By now, all of you are aware that the health care exchanges open October 1st. While the rules and procedures regarding health insurance notifications generally do not fall within the realm of payroll service or taxation, I wanted to do whatever I can to help you navigate the coming changes. I would encourage you to speak with your professional Health Insurance representative for more details.
The American Taxpayer Relief Act
Shortly after going over the “fiscal cliff,” Congress on January 1, 2013 passed the American Taxpayer Relief Act, H.R.8. The Act preserves most of the George W. Bush-era tax cuts and extends many other lapsed tax provisions, but increases income taxes for certain high-income taxpayers. Some highlights of the Act are as follows:
1. Payroll Tax Holiday Expires
While the Act preserved or extended many tax provisions, it did not extend the 4.2% rate for employees’ portion of the Social Security payroll tax, which has now reverted to 6.2%. Expect more payroll taxes being taken from our paychecks this year.
The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to private-sector businesses and certain nonprofit organizations for hiring certain individuals, including veterans, who have consistently faced significant barriers to employment.
$2,500 Illinois Small Business Job Creation Tax Credit
EXPANDED Jobs Creation Program
Beginning July 1, 2012; Eligible wage $10/hr
- Eligible if, as of July 1, 2012, you employed 50 or fewer full-time employees (counting all locations).
- Not-for-profit and Professional Employer Organizations are eligible to receive credit.
Health savings account (HSA). An employer's contribution (including an employee's contributions through a cafeteria plan) to an employee's HSA is not subject to federal income tax withholding or social security, Medicare, or railroad retirement taxes (or FUTA tax) if it is reasonable to believe at the time of the payment that the contribution will be excludable from the employee's income. However, if it is not reasonable to believe at the time of payment that the contribution will be excludable from the employee's income, employer contributions are subject to federal income tax withholding, social security and Medicare taxes (or railroad retirement taxes, if applicable), and FUTA tax and must be reported in boxes 1, 3, and 5 (use box 14 if railroad retirement taxes apply), and on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return.
Don’t we all love more government regulations! New regulations that will affect your 401K are coming. New fee disclosure rules will allow plan participants to be able to see all of the plan fees right on their quarterly statements. There may even be fees that you as the plan sponsor may not have been aware of. We can help! Payroll Solutions has partnered with a specialist in the 401K area who can assist you in a fee analysis of your plan to identify all of the fees, hidden or not, that impact fund performance and participant satisfaction. This also gives you an independent objective assessment of the plan fees apart from what your current broker may provide.