Annual Payroll Tax Update

Annual Payroll Tax Update Krista Koster, CPA, MSA Tessa Keena, Senior Accountant

Rates and Wage Bases

Standard Mileage Rates Type 2015 2014 Business Miles * 56 cents Medical/moving * 23.5 cents Charitable * 14 cents *Not yet released

Flexible Spending Accounts Type 2015 2014 Employee Contributions $2,550 $2,500 Carryover $500 $500 *Carryover allowed only if grace period is removed from plan

Retirement Contributions Type 2015 2014 401(k), SEP, 403(b), 457 deferrals $18,000 $17,500 Qualified plan, 403(b), 457 $6,000 $5,500 catch-up contributions Simple IRA $12,500 $12,000 Simple IRA catch-up $3,000 $2,500

H.S.A. Contributions Type 2015 2014 Contribution limit (employee and employer) $3,350 $3,300 Catch-up contributions $1,000 $1,000

Social Security Wage Base Year Wage Base 2015 $118,500 2014 $117,000

Social Security and Medicare Rates SS MED Employer Rate 6.2% 1.45% Employee Rate Base 6.2% 1.45% Employee Rate Wages over $200K N/A.9%

Federal Unemployment 2015 2014 Taxable Wage Base $7,000 $7,000 Tax Rate 6.00% 6.00% Maximum Credit 5.40% 5.40%

Michigan Unemployment 2015 2014 Taxable Wage Base $9,500 $9,500 Base Tax Rates 0.06 % to 10.3% 0.06 % to 10.3% O.A. Ratio 0.168337 0.153985

Form Updates and Reminders

Forms W2 and W3 What s New? Changes to titles of certain boxes Returned wage reports Third-party sick pay recap reporting

Forms W2 and W3 Due Dates: Filing Type Employee Copies SSA Copies Paper Filing February 2, 2015 March 2, 2015 Electronic Filing February 2, 2015 March 31, 2015

Forms W2 and W3 Reminders: S-Corp Health Personal use of auto Group health insurance coverage Additional Medicare tax (employee only) Group term life > $50K Other taxable benefits Reporting aide charts for retirement and deferred compensation

Forms W2 and W3 Reminders: Common errors Reconciliation of 941 totals to W-3 E-file required > 250 forms Business Services Online www.socialsecurity.gov/bso Future developments: www.irs.gov/w2

Group Health Insurance Reminders: Report in box 12 on W-2, using code DD Mandatory reporting for employers who file more than 250 W-2s Transitional relief continues for employers under 250 threshold Coverage types to report http://www.irs.gov/uac/form-w-2-reporting-of-employer- Sponsored-Health-Coverage Report both employer and employee paid amounts

Federal Unemployment Form 940 due by February 2, 2015 8 credit reduction states for 2014 CA CT IN KY NC NY OH Virgin Islands Complete Schedule A to calculate additional due for credit reduction states

Michigan Unemployment What s New? Final phase-in for online filing 2015 All employers must use MIWAM Register at michigan.gov/uia, click on link UI Tube webcasts for employers and unemployed workers available online

Michigan Unemployment Reminders: 2014 year 3 of obligation assessment Quarterly form/payment due by 25 th of month following quarter Family owned Apportionment provision UIA using IRS 20 Factor test for worker classification

Michigan Treasury Online New resource in 2015 for registering, filing, and paying sales, use, and withholding taxes Options for: Registering and paying taxes electronically Updates to registration information Update, add, or delete tax types Add a payroll service provider

Michigan Treasury Online Letters sent in October with access codes E-file encouraged, not required in all cases Coupon books will no longer be mailed Paper forms will be available on State website Sales tax licenses available through M.T.O. Must first register with Michigan Business One Stop

Independent Contractor vs. Employee Issues

Independent Contractor vs. Employee Common Law Rules Behavior control factors Financial control factors Relationship factors 20-Factor IRS Test For more information: https://www.michigan.gov/documents/uia/155_- _Independent_Contractor_20- Factor_IRS_Test_Revised_01-08-13_408013_7.pdf

Independent Contractor vs. Employee Industry Example: Independent Contractor or Employee?

Independent Contractor vs. Employee Form SS-8 Worker status determination Reviewed when received Fines and penalties Additional fines due to Obamacare mandates For more information: http://www.irs.gov/pub/irs-pdf/fss8.pdf

1099 Forms

1099 Forms Due Dates: Filing Type Employee Copies IRS Copies Paper Filing February 2, 2015 March 2, 2015 Electronic Filing Certain Returns* February 2, 2015 March 31, 2015 February 17, 2015 March 31, 2015 *Includes 1099-B, 1099-S, and 1099-MISC returns related to substitute payments and gross proceeds (boxes 8 and 14)

1099 Forms Reminders Must e-file if 250 or more returns E-file requirement applies separately to originals and corrections Fire.irs.gov Backup withholding Multiple filings Process to collect W-9s TIN matching available State/local copies may be required

1099 Forms Reminders Truncating of payee ID numbers allowed * or X Payee forms only (copy B) Full ID numbers on government copies Filer s ID number may not be truncated Not a requirement Required for all entities, including nonprofit organizations

1099 Forms Common Forms Title 1099-MISC 1099-B 1099-INT 1099-R 1099-DIV 1099-K Miscellaneous Income Proceeds from broker and barter exchange transactions Interest income Distributions from Pensions, Annuities, Retirement or Profit Sharing Plans Dividends and Distributions Payment card and third-party network transactions

1099 MISCELLANEOUS Box 1 Rents Payments of $600 or more for office lease, machine rental, storage rental Payments to corporations are not reportable

1099 MISCELLANEOUS Box 7 Nonemployee compensation Payments of $600 or more for services o Services and goods Payments of $600 or more for attorney fees (regardless of incorporation) Payments to corporations are not reportable

1099 MISCELLANEOUS Box 6 Medical and health care payments $600 or more Payments to providers of medical or health care services, not under FSA or HRA plan Reportable to corporations

1099 MISCELLANEOUS Box 14 Gross proceeds paid to Attorneys $600 or more Payments made as part of court order or legal settlement Legal fees paid in normal course of business should be reflected in box 7 Reportable to corporations

1099 MISCELLANEOUS B Notices Sent by IRS when the name/tin combination does not match IRS records Follow-up timely o Send copy of B-Notice, W-9, and return envelope to payee o Begin backup withholding if updated information not received timely o Request annually if no info received o 2 nd TIN notice box on 1099-MISC

1099 COMPLIANCE Penalties for non-compliance o o o Failure to file Willful disregard $30-$100 per information return Record retention

Questions? Krista Koster, CPA, MSA kkoster@hungerfordnichols.com Tessa Keena, Senior Accountant tkeena@hungerfordnichols.com (616) 949-3200