Posts Tagged ‘Payroll’

Supersize with Roths

October 18th, 2017

If your employer’s 401(k) or 403(b) plan permits employees to contribute “after-tax” to a “Roth” account, you should seriously consider contributing part or all of your “elective deferrals” to your Roth account.  Here’s why:

  •  Your Roth contributions and all earnings accumulated in your Roth account grow 100% tax-free to you.  Earnings on your “regular” 401(k) pre-tax funding will be taxed to you at whatever tax bracket you are in when you draw out 401(k) funds.  So the Roth investment earnings compound tax-free whereas the regular 401(k) earnings are deferred from income tax  until you take 401(k) plan distributions;
  • If you contribute to your 401(k) or 403(b) plan on a pre-tax basis, are you going to save and invest your annual tax savings for retirement, or instead spend it each and every year?  If you contribute $5,000 pre-tax to your employer’s 401(k) plan, and you are in the 15% Federal tax bracket, will you save and invest the $750 in annual tax savings?  Most people will spend their tax savings every year, and later be taxed on their regular 401(k) plan distributions.  A Roth 401(k) provides discipline needed to accumulate tax-free funds for your retirement; and
  •  Distributions from a regular 401(k) plan often dramatically increase the taxes on retirees’ social security benefits – not so with Roth distributions.



  • A person in the 15% or lower bracket (the majority of US taxpayers) does not save substantial taxes each year from pre-tax funding of regular 401(k) accounts.  Funding a Roth 401(k) is almost always the best choice for taxpayers in lower tax brackets;
  • Pastors/ministers who have “opted out” of the social security system are often excellent Roth candidates;
  •  Younger employees with 20-30 years until retirement are also excellent candidates for the compounding of totally tax-free earnings in a Roth; and
  • Employees who envision they will fund their personal retirement years based on income from social security and their 401(k) plan distributions are excellent Roth candidates.  As previously stated, Roth distributions do not create taxes on social security benefits, as regular 401(k) and IRA distributions do.  The receipt of non-taxable Roth distributions plus non-taxable social security benefits may enable a person to retire with a reasonable tax-free cash flow.



Every employer can include a Roth provision in their 401(k) or 403(b) plan document (not available for SIMPLE-IRA plans).  However, the Roth provision require separate plan accounting for the Roth funds and the regular pre-tax plan contributions.  Employer “matches” can not be added to the Roth funds.  Separate accounting for regular and Roth contributions, as well as allocating investment earnings on these separate accounts, adds to the complexity and the cost of plan administration.



We are big fans of Roth funding for the majority of taxpayers.  Consistent and regular payroll-deduction funding of a Roth investment will accumulate to a sizeable account balance after several years.  Your tax-free Roth 401(k)/403(b) distributions coupled with minimally taxed social security benefits can provide millions of Americans with a comfortable cash flow in retirement years.

AccuPay can recommend local retirement plan consultants/administrators who can assist employers with Roth provisions in 401(k) and 403(b) plans.  Call AccuPay at 885-7600 for local experts we recommend to clients.


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
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. 


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.


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.


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.


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.


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.


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.


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


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” 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.


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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The Overtime Final Rule – What’s it Mean to Me?

May 26th, 2016

The Overtime “Final Rule” signed by President Obama last week will have a significant impact on employers, as an estimated 4.2 million workers will become eligible for overtime when the law goes into effect on December 1, 2016. The greatest impact will be on employers whose employees are earning salaries just above the former standard of $455 per week. Below is a Q&A, adapted from FAQ’s created by the Department of Labor (DOL), to help employers create a strategy for dealing with this new legislation.

  • What is the purpose of the new Overtime Final Rule?
    • The main purpose of the Final Rule is to update the regulations that determine whether white collar, salaried employees are exempt from the FLSA’s minimum wage and overtime protection. The regulations were last updated in 2004, when the standard “exempt” salary level was set at $455 per week. The new ruling increases the weekly standard salary to $913 per week or $47,476 per year for a full-time worker. 10% of this amount may come from “non-discretionary” bonuses. This would include commissions or established bonuses based on quotas, etc. and paid at least quarterly, but would not include spontaneous/unplanned merit or performance bonuses. The Final Rule includes provisions for the standard exempt salary to be updated every three years. The ruling does not change the standard duties test, identifying terms by which executive, administrative, or professional employees may be considered exempt. The main purpose of the final ruling is to update the wage requirement for overtime exemption, which in effect increases the number of U.S. workers who are eligible for overtime.


  • How do I determine if my employee is exempt?
    • To qualify for exemption, a white collar employee must:
      • be paid a salary – a fixed amount not impacted by quality or quantity or work performed
      • be paid more than $913 per week ($47,476.00 annually)
      • perform executive, administrative, or professional duties as described in the Department of Labor’s duties test (found of the DOL website).
    • In addition, the DOL regulations provide exemption for certain highly compensated employees who earn above an annual compensation of $134,004 under the new rule, and satisfy a minimal duties test.


  • How will employers adapt to the changes in the Final Rule? 
    • Employers have a range of options for responding to the updated standard exempt salary level. Some of these options include:
      • increase the employee’s salary to the new standard salary in order to maintain exemption for a currently exempt employee
      • pay overtime at one and a half times the employee’s regular rate for any overtime worked
      • reduce or eliminate overtime hours
      • reduce base salary (as long as employee still earns minimum wage) and pay overtime for any hours worked over 40 each week
    • The response of the employer will be dependent upon each individual employee’s circumstances. Employers may give raises to those close to the new standard salary, maintaining their exempt status, while choosing to pay occasional overtime to those lower-salaried employees who rarely work overtime. It is important to note that nothing in the ruling requires employers to switch newly “non-exempt” employees to hourly. They can remain on salary, but must be paid overtime if working over 40 hours per week. Employers may use the same means to track overtime as they use for hourly employees. (Ask AccuPay if you need help with timekeeping services.)


  • Who is covered by the FLSA and required to comply with the Final Rule?
    • The FLSA or Fair Labor Standards Act, establishes minimum wage, overtime pay, recordkeeping, and youth employment standards for employees in the private sector as well as in Federal, state, and local governments. In general, employees of enterprises with an annual gross volume of sales made or business done of $500,000 or more who “engage in commerce or in the production of goods for commerce” are covered by the FLSA. Employees of hospitals, businesses providing medical or nursing care, schools (both for profit and not for profit) and government agencies are covered regardless of sales/income. Individuals may be covered by FLSA even if the business is not. For example, if individual employees initiate interstate commerce, such as ordering supplies, he or she may be eligible for FLSA protection even if the business is not.
    • Non-profits and/or their employees, are likely subject to FLSA, although it is possible some smaller non-profits and churches are not. The DOL will be conducting a webinar for non-profits pertaining to the Final Rule on Tuesday, June 7. Visit the DOL website to register. Determining exemption from FLSA is something that must be carefully considered. Churches and non-profits should review all of the guidelines carefully in light of their specific circumstances before making such a determination. There is no “blanket” exemption for non-profits or churches when it comes to the FLSA, and penalties for non-compliance can be severe.


Depending on your workforce, the Final Rule could be significant for your business and your payroll costs. It is important to plan now for how you will implement that new rules when enforced in December. For more information, you can sign up for free webinars conducted by the Department of Labor at If you would like more one on one assistance, try out AccuPay’s HR Support Center. Our HR On Demand service connects you with an HR expert who can help you navigate the new FLSA rules. These experts are available to you on an unlimited basis for just $40 per month, which includes access to the HR Support Center that is full of resources and information on this and other HR topics. Contact Accupay today for more information 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, tax, HR or legal advisor before implementing any ideas, comments or planning techniques.

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Indiana County Income Tax Rules

January 5th, 2016
In Indiana, it’s important to review your employees’ county tax withholdings at the beginning of each year to ensure that accurate county taxes are withheld with each payroll.  A quick review of county income tax withholding rules is as follows:
  • Where did the employee reside and work on New Year’s Day? Answers to these questions on  Form WH-4 establish an employee’s county tax withholding rate for the entire year (moving from one county to another during the year does not change the county in which taxes are withheld.) Generally, county income tax should be withheld based on each employee’s county of residence on New Year’s Day of each year; 
  •  If an employee resides out-of-state on January 1, 2016, but works in an Indiana county on New Year’s Day, the employee’s county tax withholding should be based on the employer county’s “non-resident” tax rate, which is generally a lower rate (Indiana county income tax withholdings are required even if Indiana state tax is not withheld due to a reciprocity agreement with an adjoining state); and
  • If an employee both lives and works outside Indiana on New Year’s Day, they are not subject to county tax for the entire year even if they move to an Indiana county on January 2.
  • In addition to the federal form W-4, an employer should request a new Indiana Form WH-4 from every employee currently on the payroll who is living or working in Indiana. Make sure AccuPay receives a copy of Form WH-4 for every employee currently on your payroll or that you hire during 2016.
 To access the complete list of Indiana county tax rates, click here: County Tax Rate Table .

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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Great News for Indiana Employers!

November 16th, 2015

Indiana employers were given an early Christmas gift on November 10 when the state of Indiana repaid its long-standing debt to the federal unemployment fund, and thus ended Indiana’s status as a “credit reduction state.” The repayment of this loan means that Indiana employers will avoid a penalty of $126 for every employee earning at least $7,000 during 2015. Indiana had been a credit reduction state since 2010, after borrowing from the federal unemployment fund to replenish the state’s account hit hard by the recession.

For 2015, the following states remain as credit reduction states. They are shown with the additional percentage of tax owed on each applicable employee’s first $7,000 in wages. These additional funds are due when the annual Form 940 is filed the end of January:

California         1.5%

Ohio               1.5%

Virgin Islands  1.5%

Connecticut     2.1%

If you are a client of AccuPay and have employees in any of the states above, the additional FUTA tax will be calculated and collected on the last payroll of the year. Please contact AccuPay at 317-885-7600 or with any questions.

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100 Million Tax Notices

May 27th, 2015

The IRS acknowledges that it sends over 100 million tax notices every year to taxpayers, based on billions of information documents it receives annually.

Add to that the millions of tax notices sent by financially strapped state governments and unemployment agencies, and the result is that virtually every taxpayer will receive a tax notice at some point, with many receiving a handful of notices and information requests every year.

Action steps required to resolve a tax notice are as follows: 

1) DON’T PANIC – Most tax notices can be quickly resolved with information, not additional tax.

2) CAREFULLY READ THE NOTICE – Most tax notices are computer generated and you must carefully read the entire notice to understand its message. Look for the form # — 941, WH-1, etc – the period – 2012, 3/31/13 (first quarter of 2013), April, 2013, etc – and the “explanation” noted.

3) DON’T UNDERSTAND THE NOTICE? – then call the phone # referenced on the notice and request an explanation. A tax notice may indicate that “a math error was made” when in fact they have no record of receiving your tax form. Tax notices are computer-generated to achieve taxpayer action (even if they invoke fear!), without regard to clarity. A call to the phone # listed on the tax notice often can clarify the real reason for the notice.

4) SEND IT TO A PRO – if you hired a CPA or payroll company to handle your tax issues, send them a copy of the notice for their review. Experienced tax pros are “trained readers” of tax notices and often can resolve them the same day you send a copy to them.

5) BE A PROJECT MANAGER – Tax Notices can escalate quickly as the computers aggressively send out second and third notices, if you do not manage the process. Dealing with the IRS or state government is not on a “level playing field”, so you must stay on top of tax notices – from day of receipt until the notice is resolved. If the notice lingers on, request that a “hold” be placed on your account until the issue is resolved.

 6) DOCUMENT EVERY EVENT – Maintain a “diary” or “log” in chronological order of every person you speak to. Ask for their complete name, where they are physically located, and their phone #! Keep copies of every piece of written correspondence. Always end every conversation with an agreed on “next action step” and a timeframe.

7) REQUEST PENALTY WAIVER – Many penalties can be eliminated or reduced if you request a waiver based on “reasonable cause”. If your first request is denied, you can appeal and request a meeting with a “real person” – who has greater decision-making authority than the agent who denied your first request.

8) GET IT IN WRITING! – Once you have resolved the tax notice to your satisfaction, make sure you obtain a written “letter of resolution”. It is not uncommon for a previously “resolved” notice to again surface a year or more later. Your “project management” of a tax notice is not over until you get the “letter of resolution”.

AccuPay pays payroll taxes and files payroll tax returns for over 1,000 central Indiana clients. Our Tax Director is a CPA with 40 years experience in resolving tax issues/notices. Most tax notices can be resolved “same day”, although some must be “project managed” for up to a year.

If you receive a payroll tax notice or payroll tax correspondence, call us at 885-7600, fax to us at 885-7591, or email the entire notice to us at or You can also send it to your dedicated payroll processor, who will make sure a tax notice is submitted to AccuPay’s Tax Department for review and resolution.    

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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Budget for Retro FUTA Tax

May 19th, 2015

Indiana employers have been paying extra or above normal Federal Unemployment Tax (FUTA) since the year 2010.
The additional FUTA tax is due to Indiana’s loan from the federal government in 2008 which was used to pay unemployment benefits from a depleted unemployment trust fund. (See attached January 21, 2015 memo here)
The Indiana Department of Workforce Development anticipates that the year 2015 will be the final “credit reduction state” year for Indiana, meaning that the “extra” FUTA tax will end January 31, 2016 for the year 2015.

Budgeting Extra 2015 FUTA Tax

AccuPay recently paid 2015 first quarter FUTA tax and has each employer’s actual FUTA tax amount for the first quarter of 2015.  If you would like to budget funds for the FUTA retroactive tax for 2015, your processor can provide you with your actual first quarter FUTA tax for 2015.  Since the 2015 “extra” FUTA tax rate is three times the “normal” FUTA tax rate, your additional 2015 FUTA tax due is exactly three times the amount of FUTA tax you paid for the first quarter of 2015.  This “three times multiplier” can also be used to calculate your extra FUTA tax for the next three quarters of 2015.  Some employers may choose to accrue this additional expense as a liability in their company financial statements.
AccuPay’s Pay Day from November 10, 2014 also explains the same FUTA tax matter. (More FUTA tax for 2014)  AccuPay can not impound or collect the additional FUTA tax from you since it does not become statutorily due until Indiana repays the Federal government loan on it’s November 10, 2015 due day.  As Indiana has advised, it does not anticipate repayment of the loan until the year 2016.

If you would like to know how much “extra” FUTA tax to accrue for the first quarter of 2015, any of AccuPay’s processors can provide you with your first quarter 2015 actual FUTA tax expense and simply multiply that amount by three.


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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