Archive for the ‘PayDay News’ Category

Box 14, W-2 Employee Tax Form Information

May 24th, 2017
Entering helpful information in Box 14 of your employees’ annual W-2 forms can assist them in their annual personal tax preparation – and limit the number of questions employees ask you about their W-2 forms.  Box 14 of Form W-2 is for “information only” and is not required information, nor does it “balance” or reconcile to any other payroll tax forms or calculations.
Savvy employers can use Box 14 to report any financial information to employees they wish to communicate.
Here are examples of common “Box 14″ employee disclosures: 
  • “S” Corporation health insurance premiums paid by the employer for 2%+ shareholder employees.  This will help small business owners claim a “self-employed health insurance deduction” on their Form 1040.  (See our “S” Corp Insurance PayDay)
  • After-tax employee contributions to an HSA can be reported in Box 14 with the same amount deducted on the employee’s Form 1040.  (See our HSA PayDay)
  • Pastors and tax preparers find it useful if a pastor’s housing allowance amount is entered in Box 14.  (See our Tax Tips for Pastors PayDay)
  • Contributions made by employee payroll deduction to the Indiana College Choice 529 program are ideal for entry in Box 14.  In this manner, the employee and/or tax preparer is more likely to claim the Indiana income tax credit for this college funding vehicle.  (See our College Savings PayDay)
  • The annual calculation of “personal use of a company car” is frequently entered in Box 14.  This taxable income shows the IRS that the employee is following the tax law in this “hot” tax audit area.
  • An employee’s donations to a charity via payroll deduction can be entered in Box 14 as to the amounts and names of charities.  In this matter, the personal tax deduction for charitable giving is not likely to be overlooked.
  • Other Box 14 “tax-help” possibilities include payroll deductions for professional dues, job uniforms, work supplies, after-tax health insurance premiums, etc.


How Does AccuPay Enter Box 14 Information for Our Clients?

If Box 14 is reporting an annual calculation of an expense paid via employee payroll deduction, such as after-tax HSA employee funding, we can insert an “accumulator code” and name that will automatically tally the amount and enter it in Box 14 with a “code”.

If Box 14 is used to report information which is not calculated from payroll deductions, such as personal use of company car, we will need information from the employer which we can manually report in Box 14.

Box 14 – Use Your Creativity!

Make a list of the types of information your employees typically ask about when they obtain their annual W-2 forms.  Much of the tax information can be reported in Box 14 and help your employees compile tax information for their annual 1040 forms. Our website has a Resources > Forms page which includes a researched memo we wrote called “How to Read Your W-2.”  We recommend you give a copy of this to your employees with each year’s W-2 forms.
 
If you wish to talk with us about adding payroll deduction “accumulators” for annual W-2 reporting, call your processor at 317-885-7600.
PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.
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ACA Reporting by Employers—-how much longer?

May 16th, 2017

All employers with 50 or more “full-time equivalent employees” (so called FTE’s), which is a combination of employees who work 30 or more hours per week plus all part-timer hours converted into 30 hour work-weeks, have been required to maintain meticulous records of employee hours, benefits offered, employee costs for the insurance offers, etc——–Employers with 50 or more FTE’s are deemed “applicable large employers” and must report hours, benefits, costs, etc on annual 1095-C forms to all full-time employees as well as a “summary” 1094-C form to the IRS——all of which is complex, time consuming and costly.

The recently passed House bill, the American Health Care Act (AHCA) is expected to face significant scrutiny in the Senate, to include possible “start from scratch” revisions to the House passed bill. Some experts have commented that the process of ACA “repeal and replace” will take a long time, with some thinking nothing will be passed until after the  the next Election cycle, Nov of 2018

I just listened to a webinar yesterday presented by an attorney who is an expert in healthcare reform  specializing in ACA/ benefits (she also has degrees from Harvard undergrad and Harvard Law). She indicated that the current AHCA, even if it passed the Senate “as is” (very unlikely), provides for “exchange subsidies” through year 2019, which thereafter converts to “tax credits”. Since the subsidies are based on information provided by employers in the 1095-C forms, EVEN IF the AHCA were enacted this year, employer reporting would still be required to determine whether individuals are entitled to subsidies——which last through year 2019 based on the recently passed House bill

Conclusion———Employers should continue to track employee data and plan on accurate annual reporting of 1095-C and 1094-C forms, just as they have done for the past 2 years. Make sure you have systems in place which correctly track employee hours and benefits offers and costs

 

 

 

 

 

 

 

 

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SMALL EMPLOYER HRA BASICS

May 5th, 2017

Effective January 1, 2017, small employers (less than 50 employees) can offer employees reimbursement of medical expenses to include personal health insurance premiums on a tax-free basis.  These new programs are called “qualified small employer health reimbursement arrangements”, or “QSEHRA’s” for short.

Many smaller employers had previously reimbursed employees for personal health insurance premiums on a tax-free basis until the Affordable Care Act/Obamacare required that tax-free HRA accounts be “paired” with employee group insurance offered by the employer.  Most employers who had been reimbursing employees for their personal health insurance premiums were not also offering group insurance.  Tax-free reimbursement of health insurance premiums had been used by employers for over 50 years based on IRS Revenue Ruling 61-146.  This long-used benefit strategy was essentially “killed” January 1, 2014 by various provisions of the ACA.

QSEHRA – NOT YOUR DADDY’S HRA!

Congress passed legislation late 2016 which created “Qualified Small Employer HRA’s”, effective in 2017.  Employers eligible for the new QSEHRA program need to meet the following conditions:

  • The employer must employ less than 50 employees;
  • The employer must not be offering an employee group insurance plan;
  • The employer must offer the HRA reimbursements on “similar terms/similar reimbursement amounts” to all full-time (30+ hours per week) employees who have been with the employer for at least 90 days and are at least age 25;
  • The employer must provide “notices” to employees about the QSEHRA benefits and also report the annual reimbursement amounts on the employee W-2 forms (as non-taxable HRA benefits).
UNLIKE THE FORMER TAX-FREE PERSONAL INSURANCE PREMIUM REIMBURSEMENTS BEFORE THE ACA, the brand new QSEHRA’s have a few significant disadvantages as follows:
  • An employer must offer the reimbursements to virtually all full-time employees “on the same terms” — Gone are the days of negotiating customized tax-free insurance reimbursements with specific employees.  A very defined “non-discriminatory” theme permeates the new 2017 version of health reimbursement arrangements.  All for one, one for all (which could “beg the question”, why not traditional group insurance instead of QSEHRA’s?);
  • Employees who are purchasing personal health insurance from the “marketplaces/exchanges” must reduce their subsidies/premium tax credit amounts by the amounts of the offered QSEHRA program.  An employer considering a QSEHRA program needs to survey their employees to determine which employees would lose federal tax credit subsidy amounts based on their offered QSEHRA amounts.  This program is generally not advisable for an employer who has several employees who qualify for insurance premium subsidy on the ACA exchanges; and
  • The old Revenue Ruling 61-146 tax-free insurance reimbursements involved minimal “red tape.”  The new QSEHRA program involves notices from employers to employees, reporting of HRA benefits on employee W-2s (a new “Box 12″ code will likely be used), notices from employees to the ACA marketplace if they are receiving subsidies, and accounting for employee reimbursement amounts as compared to the maximum legal annual amounts ($4,950 for employees only and $10,000 annual benefit amount for employee/family coverages.)
ADVANTAGES OF THE NEW HRA ACCOUNTS
  • All QSEHRA benefits are tax-free.  Many employers now are simply paying employees more taxable wages so they can purchase insurance and pay medical expenses “after-tax”.  The tax-free aspect of the QSEHRA benefits saves employers 7.65% in taxes and employees save 25-35% of the benefits in taxes;
  • The QSEHRA program enables employers to “fix” or “define” their costs at whatever monthly reimbursement amounts the employer chooses (but not to exceed the monthly $412.50/$833.33 tax law caps in QSEHRA benefits allowed).  Employers could view this cost certainty as an advantage over the annual pricing of group insurance plans (in essence, the risk of increasing insurance premiums is shifted from the employer to the employee);
  • Although not a group insurance plan, the QSEHRA program is a meaningful medical benefits plan which smaller employers can use for recruitment and employee retention.
A KEY CONSIDERATION
Before an employer adopts a QSEHRA program, we recommend that the plan benefits, insurance coverages/networks and costs be compared to group insurance options.  Some benefits brokers have told us that both the networks and pricing available in group insurance plans are better than options for individual insurance policies.  Options available for both personal and group insurance seem to be constantly changing as insurance companies both enter and exit various marketplaces.
IN CONCLUSION

Several smaller employers have asked us about the new HRA programs which became law this year.  In many cases, the employers have discovered that the new HRA/insurance reimbursement accounts are far less attractive than their previous, before ACA, reimbursement plans.  It is still too soon to determine how many smaller employers will adopt and use the new QSEHRA programs.

As an employer considers whether to adopt a QSEHRA plan for 2017, they should also carefully review coverage, cost and “network” options available with group insurance plans.

If you would like more information about the brand new QSEHRA plans, we have some very detailed “Q & A” information that can be emailed to you upon request.  If you actually adopt a QSEHRA, please let us know so that we can gather the benefit information needed for 2017 employee W-2 forms.

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House Repeals Obamacare—What about Senate?

May 4th, 2017

Today the House of Representatives cobbled together enough votes to “repeal and replace” the Affordable Care Act, better known as Obamacare. This legislation will now go to the US Senate, where experts anticipate major challenges exist as the Senate debates modifications to the House passed bill. The Senate will likely make major changes to the newly proposed American Health Care Act, now becoming referred to  as TrumpCare. Once the Senate generates their own version of “health care reform”, the House and Senate will then work on a compromise bill before it is presented to the President for signature—if the Senate even creates their version of a health care reform bill.

Employers need to continue complying with the ACA/Obamacare as it exists today, all the time with their “ear to the tracks” as to changes to the current law. AccuPay will continue to monitor this legislation and keep our clients informed as to the proposed law’s status and action steps to consider.

 

 

 

 

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New Overtime Rules on Hold

November 29th, 2016
On November 22, a federal judge in Texas granted a preliminary injunction blocking the December 1, 2016 implementation of the Department of Labor’s new overtime rules. These rules, as discussed in previous PayDay newsletters, would increase the minimum salary for exempt employees from $455 to $913 per week.
The injunction was the result of a complaint filed on September 19 by a coalition of 21 states, later joined by business organizations led by the US Chamber of Commerce. The complaint claims that the Department of Labor overstepped its authority in the drafting of the final overtime rule changes, specifically in regard to the increased exempt salary limits and automatic increases going forward. Upon initial review, the court determined the complaint had merit, citing evidence that the new rules were in violation of Congress’s original intent – which was to use an employee’s “actual duties,” rather than salary, to determine exemption from overtime pay. The court granted the states’ motion for a nationwide, temporary injunction. In the meantime, the court will continue to review the case until a final determination can be made.
What Now?
At this point, it is unknown whether the rules originally set to go into effect on December 1 will be implemented at a later date, will be implemented in part, or will be determined unlawful.
For employers who have already increased employee wages based on the proposed exempt limit, it is recommended by organizations such as SHRM that these changes be kept in place. Taking back raises, unless the expense jeopardizes a business’s viability, may have more negative impact than spending extra money on salaries. Employers who have already paid employees at a higher rate cannot take this money back. If deciding to reduce wages going forward, employers should pay attention to state laws that require advance notice of wage reduction. (Indiana does not have such a law.)
Employers who have not yet implemented changes to comply with the new overtime laws would be wise to postpone these decisions until the final ruling is made.
As of today, the future of the DOL’s new overtime rules is still unknown. While employers can now legally postpone any sweeping internal changes, they should not assume that the overtime rules have been permanently barred. Employers would be wise to have a plan in place if and when it becomes necessary.
AccuPay’s HR Support Center has added the video, “What the Overtime Injunction Means for You” which we are making available to you here.  Our HR experts are also available to help you strategize for handling overtime or any other HR issues. For more information about the HR Support Center or HR consulting through AccuPay HR, call Betsy or Laura at 317-885-7600.
 
PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.
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Impact of New FLSA Rule Changes Webinar

November 15th, 2016
The Department of Labor has proposed rule changes to overtime eligibility that could make more than five million new white collar workers previously classified as “exempt” eligible for overtime pay.  The changes, which take effect on December 1st, could mean increased payroll costs, unhappy employees, and headaches for management.
Register now for the November 16th webinar, The Unintended Consequences of New OT Rules, to learn more about the rule changes and get valuable tips on controlling payroll costs, including:
  • The 4 requirements of the Fair Labor Standards Act (FLSA) under the new rules
  • 2 ways the new overtime changes will impact reclassified employees, managers, timekeeping editors, and approvers
  • 2 ways the new overtime changes will impact job descriptions, job satisfaction, and retention
  • Best practices for overtime management in the face of the new regulations
When registering for the session, please ensure that you put our full company name in the registration field that reads, “Please provide the name of the company that referred you to this webinar.”
This webinar is being hosted by ChrysMarie Suby, President-CEO of the Labor Management Institute, who brings over 35 years of workforce amnagement experience and has been featured in numerous industry publication.  Register today to prepare for the upcoming overtime changes.
P.S. Even if you can’t attend the webinar, be sure to register now to receive exclusive access to the webinar replay.

 

Have Questions?
Call one of AccuPay’s many CPP/CPA service teams at 317-885-7600.

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ACA 101 For Employers

October 18th, 2016

Employers of all sizes need to review the impact of the Affordable Care Act, also known as Obamacare, on their responsibilities as to notifying employees, providing medical benefits, reporting payroll/benefits information to the IRS, and reviewing both Marketplace and IRS notices for possible ACA penalties.

This PayDay will provide all employers with a basic overview of the Affordable Care Act, to include both required and recommended action steps employers should take regarding the ACA.

Purpose of the ACA

The express purpose of the Affordable Care Act is to provide insurance to all Americans in an affordable manner. A key driver in meeting this objective is a system of penalties/fines which can be imposed on both individuals and employers.

Here are the basics:

Individuals – Virtually everybody is required to obtain health insurance or pay a penalty for not doing so (termed the individual mandate). The amount of the individual penalty has increased dramatically from its inception in 2014 to the thousands of dollars for families without coverage in 2016. Individuals can obtain their coverage through brokers, government exchanges/marketplace, or through their employers. A key component of the ACA is that individuals at lower income levels may be able to obtain cost subsidies or insurance at discounted premiums from government exchanges.

Employers – Employers which average 50 or more “full time equivalent employees” are deemed “large employers” and are required to offer coverage to their employees or potentially pay penalties. The ACA is essentially telling large employers that they are required to offer affordable, minimum essential value insurance coverage, or to instead potentially pay fines/penalties to the IRS. An employer’s payment of penalties in lieu of offering group insurance to employees helps finance the cost subsidies which the government exchanges provide to lower income individuals who procure medical insurance on a government exchange.

Employer Action Step #1 – Are You A Large Employer? 

The ACA’s intent is to mandate large employers to either offer group health insurance or help finance America’s health care costs by paying penalties to the IRS. The ACA relieves smaller employers from the requirement to provide insurance coverage or pay penalties.

A large employer is one which employs 50 or more full time equivalents (so called FTEs) based on monthly averages of FTE’s during a calendar year.

Your FTE count is figured as follows (must be calculated every month):

  • Add up all of your employees who work at least 30 hours per week; plus
  • Add the total hours of all remaining part time employees and divide those total part time monthly hours by 120 hours per month

*Special Note – Employers who are affiliated with one another due to common ownership or a management company services group, are generally required to be counted as a single employer for FTE “large employer” purposes. One of our AccuPay ACA experts can help you determine if you have a controlled group of employers (IRC Section 414).

Counting your FTEs every month is required to determine whether you are a large employer for ACA purposes. AccuPay’s staff includes two Certified Healthcare Reform Specialists who can help you count FTEs and determine if you are a large employer.

 

Less Than 50 FTEs – Small Employer

Small employers are not required to offer health benefits to employees and are not subject to IRS fines/penalties.

Small employers should take the following action steps regarding ACA:     

  • Provide every new employee with a Department of Labor (DOL) notice which explains whether you offer insurance or not, and also informs new employees about government exchanges. AccuPay’s website has copies of “model DOL ACA notices” which you can download and use for your new employees;
  • If you do offer medical insurance/benefits to your employees, the coverages must meet various ACA requirements. Your insurance broker/benefits consultant will make sure your plan meets ACA standards; and
  • Small employers may receive letters/notices from the government marketplace which provides information about employees who have obtained cost subsidies on their marketplace insurance. Small employers may wish to appeal any marketplace notices they feel are incorrect.

Large Employers  

If you count your full time equivalent employees each month and your annual average monthly FTE counts average 50 or more you are deemed to be a “large employer” for the succeeding/next year.

Responsibilities of a “large employer” are all of the following:  

  • Provide DOL notices to your new hires;
  • Maintain detailed records of hours worked for each of your employees so that you can make FTE counts every month and very importantly identify your full time employees every month (for ACA employer reporting to the IRS and to your employees); and
  • Make sure that you carefully evaluate your “pay or play” ACA strategy – the costs and business values of offering group insurance compared to estimated non-tax deductible IRS penalties for not offering insurance;

AccuPay can help you calculate your “pay or play” costs, net of tax benefits, in conjunction with your benefits consultant (who needs to thoroughly understand ACA law);

  • If you decide to “play” and offer group coverage (most employers do), you need to make sure that your coverage meets ACA standards (your benefits consultant will know this);

As a large employer, you are required to report month-to-month annual information for all of your full time employees (generally those who work 30 or more hours per week). Your employee ACA information is reported on IRS 1095-C form and is due January 31st of each year.

  • This information is detailed, complex, and requires information as to hours worked and medical benefit offers made (or not made) to every employee for every month of the calendar year.

AccuPay prepared and mailed thousands of IRS 1095-C forms for year 2015 for our large employer clients. Both of our payroll software platforms (PayChoice by Sage and SaaShr by Kronos) will produce annual employee 1095-C forms.

  • As a large employer you are also required to file an annual Form 1094-C with the IRS by February 29th (March 31st if filing electronically as AccuPay does). The 1094-C form calculates an employer’s number of full time employees each month for the reporting year.

Make sure your payroll company, benefits broker, etc. knows how to accurately prepare your employee 1095-C and IRS 1094-C forms. IRS penalties for errors and omissions are onerous.

In Conclusion

AccuPay assisted about 100 employers with ACA reporting (both employee 1095-C and employer 1094-C) services for the inaugural reporting year of 2015. Accurate ACA reporting requires knowledge of the Affordable Care Act laws, coupled with systems/procedures which integrate payroll and benefits information onto the ACA forms.

Now is the time to make sure you are complying with ACA law as to both benefits offered and employee hours/information tracking.

AccuPay’s team has ACA law and systems consultants who are certified in ACA and can help you comply with ACA requirements in the most cost effective manner. Call us at (317) 885-7600 with your ACA questions and/or to schedule an ACA analysis review meeting.

 

This blog and our PayDay newsletters are a communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.

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The Importance of Job Descriptions

September 21st, 2016
Job Descriptions create the foundation for recruiting, hiring, managing, and setting expectations of employees. Writing Job Descriptions is a critical step in workforce planning. Job Descriptions should be considered ‘living’ documents that should be updated as job duties change and evolve.
To create a job description, the organization should first conduct a job analysis. The activities included in the Job analysis are:
  • Reviewing the existing job description; and
  • Interviewing the employee in the position, his/her supervisor, and others who work closely with the employee.
Including management and employees in creating job descriptions can promote your organization’s values and re-enforce the company culture.

The benefits of Job Descriptions include:
  • Recruiting Assistance – It relays core job requirements to applicants to attract competent employees and helps develop interview questions.
  • Defines Essential Duties & Qualifications – It clearly communicates the requirements of the position.
  • Creates a Standard for Performance Reviews – It serves as a basis of the job requirements that must be met.
  • Determines Reasonable Accommodations – It can assist in determining reasonable accommodations for compliance with the Americans with Disabilities Act.
  • Liability – It can be used to dispute Unemployment claims and assist in determining proper Workers’ Compensation codes which determine premiums.

Job Descriptions should typically include the following:

  • Job Title – It should include an accurate description of the type of work performed and level of the work.
  • Position Summary – It should provide a basic overview of the purpose and function of the job.
  • Job Duties, Responsibilities, and Tasks – It should have a listing of the primary tasks the jobholder performs.
  • Minimum Job Requirements – It should include education, experience, skills, and any certifications or licenses needed to do the job.
  • A line that states “other duties as assigned” – A job description is subject to change and is not intended to be all inclusive.
  • Title of Direct Supervisor, and other important reporting structure information
  • Physical Requirements – This can include minimum lifting requirements, sitting, standing, walking, climbing, talking, hearing, seeing, tasting, smelling, and use of hands/fingers.
  • Work Environment – This should, if applicable, include noise level, extreme temperatures, weather conditions, and various types of exposure.
  • FLSA status (Exempt or Non-Exempt) – By spelling out the FLSA status you set the parameters for work hours, pay type, and overtime.
  • A line for the employee to sign as proof they have reviewed and understand the job description.  Once the employee has signed the job description, give one copy to the employee, and place the original in the employee’s personnel file.

AccuPay HR is available to help clients create and/or update Job Descriptions, as well as most other HR needs. Please call our Certified HR Professionals, Betsy Wilson or Laura Buchanan at (317) 885-7600 for more information about AccuPay HR services and pricing. 

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.
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Are You Ready for the New Overtime Rules?

September 21st, 2016

As most employers know, the U.S. Department of Labor has increased the required salary which must be paid to an employee who is otherwise “exempt” from overtime pay.Effective December 1, 2016, an employee who is exempt from overtime pay must be paid at least $47,476 annually ($913 or more per week). This increased salary amount compares to the current required annual salary of $23,660 (or $455 per week).

AccuPay has partnered with HR Answerlink to provide you with a 45 minute on-demand video titled “FLSA Overtime Changes – What Every Employer Needs to Know.” Employers, whether for-profit or not-for-profit, and of all sizes, should watch this video presentation and apply its content to your own unique employee demographics. Also linked here is the U.S. Department of Labor’s Q & A information about overtime rules.

AccuPay HR

As federal, state, and local governments continue to issue increasing regulations pertaining to various aspects of human resources and the dynamics of employer-employee relationships, we have noticed an increasing demand for HR advice from small to medium employers. In response to increasing needs for HR consulting from employers with 1 to 500 employees, we have formed AccuPay HR to assist our payroll clients with their HR needs and concerns.

AccuPay’s staff currently includes three HR Professionals, each certified by the Human Resources Certification Institute (HRCI), as a PHR (Professional in Human Resources) or SPHR (Senior Professional in Human Resources), and each have varied experiences dealing with various types of HR issues. AccuPay’s team also includes two professionals with certifications in the Affordable Care Act (ACA), and whose ACA experiences include both ACA strategic planning with employers and also ACA reporting requirements.

AccuPay HR’s objective is to provide HR/ACA consulting to our clients at budget-friendly rates. Our clients frequently tell us that they need some HR help, but well short of hiring a dedicated HR Director. On demand HR services (phone calls, local face-to-face visits, or specific HR projects) are priced so that our payroll clients can purchase 5 or 10 hour packages of HR time for a year at a time, and we will invoice the HR charges ratably per payroll. OurAccuPay HR one page flyer details some of the more common HR services provided by our team of HR Professionals.

HR Software

AccuPay is a “channel partner” and licensee of a cloud based Human Resource Information System (HRIS) software which helps larger employers (generally 50 plus) manage payroll, HR, time/attendance, benefits enrollment, ACA, and recruitment/onboarding for their workforce/employees. The system is robust in functionality, and is intended to serve a market of employers who have more complex HR needs. A YouTube video of our Kronos Workforce Ready system overview can be seen here.

In Conclusion

AccuPay is growing and evolving to meet the increased HR needs of our clients. We currently have software which meet the payroll, tax, and HR needs of various complexity levels of our clients. As our competitors increasingly focus on do-it-yourself software technology (which is important!), we will continue to focus on people and client service. As always, address your questions and information requests to your dedicated payroll specialist at 317-885-7600.

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.
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Review Your 2016 Tax Targets

September 5th, 2016
REVIEW YOUR 2016 TAX TARGETS
 
Mid-year is an excellent time for both employees and employers to make sure they will reach their payroll, tax and financial objectives for calendar year 2016. The following items should be reviewed for possible action steps before your last payroll of 2016. 

ARE YOUR TAX WITHHOLDINGS ON TRACK?

Now is the time for every employee to review their 2016 payroll income tax withholdings to prevent April 15, 2017 “tax surprises”. This is particularly important for business owners and households in which both spouses are employed. AccuPay would be pleased to adjust your remaining 2016 tax withholdings upon your instruction. Not sure if your withholding is adequate? Visit our website and plug your information in to the IRS Withholding Calculator for a quick review.

ON TRACK TO MEET YOUR RETIREMENT FUNDING OBJECTIVE?

An employee can contribute up to $18,000 this year from payroll as “elective deferrals” to their 401(k) and 403(b) retirement accounts. If an employee is at least age 50 by 12/31/16,an additional $6,000 can be contributed as a “catch-up” contribution. If you are participating in a SIMPLE-IRA plan through your employer, the maximum 2016 employee contribution amount is $12,500, plus $3,000 as an additional “catch-up” for those at least age 50.

Review your year-to-date payroll details to determine if you will “hit” your retirement plan targets for 2016.

HSA TARGETS ON TRACK FOR 2016?

Maximum permitted funding for 2016 to health savings accounts is $3,350 for a “self-only” HSA and $6,750 for a “family” HSA. For those employees at least age 55 this year, you can add an additional $1,000 to your maximum allowable 2016 HSA funding.

These HSA funding limits are the total combined amounts which can be contributed by an employee plus any employer matching contributions.

FLEXIBLE SPENDING ACCOUNTS (FSA’s)

Those employees who are enrolled in employer “flexible spending account” programs should review their 2016 FSA contributions (limit of $2,550 for 2016),  how much they have spent, and how much remains to be spent by year-end (or a later “grace period date” early 2017 if the employer plan includes a grace period). If the employer has amended their Section 125 plan to include a “rollover provision”, an employee can carry/roll over up to $500 per year of unused FSA funds to the following year.

COLLEGE CHOICE 529 PLAN FUNDING 

For employees whose employers are sponsoring Indiana College Choice 529 plan payroll deduction plans, the State of Indiana provides an Indiana resident with an income tax credit in the amount of 20% of up to $5,000 of Indiana 529 education plan funding, per household. Essentially, if a household contributes $5,000 into an Indiana 529 education plan, the State of Indiana gives you $1,000 back in the form of a tax credit on your 2016 personal tax return.

AccuPay can help an employer set-up a payroll deduction 529 plan as a no-cost employer – sponsored fringe benefit plan for employees. You can contact AccuPay or click here for program details.

FAMILY MEMBERS ON THE PAYROLL

If a business owner has children or parents who provide services to their business, putting them “on the payroll” saves income taxes if the children or parents are in a lower income tax bracket than the business owner. The business should pay wages which are consistent with the value of the services, based on time spent and job complexity. For 2016, a child can earn up to $6,300 in wages without paying any Federal income tax. If the business sponsors a 401(k) or SIMPLE-IRA plan, consider paying your spouse “on the payroll” so that he/she can also participate in your business retirement plan for 2016.

REIMBURSE EMPLOYEE VEHICLE EXPENSES

The 2016 IRS permitted business mileage rate is 54 cents per mile.

“S” CORPORATION PAYROLL MEDICAL PREMIUMS 

Based on IRS announcements and positions they have taken within the last few years, it is essential that “S” corporation owner – employees have their medical insurance premiums either paid directly by the “S” corporation or personal health insurance premiums reimbursed by the “S” corporation. Health insurance premiums paid personally by the “S” corporation owner-employee and not reimbursed will not be eligible for the “self-employed health insurance deduction”.

Make sure all employed owners of a “S” corporation have been reimbursed for their premiums by 12/31/16 (if not directly paid by the “S” corporation).

“S” CORPORATION OWNER WAGES 

“S” corporations which are profitable are required to pay “reasonable compensation” to their owner-employees. If you own a profitable “S” corporation and have taken little or no wages to date in 2016 consult with your tax advisor as to “catching up” your compensation to a “reasonable level” before the end of 2016.

IN CONCLUSION

Call one of AccuPay’s “CPP/CPA advisor service teams” at 317-885-7600 to discuss any questions or comments you have about payroll tax planning adjustments needed before year-end 2016.  

 

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.
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