2013 YEAR-END PAYROLL PLANNING GUIDE AND CHECKLIST

 

It is hard to believe it is that time of year again. The end of the year always  brings  with it the need for some  additional payroll and payroll  tax planning considerations and preparations.  In an effort  to help your 2013 year-end  process run smoothly, we have prepared  this guide  to help you in your planning.  The information will discuss the following year-end issues and concerns:
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•         Federal and State tax identification rates
•         W-2 information
•         Year-end  bonus runs and adjustment payrolls
•         Fringe Benefits
•         Third Party Sick Pay
•         Employer HSA contributions
•         Reporting Employer Sponsored Health on W2 (Required for 250+    employees)

 2013 FUTA Credit Reduction

Federal law provides for a reduction in the FUTA tax credit when a state has outstanding federal loans for two years that have not been repaid by November 10,2013. The reduction in the FUTA tax credit is 0.3% for the first year and an additional 0.3% for each succeeding year until the loan is repaid.  There are 15 states that have outstanding  loans from the federal government and will now be subject to a reduction in the credit for unemployment taxes that can be applied to their annual IRS Form 940. Delaware has a 0.6 percent credit reduction.  States with a 0.9 percent credit reduction are  Arkansas, California, Connecticut,  Georgia, Kentucky,  Missouri,  New  York, North  Carolina,  Ohio, Rhode Island and Wisconsin.   Indiana  now has a 1.2 percent  reduction  that  will require  employers  to pay an additional $84 in FUTA costs per employee for 2013.

Employer Sponsored Group Health

The Affordable Care Act (ACA) requires employers to report the cost of coverage under an employer-sponsored group health plan.  Reporting the cost of health care coverage  on the W2 does NOT mean that the coverage  is 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.

Reporting is required for all employers who file 250 or more W2’s and is optional for those with less than 250 (transition relief).

The value of the health care coverage will be reported in Box 12 of the W2, with code DD to identify the amount. There is no reporting of these amounts on the W3.

Third Party Sick Pay

If a  third  party  (your  insurance  carrier)  has been  making  third  party  sick  payments to any  of  your  employees, the insurance company  should  provide  a listing to you by January  2, 2014 indicating all payments made during  the 2013 calendar year.

The  third party sick pay amounts  must  be reported  on your  tax returns.   It has been  our experience that clients  report these amounts through  the year, but discover  at year-end  they may not have reported  all  payments to us.

Subchapter S Health Insurance

When an S-corporation pays health and accident  insurance  premiums on behalf of the 2% shareholder, these amounts need to be reported for W2 purposes.   If the premiums are paid under a plan that does not discriminate (offered to all employees) the premiums are exempt from FICA.   If the premiums arc available only to the 2% shareholders, they will be treated like normal compensation and as such are subject  to FICA.

 Group Term  Life

When premiums are paid for group term life insurance for an employee, premiums for coverage in excess of $50,000 arc subject to FICA.

Personal Usc of Auto

The personal use of an employer-provided auto is subject to FICA.

Changes 2014 Payroll Year

The FICA rates effective January  1, 2014 are as follows:

Social Security portion is 6.2% on wages up to $117,000

Medicare portion is 1.45% on all wages. (Additional 0.9% on wages greater than $200,000 for employee)

In addition, the following contribution limits have been announced for 2014.

2014 Limits
Account Type

Regular Limit

Catch-up Amount Catch-up Limit
401(k)

$17,500

$5,500

$23,000
SIMPLE

$12,000

$2,500

$14,500
Roth IRA

$5,500

$1,000

$6,500
HSA (single/family)

$3,300/$6,550

$1,000

$4,300/$7,550

 

Mandated EFTPS Filers

If a business exceeds $200,000 in aggregate deposits in a calendar year, the business is required to use EFTPS starting January 1 of the second succeeding year.  The threshold is determined by aggregate deposits; therefore, businesses must consider all types of federal taxes deposited during the year to determine if they are required to use EFTPS.  If mandated, failure to comply  with EFTPS regulations  will result in a non-compliance penalty.

As always, any questions or issues please feel free to contact us. May 2014 be a prosperous year for you.