CHECKLIST FOR YEAR-END PAYROLL PROCESSING

Transcription

1 DECEMBER 2014 CHECKLIST FOR YEAR-END PAYROLL PROCESSING Ask employees to verify their names, addresses and Social Security Numbers before preparing W-2s. Employee names should be reported in capital letters exactly as reported on their Social Security cards do not use nicknames or titles such as Dr., Mr., etc. Compound names do not require a hyphen; insert a blank space for the hyphen. Finalize the last payroll of the year for Wages earned in 2014, and paid with a check dated in 2015, will be reported in Confirm that no one exceeded the annual withholding limits of $7, for Social Security (excluding Medicare tax) or $1, for State Disability Insurance. If someone has exceeded the limits, make adjustments or refunds before making the final payroll tax deposit for tax year Reconcile payroll data to the general ledger. Verify that all manual or voided payroll checks have been properly recorded. Record other employee taxable income such as personal use of company vehicles, relocation expense reimbursements, company-paid education assistance, and gifts (such as gift certificates). Determine if you need to report Employer Sponsored Health Coverage. (Refer to the chart on page 6 of this newsletter.) Print quarterly and year-end reports. Print W-2s. Verify that wages reported on the quarterly tax returns agree with the amounts reported on the W-2s. Verify that the Employer Identification Number is correct on all forms. Make a year-end backup of your data. Close 4th quarter and year-end payroll. Load new tax tables for 2015, if needed, or verify that you are operating under the most current version available of your software. Ask employees to complete new W-4 forms to report changes, if there is a filing status change in Employees who claimed 10 or more exemptions or exempt in 2014 must turn in a new W-4 form by February 15th (or employer must start withholding as Single-0). Employee W-2 copies should be in employees possession, postmarked or available on a website by February 2, If you file 250 or more W-2 forms, you must report to the Social Security Administration by filing the W-2 forms electronically. continued on page 2 Beginning with the next issue, By the Book will move to digital format only. If you received this issue in both print and digital format, we already have your address. If you received only the print version and wish to continue receiving By the Book in the future, please send your address to mail@bpfcpa.com. 1

2 CHECKLIST FOR YEAR END PAYROLL PROCESSING - cont. d Copy A of the W-2 Forms and Form W-3, filed by paper, must be postmarked by March 2, Mail them to the Social Security Administration, Data Operations Center, Wilkes Barre, PA If sending by Certified Mail, use zip code and keep the receipt. Forms filed electronically are due March 31, SUGGESTED RETENTION SCHEDULE FOR BUSINESS RECORDS A business handles a tremendous volume of records. Whether you use a simple filing system or sophisticated electronic equipment to record your data, the basic problems remain what records do you need, why do you need them, and how long should you keep them? The following list is designed to help you determine what records to keep and how long to keep them. These time periods represent a consensus and are not absolutes to be followed without question. 4 to 5 years Bills of material Bond, paid-interest coupons Cash slips Claims, closed by company Correspondence, general Customer account records, closed Delivery receipts Freight bills Inspection records Manifests Petty cash records Purchase orders Receiving reports Remittance statements Requisitions Sales slips Service reports Shipping tickets Time cards 5 to 6 years Complaint records Correspondence: license, purchase and traffic Credit memos Employees daily time reports Monthly trial balance Price exceptions and adjustments Safety reports 6 to 7 years Bank deposit slips Bank reconciliations Bank statements Cancelled checks Claims, closed against company Credit files Employee records (terminated) Inventory records Invoices, copy of order Invoices, paid Payroll 7 to 8 years Accounts, charged off Commission statements Cost account records Entertainment records Expense reports, employees Purchase orders for capital expenditures Sales sheets Specification sheets 8 to 9 years Agreements, leases (after expiration) Salary and rate changes Vouchers, cash Vouchers, numeric copy 9 to 10 years Voucher register Voucher, A-Z copy 10 years Claims, workers compensation Employee tax withholding statements Insurance claims (after settlement) Vouchers, capital 17 years Agreements, licenses Permanent Accident reports Agreements, deeds Applications filed with regulatory agencies Articles of Incorporation Auditor reports continued on page 7 2

3 TABLE OF 2015 TA RATES The maximum wage base and maximum annual deduction will change for FICA. The state SDI rate has remained the same; however, the maximum wage base has increased. An additional Medicare tax for employees earning more than $200,000 was added in 2013 and remains in effect. The following table highlights important rates for the coming year. Please call our office or visit com if you have any questions. Employer payroll taxes rate maximum subject to tax maximum deduction Federal FICA 6.2% $118,500 $7,347 FICA Medicare 1.45% All wages - no limit Unlimited Total FICA 7.65% FUTA 0.6% $7,000 $42.00* Employee FICA 6.2% $118,500 $7,347 FICA MEDICARE 1.45% All wages - no limit Unlimited Additional Medicare (no employer match) Total FICA 7.65% to 8.55% Employer.90% Wages over $200,000 Unlimited State SUI (State Unemployment Insurance) ETT (Employment Training Tax) Employee 1.5% to 6.2% Rates will vary 0.1% (Some employers are exempt) $7,000 Amount will vary $7,000 $7.00 SDI (State Disability Insurance) 0.9% $104,378 $ sales tax Fresno County City of Clovis Madera County Merced County** Tulare County** 8.225% 8.225% 8.00% 7.50% 8.00% standard mileage rate for cents per mile california minimum wage Current rate is $9.00 per hour. Rate increases to $10.00 per hour January * The base rate is 0.6%. An additional amount may be added; to be announced. ** Varies by city. 3

4 CHECKLIST FOR 1099-MISC REPORTING If the following conditions are met, businesses must generally report nonemployee compensation on Form 1099-MISC: You made the payment to someone who is not your employee You made the payment for services in the course of your trade or business You made the payment to an individual, partnership, estate, or attorney You made payments to the payee of $600 or more during the calendar year Generally, payments to corporations are not reported on Form A limited liability company (LLC) can be taxed as a corporation or a partnership. To determine if you need to issue a 1099 to a LLC, you should request that the LLC complete Form W-9, Request for Taxpayer Identification Number and Certification, and make your determination based on the information the LLC provides on the W-9 form. You should have a Form W-9 on file for each 1099 recipient. Provide the payee with Form W-9, Request for Taxpayer Identification Number and Certification. Update your vendor files to include the vendor name, address, and tax identification number (TIN). When entering an address, do not use a number (#) sign (for example, enter APT B rather than APT #B ). Enter all information in capital letters. Verify you are reporting the name the vendor uses with the IRS; the vendor s trade name may differ from the one on its tax returns. If the vendor doesn t fill out the W-9 form, there are two steps to obtain the information: First, warn the vendor you won t be able to issue their initial check until they supply the information. Second, inform them if you do not receive at least their TIN, you will need to start backup withholding on their checks. Backup withholding is 28% of any payment that is reportable. If you don t withhold, IRS may apply penalties to your company for failure to withhold or failure to obtain that information, as well as having to pay the amount that should have been withheld. Use the IRS TIN matching program it is free and allows you to verify TINs online. For details, refer to IRS publication 2108A. It is available online at by typing 2108A in the search box. Technical support is available at If a Social Security Number is to be used as the TIN, use this person s name on the top line in the recipient box with the business name underneath. Social Security Numbers are to be typed in a format. Amounts should be presented without dollar signs or commas. Add a decimal followed by the cents. Leave the box blank if the amount is zero. Report on preprinted forms, not photocopies. Be sure to order forms in advance, or if you only need a few, they are available from most office supply stores. You cannot use forms printed from the IRS website. Do not use prior year forms to report current year information. Recipient copies (Copy B) are due or need to be postmarked by February 2, Returns can be filed on paper or electronically. Employers that file 250 or more 1099s are required to submit to the IRS electronically using the IRS FIRE (Filing Information Returns Electronically) system. Paper returns are due to the IRS March 2, Electronic files are due to the IRS by March 31, If you fail to file a correct information return by the due date and cannot show reasonable cause, you may be subject to a penalty. The penalty applies if you do not file timely, do not include all information required to be shown on a return, or include incorrect information on a return. The penalty also applies if you file on paper when you were required to file electronically, report an incorrect TIN, do not report a TIN, or neglect to file paper forms that are machine readable. The amount of the penalty is based on when you file the correct information return. The penalty is: $30 per information return, if you correctly file within 30 days (by March 30, if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses). $60 per information return, if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses). $100 per information return, if you file after August 1 or you do not file required information returns; maximum penalty $1,500,000 per year ($500,000 for small businesses). continued on page 5 4

5 CHECKLIST FOR 1099-MISC REPORTING - cont. d Businesses may request a 30-day extension to file 1099s with the IRS using Form 8809; however, the extension does not permit additional time for providing the 1099 to the recipient. For more information, see General Instructions for Certain Information Returns available at Beginning with the next issue, By the Book will move to digital format only. If you received this issue in both print and digital format, we already have your address. If you received only the print version and wish to continue receiving By the Book in the future, please send your address to mail@bpfcpa.com. W2 REPORTING FOR EMPLOYER-SPONSORED HEALTH COVERAGE The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on Form W-2 does not mean that the coverage is taxable. The value of the employer s excludable contribution to health coverage continues to be excludable from an employee s income, and is not taxable. This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage. Employers that provide applicable employer-sponsored coverage under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). However, federally recognized Indian tribal governments are not subject to this requirement. For certain employers, types of coverage, and situations, there was initial transitional relief from the requirement to report the value of coverage on the 2012 Forms W-2. This will apply to future calendar years, until the IRS publishes additional guidance. Any guidance that expands the reporting requirements will apply only to calendar years that start at least six months after the guidance is issued. Health care coverage reporting is required for employers who filed 250 or more W-2s in the previous year. If you filed 250 or more W-2s in 2013, you are required to report health care coverage on the 2014 W-2s. The value of the health care coverage will be reported in Box 12 of the W-2 form, with Code DD to identify the amount. There is no reporting on the W-3 form of the total of these amounts for all the employer s employees. In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. An employer is not required to issue a W-2 form solely to report the value of the health care coverage for retirees, other employees, or former employees to whom the employer would not otherwise provide a Form W-2. The law excludes from reporting health reimbursement accounts, health savings accounts, dental or vision care that is not integrated into a group plan, long-term care insurance, workers compensation, and specific disease or hospital/fixed indemnity plans. We have included a chart on the following pages that details the types of coverage employers must report on the Form W-2. Certain items are listed as optional based on transition relief provided by IRS Notice The chart reviews the reporting requirements for Box 12, Code DD, and has no impact on requirements to report these items elsewhere. For example, while contributions to Health Savings Arrangements (HSA) are not to be reported in Box 12, Code DD, certain HSA contributions are reported in Box 12, Code W (see the IRS publication General Instructions for Forms W-2 and W-3). 5

6 form w-2 reporting of employer-sponsored health coverage Coverage Type Form W-2, Box 12, Code DD Report Do Not Report Optional Major Medical Dental or vision plan not integrated into another medical or health plan Dental or vision plan which gives the choice of declining or electing and paying additional premium Health Flexible Spending Arrangement (FSA) funded solely by salary-reduction amounts Health FSA value for the plan year in excess of employee s cafeteria plan salary reductions for all qualified benefits Health Reimbursement Arrangement (HRA) contributions Health Savings Arrangement (HSA) contributions (employer or employee) Archer Medical Savings Account (Archer MSA) contributions (employer or employee) Hospital indemnity or specified illness (insured or self-funded), paid on aftertax basis Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer Employee Assistance Plan (EAP) providing applicable employer-sponsored healthcare coverage On-site medical clinics providing applicable employer-sponsored healthcare coverage Wellness programs providing applicable employer-sponsored healthcare coverage Multi-employer plans Domestic partner coverage included in gross income Governmental plans providing coverage primarily for members of the military and their families Federally recognized Indian tribal government plans and plans of tribally chartered corporations wholly owned by a federally recognized Indian tribal government Self-funded plans not subject to Federal COBRA Accident or disability income Long-term care Liability insurance and supplemental liability insurance Worker s compensation Automobile medical payment insurance Credit-only insurance Excess reimbursement to highly compensated individual, included in gross income Payment/reimbursement of health insurance premiums for 2% shareholderemployee included in gross income Required if employer charges a COBRA premium Required if employer charges a COBRA premium Required if employer charges a COBRA premium Optional if employer does not charge a COBRA premium Optional if employer does not charge a COBRA premium Optional if employer does not charge a COBRA premium 6

7 FORM W-2 REPORTING OF EMPLOYER-SPONSORED HEALTH COVERAGE cont. d form w-2 reporting of employer-sponsored health coverage Other Situations Employers required to file fewer than 250 Forms W-2 for the preceeding calendar year (determined without application of any entity aggregation rules for related employers) Forms W-2 furnished to employees who terminate before the end of a calendar year and request, in writing, a Form W-2 before the end of that year Forms W-2 provided by third-party sick-pay provider to employees of other employers Form W-2, Box 12, Code DD Report Do Not Report Optional SUGGESTED RETENTION SCHEDULE FOR BUSINESS RECORDS - cont. d Permanent, cont. d BUSINESS SUPPORT SERVICES Bylaws Capital stock and bond records Contracts and leases Corporate stock records Engineering & research projects Financial statements Insurance policies, all types Labor contract and collective bargaining records Ledgers and journals: cash, general, customer journal, payroll, plant, etc. Minutes: executive, directors and stockholders Patents, records and assignments Pension records Plant surveys Proxies Real estate records Taxes: federal, state, property, sales and use Taxes: audit reports Tax and legal correspondence Other Certificates of insurance Period of coverage, plus 4 years Depreciation schedules Life of asset, plus 4 years Insurance claims 3 to 5 years after settlement Our Business Support Services department offers customized services on a monthly, quarterly, annual, or as-needed basis to ensure your business records and procedures enable your business to operate in an effective and efficient manner. Regardless of the size of your organization, the record keeping process is time consuming and constantly changing to meet new regulations. Current record keeping ensures an accurate picture of the condition of any business. Utilizing our Business Support Services for your ongoing or one-time tasks could provide more time for your office to concentrate on areas that can generate growth for your business, and could prove to be more profitable than hiring a full-time bookkeeper or accountant. Our services include: Financial statement and general ledger Bank reconciliations Accounts payable and receivable Payroll tax returns Resolution of payroll tax issues Sales and use tax returns and audits Property tax returns and audits Workers compensation audits Analysis and development of procedures Staff training Temporary staffing 7

8 2014 FUTA CREDIT REDUCTION In 2009, California s unemployment insurance program ran out of funds, and California borrowed from the federal government to pay its unemployment benefits. Once a state carries a federal loan balance for two consecutive years, and if the entire loan amount is not repaid by November 10 of the second year, the state is deemed to be a Credit Reduction State and is charged a tax credit. California has been classified as a Credit Reduction State. For 2014, the additional tax has been raised to 1.2%. This requires the preparation of Schedule A with Form 940 and an additional tax due of 1.2% of taxable FUTA wages. This brings the effective FUTA tax rate to 1.8% for All California employers will need to check Box 2, Part 1, complete Schedule A and enter the amount on Line 11, Part 3. Example: The standard FUTA rate is 0.6% on the first $7, of wages. Basic Computation $7,000 x 0.6% = $ Credit Reduction Computation $7,000 x 1.2% = $ Total tax due $ UPCOMING DUE DATES FEB. 02 W-2 Copies B, C and 2, Wage and Tax Statement, should be in employees possession, postmarked or available on a website MAR. 02 Paper Filings Due W-2 Copy A, Wage and Tax Statement, due to the Social Security Administration 1099s Recipient copies should be postmarked or available on a website W-3 Transmittal of Wage and Tax Statements 941 Employer s Quarterly Federal Tax Return 1099 Copy A, due to the Internal Revenue Service 943 Employer s Annual Tax Return for Agricultural Employees 1096 Annual Summary and Transmittal of U.S. Information Returns 940 Annual Federal Unemployment Tax Return DE9 Quarterly Contribution Return and Report of Wages MAR. 31 Electronic Filings Due Electronic transmissions of W-2s and 1099s DE9C Quarterly Contribution Return and Report of Wages (Continuation) 8

9 New Mileage Rates for 2015 The standard mileage rates have changed for Federal and California purposes. The new rates for 2015 will be: 57.5 cents per mile for business use 23 cents per mile for medical expenses 23 cents per mile for moving expenses 14 cents per mile driven in service of a charitable organization LEGAL HOLIDAYS FOR 2015 To ensure the timeliness of your 2015 tax payments and reports, please refer to the chart below. If a payment or report due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. For specific payroll tax deposit or report requirements, refer to the Employer s Tax Guide (Circular E), the California Employer s Guide (DE 44), and the EFT Information Guide (DE 27). To obtain a federal guide, visit the website. To obtain a state guide or for more information, call or visit the website: Thu JAN. 01 New Year s Day 2015 Mon FEB. 16 Presidents Day Fri JUL. 03 Wed NOV. 11 Independence Day (observed) Veterans Day Mon JAN. 19 Martin Luther King, Jr. Day Tue MAR. 31 Cesar Chavez Day* Mon SEP. 07 Th & Fr NOV Labor Day Thanksgiving & day after Thu FEB. 12 Lincoln s Birthday Mon MAY 25 Memorial Day Mon OCT. 12 Fri DEC. 25 Columbus Day Christmas Day * IRS offices are open on this legal holiday 9

10 FIRST-CLASS PRSRT STD MAIL U.S. POSTAGE PAID FRESNO, CA PERMIT NO Baker, Peterson & Franklin, CPA, LLP 970 W. Alluvial Fresno, CA RETURN SERVICE REQUESTED Beginning with the next issue, By the Book will move to digital format only. If you received this issue in both print and digital format, we already have your address. If you received only the print version and wish to continue receiving By the Book in the future, please send your address to business support services staff: Jayne Massie, Manager Carol Fenzke published by: Baker, Peterson & Franklin, CPA, LLP 970 W. Alluvial Fresno, CA TEL: (559) FA: (559)