Employers

Important Topics:
Annual Key Withholding Figures
Minimum Wage Requirements
Accelerated PA Withholding Tax Payments
Section 125 Cafeteria Plan Requirements
Electronic Federal Tax Payment System
Local Services Tax
New Hire Reporting
Employee vs. Independent Contractor
Tuition Reimbursement
Employer-Owned Life Insurance Policies

KEY 2009 FIGURES

Standard Mileage                                        55.0¢/mile
Section 179 Expense Deduction              $250,000.00

Standard Mileage                                        50.0¢/mile
Section 179 Expense Deduction              $134,000.00

Minimum Wage Requirements
Just a reminder that as of July 24, 2009, all employers are now required to pay a minimum wage of $7.25 per hour, regardless of business size. In addition, the tip minimum cash wage is $2.83 and the tip credit is $4.42 for all employers. Please be sure you are in compliance with these minimum wage requirements.

Accelerated PA Withholding Tax Payments
In October, Pennsylvania employers became subject to an accelerated withholding payment schedule.  The following chart can be used to determine when your new payment due dates are:

Section 125 Cafeteria Plan Regulations
In August 2007, the IRS proposed new regulations regarding Section 125 Cafeteria Plans, effectively updating the previous regulations. The proposed regulations became effective on January 1, 2009 and may be relied upon to comply with the requirements of Section 125. Some of the key provisions of the regulations include a written plan document and nondiscrimination requirements. The written plan must include descriptions of the benefits available and eligibility provisions; procedures for participants’ elections and for making contributions through salary reductions or nonelective contributions; an explicit prohibition against employees’ participation if they are not common law employees; a stated maximum contribution for each employee; and the plan year. Several types of plans fall under Section 125, including “flex” plans and premium-only plans. Be sure that your cafeteria plan complies with these new regulations; otherwise, all plan expenses may be included in your employees’ taxable income, which means less take home pay for them and higher payroll taxes for you!

Electronic Federal Tax Payment System
The Internal Revenue Service mandates that certain employers file taxes electronically. In 2000, the Electronic Federal Tax Payment System (EFTPS) was expanded to require that businesses making aggregate federal tax deposits of more than $200,000 during a calendar year must make all federal tax deposit payments electronically beginning in the second succeeding calendar year. For example, if you had more than $200,000 in total deposits in calendar year 2007, you will be required to use EFTPS beginning January 2009. This includes ALL payments previously made with a check and Form 8109. Deposits made at a local bank with Form 8109 will be considered late, resulting in a 10% penalty. Once a business meets the $200,000 threshold, you are required to continue using the system even if your deposits in future years drop below the threshold amount. For those of you under the threshold, you may still want to consider enrollment in EFTPS. The system is very easy to use and will eliminate numerous trips to the bank.

To comply, businesses must enroll in the EFTPS by completing IRS Form 9779. If you need assistance completing the enrollment form or determining whether you are required to comply, please feel free to contact us.

When you implement electronic filing of tax payments, remember to maintain a record of the following information for each payment: date of transaction, amount of deposit, type of tax remitted, reporting period to which the payment is applied, and acknowledgement number received from the treasury financial agent.

To access EFTPS, follow the link in our Payroll Center. 

Local Services Tax
In June of 2007, the State of Pennsylvania made various changes to the Emergency and Municipal Service Tax (EMS Tax). The tax was renamed to Local Services Tax (LST). Beginning January 1, 2008, employers located in municipalities that levy a Local Services Tax in an amount greater than $10.00 per person, must withhold the tax from employees' paychecks on a per pay basis and remit the withheld amounts on a quarterly basis. An exemption is available for employees who reasonably expect to earn less than $12,000 for the year. For more information regarding the local services tax as it relates to your particular county and related forms, please click here.

New Hire Reporting
All employers are required to comply with New Hire Reporting requirements. The New Hire Reporting requirements were enacted to improve the collection of child support payments and detect and prevent erroneous Medicaid, food stamp, and unemployment compensation claims.

Each New Hire Report should contain the employer’s name, address, federal employer identification number, and a contact name and telephone number. In addition, the employee’s name, address, social security number, date of birth, and date of hire are required.

New Hire Reports may be submitted via first class mail, via fax, or filed electronically.

NOTE: NEW HIRE INFORMATION MUST BE SUBMITTED WITHIN 20 DAYS OF HIRING THE EMPLOYEE.

Remember also to continue to maintain W-4 and I-9 forms for all employees. A new W-4 should be completed by every employee each year. These documents will generally be requested in the event of a payroll audit.

To submit New Hire Reports electronically or to obtain W-4 or I-9 forms, follow the links in our Payroll Center.

Employee vs. Independent Contractor
The Internal Revenue Service is continually looking at whether a particular worker is an employee or an independent contractor. Improperly classifying a worker as an independent contractor can have significant adverse consequences. It is important that all workers be properly classified and appropriately treated. There are numerous factors that should be considered in determining whether a worker should be included in the payroll. These factors fall into three major categories: behavioral control, financial control, and the type of relationship between the parties. To assist you in your consideration of this issue, we have provided you with several links that outline IRS guidelines. Please click here for further information. Failure to properly classify a worker could result in significant tax penalties.

Tuition Reimbursement
Tuition reimbursements provided to an employee for job-related educational expenses are excludible from the employee's income as a working condition fringe benefit. An expense is considered job-related if the education maintains or improves skills required by the individual's employment and/or is a condition of employment. However, if the education is required to meet the minimum educational requirements for the job, or will qualify the individual for a new trade or business, then the educational payments are includible in income and subject to taxation.

Legislation allows employers to exclude from income up to $5,250 annually in payments for educational assistance. To be excluded, the payments must be made as part of an accountable plan. This includes educational assistance benefits that are not job-related and the exclusion applies to graduate as well as undergraduate courses.

Employer-Owned Life Insurance Policies
The Pension and Protection Act of 2006 included changes to tax law regarding employer-owned life insurance policies issued after August 17, 2006. The proceeds of a life insurance policy may potentially be taxable if certain requirements are not met. The Act requires the employer to notify the employee in writing that they intend to insure the individual’s life and disclose the face amount of the policy. In addition, the employee must consent in writing to being insured and that the coverage may possibly continue after employment terminates. The Act also imposes an annual reporting requirement with respect to policies held. Please contact us if you have any life insurance policies to which these provisions may apply.