Preparing For Year-End: 2016 Payroll Compliance, Updates, and ACA - - PowerPoint PPT Presentation

Preparing For Year-End:

2016 Payroll Compliance, Updates, and ACA Filing

Year End Check List – Key Items

Below are some items to consider, each company should hold a planning session with key leaders to define a list catered to their needs.

• Schedule bonus payrolls (more on this later)
• Review holiday processing schedule with payroll department,

processor and bank

• Issue payroll to terminated employees in current year if next check

date is 2016

• Capture census data for deferred compensation plan (like 401k)
• Update state unemployment rates and wage limits for 2016
• Schedule your 2016 check dates
• Mail or distribute W2 and ACA 1095C or 1095B to employees
• Send reminder to employee to update their W4 if required or

desired

• Review year end carryover PTO based on company policy

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What Can Clients Do?

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Helping the Client Help Themselves

• Remind clients to carefully review the employee data in the payroll system and notify their

payroll vendor of any changes/corrections. The key elements are name, address, SSN and YTD earnings.

• Payroll Providers will typically send a W2 verification report in the month of November and

ask clients to review and notify of any corrections.

• Provide any missing tax identification numbers (applied for does not count as a number).

There are 42 states that will do accept payments, allow the filing of a return or apply an amendment with a missing or applied for tax identification number.

• If you are using a payroll provider, make sure they are set up as Third Party Administrator

for any states that require it.

• DC, IA, IN, LA, MA, MI, MN, NM, NV, OH, PA, WI
• Also very important to make sure a power of attorney is provided. Many taxing authorities

will not allow payroll companies to file, make payments, obtain rates or do amendments without a POA on file.

• Ensure all manual checks have been entered before year end.
• Ensure all third party sick that will be included on the W2 is entered prior to year end.
• All voided wages are added and related amendments completed before year end.

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Bonus Payrolls

Bonuses are called supplemental wages and can create different taxing situations.

• If a bonus is included with regular wages, withhold

taxes on the combined amount using the normal payroll process

• If the bonus is paid separately, a flat 25 percent should

be withheld for amounts under $1 million.

• Amounts that exceed $1 million should be taxed at

39.6% or the highest rate of income tax for the year. This applies regardless of the employee W4.

• See - https://www.irs.gov/publications/p15/ar02.html

and Supplemental Wages for full details and examples

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Bonus Payrolls - Continued

Impact of bonus payrolls on 941 liabilities and due dates

• First the basis - IRS payment frequencies
• Payment frequency is determined by a look back

period from July to June.

• Liabilities over $50,000 will have a semi weekly

payment schedule

• Liabilities under $50,000 will have monthly

payment schedule

• Amounts under $2,500 in a quarter can still be

paid by attaching a check to the return

• Anytime liabilities exceed $100,000, the payments

are due the next business day

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Bonus Payrolls - Continued

• When trouble starts
• Client runs a bonus payroll and the liability exceeds $100,000 and the

client does not make the payment on the next day

• Client runs a regular payroll and then a bonus payroll that creates a tax

liability greater than $100,000 in the same deposit period. Even if the amounts separately are less than $100,000, the amounts are due the day after the bonus payroll run.

‒ If check date falls on Wednesday, Thursday or Friday – due the next Wednesday ‒ If check date falls on a Saturday, Sunday, Monday or Tuesday – due the next Friday ‒ Dates typically moved by one day when a federal holiday is on the due date.

• Client wants to backdate the bonus payroll and the taxes are

considered due in the past.

• Penalties
• 2% up to 5 days late, 5% 6 to 15 days late, 10% if more that 15 days

late

• 15% if not paid within 10 days of notice and demand by the IRS

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Agencies That Will Not Accept Payments and/or Filings for Applied for Status:

AL SUI/SWT, AR SWT, AZ SWT, CA SUI/SWT, CO SUI, CT SUI, DC SUI, DE SUI/SWT, FL SUI (will accept but with penalty), GA SWT, HI SUI/SWT, IA SUI/SWT, ID SUI (filing and payments are placed in suspense account), IN SUI (will accept but with penalty), IN SWT, KS SWT, KY SWT, LA SUI/SWT, MA SUI/SWT, MD SWT (filings and payments are placed in suspense account), ME SUI/SWT, MI SUI, MN SUI/SWT, MO SWT, MS SWT, NC SWT, NE SWT, NJ SUI/SWT, NM SUI/SWT, NV SUI, NY SUI (will penalize and will not post), NY SWT, OH SUI, OK SWT, PA SWT, PR SUI/SWT, RI SWT, SC SUI/SWT, TN SUI (penalizes), TX SUI, UT SWT, VA SWT, VT SUI (will accept but penalizes $100), VT SWT, WA SUI (will accept but with penalty), WI SUI, WY SUI, WY w/comp, US Virgin Island SUI/SWT, Denver CO, Philadelphia, PA

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What Can Payroll Companies Do?

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How Payroll Companies Assist the Clients

• Collect any missing pre-load data from clients that started during

the year

• Remind clients of wiring requirements for over limit bonus payrolls
• Remind clients to review the SSN verification reports
• Answer FUTA reduction credit questions in states impacted
• Work with clients to complete all amendments prior to year end.
• Explain the dangers of backdated payrolls to clients
• Review how “Employer Cost of Health Benefits” is added for W2s
• (Box 12 code DD)

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Other Things Payroll Companies Can Do

• Force balance accounts with missing pre-load data
• Review YTD reports from tax systems to identify

and fix any issues

• Rate exchanges with states
• Frequency updates
• Delete POAs when clients move to another payroll

company

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FUTA Credit Reduction

What is it?

• FUTA taxes are calculated on the first $7,000 of wages.
• If an employer has paid and filed their unemployment taxes in their

state, a credit can be taken of 5.4% when they file their federal 940 unemployment form.

• If a state takes a loan with the federal government to cover their

state unemployment costs and that loan is not repaid timely, the credit is reduced.

• The amount of the reduction increases each year a state is unable to

repay their loan. For each year the reduction is increased by 0.3%

• Additional credit reduction may apply in the 3rd and 5th year if

certain criteria are not met.

• DOL lists the FUTA credit reduction states on November 10
• 2015 states include CA (1.5%), CT (2.1%), OH (1.5%), VI (1.5%) (1.5%

= $105 per employee, 2.1% = $147 per employee)

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FUTA Credit Reduction - Continued

• How does it impact the 940?
• The reduced credit increases the amount
• wed when filing the 940.
• The increased tax is consider due with the

4th quarter liability.

• The reductions are recorded on the 940

schedule A by state.

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2016 Changes and No Changes

• Social Security wages subject to tax

$118,500 (unchanged from 2015)

• 401(k) limits 18,000 with $6,000 catch up

for over 50 (unchanged from 2015)

• Standard Mileage Allowance – not yet

released for 2016 (2015 is 57.5 cents per mile)

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2016 State Wage Base Changes

• CO wage base for SUI is

changing to $12,200.00

• IA wage base for SUI is

changing to $28,300.00

• KS wage base for SUI is

changing to $14,000.00

• KY wage base for SUI is

changing to $10,200.00

• MN wage base for SUI is

changing to $31,000.00

• MT wage base for SUI is

changing to $30,500.00

• NV wage base for SUI is

changing to $28,200.00

• NJ wage base for SUI and SDI

is changing to $32,600.00

• NY wage base for SUI is

changing to $10,700.00

• OK wage base for SUI is

changing to $17,500.00

• PA wage base for SUI is

changing to $9,500.00

• VT wage base for SUI is

changing to $16,800.00

• WA wage base for SUI is

changing to $44,000.00

• WY wage base for SUI is

changing to $25,500.00

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2016 State Minimum Wage Changes

• AK min wage is changing to

$9.75

• AR min wage is changing to

$8.00

• CA min wage is changing to

$10.00

• CT min wage is changing to

$9.60

• DC min wage is changing to

$11.50 in July of next year

• HI min wage is changing to

$8.50

• MD min wage is changing to

$8.75 in July of next year

• MA min wage is changing to

$10.00

• MI min wage is changing to

$8.50

• MN min wage is changing to

$9.50 in August of next year

• NE min wage is changing to

$9.00

• NY min wage is changing to

$9.00 (12/31/2015 for some reason they always do it one day before the changeover)

• RI min wage is changing to

$9.60

• VT min wage is changing to

$9.60

• WV min wage is changing to

$8.75

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Patient Protection and Affordable Care Act (PPACA) is also known as the Affordable Care Act (ACA)

• r Obamacare

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Affordable Care Act (ACA) – The Basics

• Intended to reform the health care system and curb growth in health

care spending

• Provide uninsured Americans with affordable health insurance
• Eliminates lifetime and unreasonable annual limits
• Provide essential health benefits
• Prohibit recessions of health insurance policies
• Extend dependent age up to 26
• Cap insurance company non-medical expenditures
• Individuals must have minimum essential coverage or pay a tax (for

2015 $325 per adult, $162 per child with household cap of $975 for income up to $48,750. 2% for household income over that amount)

• Employer “play or pay”. If minimum essential coverage is not
• ffered, employer will pay $2,000 per full time employees in excess
• f 30 or $3,000 for each employee who purchases through an

exchange.

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ACA Reporting

• Companies with over 50 FTEs (as defined by the

law) or with self insured plans must report.

• Over 50 FTE will complete forms 1094-C and 1095-

C

• Self-insured under 50 FTE will complete forms

1094-B and 1095-B

• Employee copies must be provided by January 31

(February 1 in 2016)

• IRS filing are due by February 28 if filing on paper

and March 31 if filing electronically extensions are available

• Employers with over 250 employees must file

electronically

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Questions Employers Will Need to Answer Completed Forms

• Is the plan affordable – 3 safe harbors?
• Federal Poverty Line (9.5% of Federal Guidelines)
• Rate of Pay (9.5% of employees rate of pay)
• W2 wages (9.5% of W2 box 1 wages)
• Rule of parity other than 13 weeks (26 for educational
• rganizations) Period can be as low as 4 weeks. Determines

when a returning employee is consider a new employee.

• What is the plan year?
• What are the employee contributions?
• Is the plan self-insured?
• What is the measurement period?
• What is the administration period?
• What is the actuarial value of the plan? (Must be at least 60%

for MEC

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1094-C Transmittal for 1095-Cs

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1094-C Continued…

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1094-C Continued…

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The Forms 1094-C

• Transmittal of Employer-Provided Health Insurance

Offer and Coverage Information Returns

• Part I – Employer Information in boxes 1 to 16
• Box 18 is number of 1095-Cs
• Part II – ALE Member Information

‒ Box 19 is used to indicate that employer is the authorized transmittal for ALE group. If an employer or related employers are reporting separately, one of the members of the group will check this box and report for all members in Parts II, III and IV. ‒ Box 22 – Qualifying Offer Method (offer to all full time employee for all months) ‒ Box 22 – Qualifying Offer method Transition Relief (offer to 95%

• f full time employees)

‒ Box 22 – Section 4980H transition Relief (employer chose one of the options and indicates in part II, column e.) ‒ Box 22 – 98% Offer Method (offered affordable coverage to 98%

• f employees and dependents for all 12 months)

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The Forms 1094-C - Continued

• Part III – ALE Member Information-Monthly
• Box 23-35

‒ Column (a) is used to indicate if minimum essential coverage was offered. Use only box 23 if all 12 months are the same ‒ Column (b) is used for Full-Time Employee Count for ALE

• member. Not required for 98% method (box 22 D).

‒ Column (c) is used for total employees (full time and non full time) ‒ Column (d) is used for showing the months the employer was part of an ALE ‒ Column (e) is used for indicating which transition relief was selected (50 to 100 = A) (100 and over = B)

• Part IV – Other ALE Members of Aggregated ALE

Group

• List up to 30 ALE members related to this employer

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1095-C Employee Forms

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1095-C - Continued

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The Forms 1095-C

• Employer-Provided Health Insurance Offer and Coverage
• Part I – Employee Information in boxes 1 to 13
• Box 10 is phone number of person to be contacted about information
• n the form
• Part II – Employee Offer and Coverage

‒ Box 14 – enter code for coverage offered to employee 1A to 1I ‒ Box 15 – enter employee only cost for minimum value coverage (only if coverage

• ffered 1B to 1E in box 14)

‒ Box 16 – enter the code for the 4980H Safe Harbor Code or Other Relief 2A to 2I

• Part III – Covered Individuals
• Only complete this section for employer-sponsored self-insured plans.

Does not include coverage under a multiemployer plan.

• Enter an X in the box indicating that this portion of the form will be

completed.

• Complete the name, SSN OR birth date of the cover individual and the

months coverage was provided

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The Forms 1094-B

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The Forms 1094-B Transmittal

• Transmittal of Health Coverage Information Returns
• Plan sponsor will complete and file the 1094-B
• This form is for self-insured plans under 50

employees

• Boxes 1-8 are the employers demographic

information

• Box 9 will list the number of 1095Bs

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The Forms 1095-B

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The Forms 1094-B

• Health Coverage
• Part I – Employee Information in boxes 1 to 7
• Box 8 – enter code for the policy

‒ A Small Business Health Options Program (SHOP) ‒ B Employer-sponsored coverage ‒ C Government-sponsored coverage ‒ D Individual market insurance ‒ E Multiemployer plan ‒ F Other designated MEC

• Box 9 should be blank for 2015 filing
• Part II – Employer Sponsored Coverage

‒ Box 10-15 Employer Information (Do not complete if multiemployer plan)

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The Forms 1094-B

• Part III – Issuer or Other Coverage Provider
• Enter the demographics for the provider of

the coverage in boxes 16-22

• Part IV – Covered Individuals
• Complete the name, SSN OR birth date of

the cover individual and the months coverage was provided

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Thank You!

Questions? Email us! info@benefitmall.com

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