What's New
Child Support Threshold Lowered to Companies with 50 or more Employees
The child support electronic payment threshold has been lowered. Effective 9-1-2011, an employer with 50 or more employees (currently 250 or more employees) must remit child support payments by electronic funds transfer or electronic data interchange by the second business day after pay date. An employer with fewer than 50 employees may also remit payments electronically by the same deadline
Let ProPay make those payments for you! ProPay can send all of your child support payments electronically to all 50 states, the District of Columbia and Puerto Rico, we just need a copy of the order and we do the rest.
Employers Face Tricky Tax Process on Certain Payments
Employers who wish to claim that a payment is a loan and not a sign-on bonus need to be clear and consistent. Here are suggestions to consider:
- Do not have a signing bonus policy. Do not use this terminology for any reason. A payment called a "signing bonus" means the amounts are wages.
- Have a formal, published employee loan policy directed at new hires. The policy should be clear on the scope of the forgiveness rules.
- Have a formal loan agreement that follows state law. This could range form a simple one page agreement to a document prepared by a lawyer.
- Have a separate formal voluntary deduction agreement signed by the employee prepared before any payment is made if there is any chance that payroll will need to take a deduction. This is required under the laws of some states.
- Payroll needs a copy of the loan agreement and the voluntary deduction agreement at the time the payment is made. Payroll needs to be compliant with the IRS rule on recognizing the wage payment as soon as the forgiveness occurs. Failure to comply can be used by IRS as evidence that the payments were not loans.
- Loans in excess of $10,000 cause interest to occur. If the employee does not pay the interest, then that must be accounted for by payroll.
FUTA Surtax Expires June 30
The 0.2% Federal Unemployment Tax Act (FUTA) surtax expired on June 30, 2011. The permanent gross FUTA tax rate is 6.0%. The 0.2% surtax was added in 1976 and has been in effect since then. The last time it was extended was from January 1, 2010 to June 30, 2011. After expiration the net FUTA rate will be reduced to 0.6% on FUTA taxable wages paid beginning July 1, 2011 (0.8%-0.2%=0.6%).
With the surtax expiring, employers will need to separately track FUTA taxable wages paid before July 1, and FUTA taxable wages paid after June 30. It is expected that Form 940 for 2011 would be revised to require separate reporting of wages subject to the surtax and those not subject to subject to the surtax. With no surtax in effect for the third quarter of 2011, employers may determine their FUTA tax liability and deposit requirement for the quarter based on a net FUTA rate of 0.6%. Because of the possibility of a retroactive extension, however, employers may consider it prudent to continue to accrue FUTA tax at a rate of 0.8% until the third quarter FUTA deposit is due on October 31st, 2011.
Records Retention Schedule
The Better Business Bureau has released a list of important documents and how long you should keep them. The list was provided to the BBB by the IRS. This retention period is the number of years from the date the tax return was filed. All material presented is for general information only and should not be acted upon without professional assistance. ProPay can provide your company with CD's containing all payroll records for the year, the cost for these CD's is based on the number of employees you have.