exclude compensation earned or partially earned during the year but not received during the year. The rules for reporting deferred compensation can be complicated and are beyond the scope of this memo. Please contact your CohnReznick professional at if you have a deferred compensation plan and have any questions on how to report deferred compensation to your employees. The information included herein is not intended or written to be used, and it cannot be used by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing or recommending to another party any tax related matters. (The foregoing disclosure has been affixed pursuant to U.S. Treasury Regulations governing tax practice.) This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees, and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. 4

6 Employee Use of Employer-Provided Vehicle (One form per auto) Company: Please be advised that during 2013, the Company furnished the vehicle described below for my use on Company business. I am providing the information shown below on my business and personal use of the Company-provided vehicle: Year Make Model Driver Ending odometer ( ) Date Beginning odometer ( ) Date Total mileage (Ending odometer reading minus beginning odometer reading) Business mileage Nonbusiness mileage Other personal mileage The above figures are based on my written records of business use. I understand that I may be required to furnish such documentation in the event of an IRS examination. Signature _ Date For Employer Use Only: Check the following ( ) Vehicle was purchased this year ( ) Vehicle was leased this year Date Purchased _ First business date of use Purchase Price $ (Provide copy of invoice) Date of Lease _ First business date of use Value of auto $_ (Provide copy of lease) ( ) Vehicle was sold this year Make & Model Date sold Sales Price $ 5

7 Other Benefits Provided By the Company (One form per employee) Year Company Information Name of Company: MEDICAL EXPENSES AND INSURANCE PREMIUMS (Paid on behalf of a more than 2% shareholder in an S Corporation or any partner in a Partnership only. This is not applicable to C Corporations.) Shareholder or Partner Name Medical Expenses Paid or Reimbursed Medical Insurance Premiums GROUP TERM LIFE INSURANCE IN EXCESS OF $50,000, DISABILITY INSURANCE, DEPENDENT CARE AND LONG TERM CARE LIFE INSURANCE DEPENDENT CARE Name of Employee Name of Employee Age Amount Paid Face Amount Total wages for year Owner Beneficiary Insured Annual Premium Paid DISABILITY INSURANCE LONG TERM CARE Name of Employee Name of Employee Annual Premium Paid Annual Premium Paid Owner Age of Employee at 12/31 Beneficiary Insured Additional Information or Comments such as personal use of company automobiles, personal flights on employer-provided aircraft, employer-provided vacations, and certain gifts ****************************************************************** For Internal Use Only ******************************************************************** Entity Type General Ledger Accounts Insurance Posted to: New Jersey C Corporation (Y or N) Life New Jersey S Corporation (Y or N) Medical 6

8 Other States C or S Status Disability Other Group Term Life Insurance EMPLOYEE AGE AMOUNT OF COVERAGE 7

9 Non Accountable Reimbursement Plan EMPLOYEE AMOUNT OF ALLOWANCE 8

10 2014 and 2013 Payroll Limits CA SUI/SDI -MAXIMUM EARNINGS DISABILITY $101,636 $100,880 -EMPLOYEE PERCENTAGE DISABILITY 1.0% 1.0% -MAXIMUM DEDUCTION $1, $1, CT SUI/SDI: -MAXIMUM EARNINGS UNEMPLOYMENT $15,000 $15,000 -EMPLOYEE PERCENTAGE UNEMPLOYMENT 0.000% 0.000% MA SUI/SDI: -MAXIMUM EARNINGS UNEMPLOYMENT $14,000 $14,000 -EMPLOYEE PERCENTAGE UNEMPLOYMENT 0.000% 0.000% NJ SUI/SDI: -MAXIMUM EARNINGS $31,500 $30,900 -EMPLOYEE PERCENTAGE (Includes FLI) 0.905% 0.885% -MAXIMUM DEDUCTION $ $ NY SUI/SDI: -SUI MAXIMUM EARNINGS $10,300 $8,500 -SDI EMPLOYEE PERCENTAGE 0.50% 0.50% (MAXIMUM $.60 PER WEEK) FICA/SOCIAL SECURITY: -MAXIMUM EARNINGS $117,000 $113,700 -EMPLOYER PERCENTAGE 6.20%* 6.20% -EMPLOYEE PERCENTAGE 6.20%* 6.20% -MAXIMUM DEDUCTION $7, $7, SELF EMPLOYMENT TAX RATE 12.40%* 12.40% -ADDITIONAL MEDICARE TAX 0.9%**** 0.9%***** FICA/MEDICARE: -MAXIMUM EARNINGS NO LIMIT NO LIMIT -EMPLOYEE/EMPLOYER PERCENTAGE 1.45% 1.45% -MAXIMUM DEDUCTION NO LIMIT NO LIMIT -SELF EMPLOYMENT TAX RATE 2.90% 2.90% FUTA: -6.0% LESS MAX CREDIT OF 5.4% =.6%** -MAXIMUM EARNINGS $7,000 $7, (k) LIMIT $17,500 $17,500 $23,000*** $23,000*** Maximum Compensation Considered for Defined Contribution $260,000 $255,000 Maximum Defined Contribution under these plans $ 52,000 $ 51,000 EARNINGS CEILING FOR SOCIAL SECURITY BENEFITS REDUCTION -Full retirement age is determined by the year of birth (see -Earnings limits for taxpayers under full retirement age $15,480 $15,120 -Earnings limits in the year reaching full retirement age $41,400 $40,080 -Earnings limits at full retirement age or older NO LIMIT NO LIMIT * Current rates absent any Governmental action ** For 2012, the credit was further reduced by another.3% to.6% for California, Connecticut, New Jersey, and New York. For 2013, the credit is reduced by another.3% to.9% for California, Connecticut, New Jersey, and New York. *** Individuals age 50 or older are entitled to an additional $5,500 of catch-up contributions in 2013 and in

11 **** Effective in 2013, an additional 0.9% Medicare tax is imposed on employees and self-employed individuals. The additional 0.9% Medicare tax is imposed on wages and self-employment income in excess of $200,000 ($250,000 on a joint return and $125,000 for married taxpayers filing separately)