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Posts published in “Tax”

Ready or Not, Here it Comes. 2020 W-4

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The W-4 form has remained basically unchanged for many decades.  For a flashback, here is what it looked like in 1990: https://www.irs.gov/pub/irs-prior/fw4–1990.pdf.  Unchanged until now, that is.  The IRS has done a complete revamp of the form for 2020 by adding many additional fields for the employee to complete as well as removing ‘number of allowances.’  You may ask how that can be since the number of allowances basically dictated the amount of federal income tax withheld from a paycheck. You need to see the new form to believe it, and here it is: https://www.irs.gov/pub/irs-dft/fw4–dft.pdf. The form asks the employee…

Payroll Tax Treatment of Health Benefits for Domestic Partners

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Ever since the 2015 Obergefell v. Hodges case in which the Supreme Court of the United States ruled that the fundamental right to marry is guaranteed to same-sex couples by both the Due Process Clause and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution, it has been shown that the number of employers offering domestic partner benefits has significantly decreased. A year before the ruling (2014), a survey reflected that 59% provided benefits to same-sex domestic partners and just one year later (2016), 48% are providing benefits with that number decreasing each year. The reason…

Pitfalls of Employee Loans

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According to a 2017 study by CareerBuilder, they determined that 78% of US workers live paycheck-to-paycheck and 75% of workers were in debt.   With those statistics, many employers find it common to be approached by an employee for a loan or advance.   While it may be seen as a way to improve employee morale, productivity, and employee loyalty, there are many other factors to take into consideration to avoid a detrimental impact.  In this article, I will cover some of the little known aspects of employee loans and advances. First off is whether or not the loan is going to…

SSN Mis-Match Error Letters Being Mailed

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The time is here. As a followup to my July 26th, 2018 article, the Social Security Administration has started mailing those Employer Correction Request Notices (EDCOR) to employers who submitted their 2018 W-2 form containing employees names and Social Security Numbers that did not match the SSA’s records.  A sample of the notice is provided here. Since this notice is being sent to an employer with just one error, this will affect a large amount of businesses that it may take them several months to send out all of the notices.   If you do not see one right away, it…

A Handy Guide to the IRS Form W-2

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Over the next few weeks, as your employees start to receive their 2018 W-2 form, they will most likely have questions as to what all those numbers mean.  For example, it is not uncommon for a salaried employee who earns $50,000 per year question why their Box 1 Wages only reflects $45,000.  The response is, ‘do you contribute to a pension plan or have pre-tax insurance, then if so those amounts reduce your “taxable” wage, which is what appears in Box 1’. To assist you with those questions, here is an explanation of what is in each box and what…

New Federal Withholding W-4 Form Released

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Whew!  We dodged a bullet… at least for another year.  If you are not familiar with what the 2019 W-4 form could have looked like, then keep an eye out for a future article where we will give it a thorough review as it is now postponed for 2020 by the U.S. Treasury. The new 2019 W-4 form has been published (including the Spanish W-4(SP) version) and not much is changed from the 2018 version. A Form W-4 remains in effect until the employee gives you a new one, so you do not need to obtain a new form each year.  When…

Little Known Successor Rule Means Big Tax Savings

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There are tax credits and savings all around us, but if you do not know what to look for or have an experienced tax adviser, you may be missing out.  One rarely known tax savings is the Successor employer rule.  The regulations can be found under IRS Code 31.3121(a)(1)-1(b), and there is a single, small paragraph that makes mention of it in Publication 15 Employer’s Tax Guide, but I will give you the rundown here.   If you have purchased or looking to purchase a business, then this is definitely one you do not want to overlook. Most employer taxes are…

Are Your Employees Mismatched? SSA is Cracking Down – Penalties May Follow

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The Social Security Administration has announced that they will begin mailing Educational Correspondence (EDCOR) notices in the middle of next year to businesses and employers who submit wage and tax statements (Form W-2) that contain name and Social Security number (SSN) combinations that do not match their records.  There are a number of reasons why reported names and SSNs may not agree with their records, such as typographical errors, unreported name changes, and inaccurate or incomplete employer records. If they cannot match the name and SSN reported on a Form W-2 to their records, they cannot reconcile employer wage reports and…

Thinking about a PEO? Think Twice.

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While I am biased, as President of PayMaster, a payroll service provider, I do find the rare case for a business to utilize the services of a Professional Employer Organization (PEO) or Employee Leasing as it is sometimes referred to.  In my opinion, there are only two reasons for a business to utilize a PEO, and that is in regards to Health insurance and Workers’ Compensation insurance as we will discuss.   If the PEO route is the decision then I strongly recommend proceeding with caution and do your math, taking into consideration the big picture of the financial cost.  This not…

Are You Getting The Credit You Deserve? Here Is a TIP.

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The Credit For Portion Of Employer Social Security Paid With Respect To Employee Cash Tips, or Excess FICA Tax Credit on Tips, for short, to be exact. If you are familiar with this tax credit, then congratulations, you are one of the few (just be sure you are not a victim to the ‘Confusions’ I point out below).  The IRS recently reported that for tax 2012 (yeah, it takes them this long to report), 66,400 taxpayers took advantage of this credit.  This quantity seemed underwhelming to me, so I did some research as to how many businesses were potential candidates. …