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Material
provided by Keith Hill, Editor, BNA's Payroll Library. For contact
information, see below.
IRS and SSA Rates
- Social Security Wage Base
-- $102, 000 (2008) compared to $97,500 (2007)
- Social Security - EE's
Maximum Tax at 6.2% -- 6,324.00 (2008) compared to 6,045.00
(2007)
- 401(k) Maximum
Contribution -- $15, 5 00 (2008) - (no change from 2007)
- Catch-Up Contribution
Limit -- $5,000 (2008) - (no change from 2007)
- Compensation Cap for 401 -
$230,000 (2008) compared to $225,000 (2007)
- SIMPLE Plan Maximum
Contribution -- $10, 500 (2008) - (no change from 2007)
- SIMPLE Plan Catch-up
Contribution -- $2,500 (2008) - (no change from 2007)
- 403, 457 Maximum
Contribution -- $15, 5 00 (2008) - (no change from 2007)
- Defined Benefit Maximum
for 415 -- 185,000 (2008) compared to $180,000 (2007)
- Defined Contribution
Maximum -- $46,000 (2008) compared to $45,000 (2007)
- Standard Mileage Rate --
48.50 cents per mile (2007)
- Monthly Qualified Parking
Expense Exclusion -- $205
- Standard Automobile Cost (FAVR)
-- $27,600
- Adoption Expense Exclusion
-- $10,960
You can download the 2008 W-2
& W-3 Forms from the APA's "Forms, Pubs, Info" Page located:
HERE.
Congress: The Federal Minimum
Wage (Finally!) Increases, In Steps
President Bush signed into law,
on May 25th, an emergency war supplemental spending bill (H.R.
2206) that raises the federal minimum wage in three steps to $7.25
an hour by 2009, while affording approximately $4.8 billion in tax
relief to businesses affected by the wage increase. Under the
measure, the current minimum wage of $5.15 an hour will rise to
$5.85 an hour on July 24, 2007, to $6.55 an hour on July 24, 2008,
and to $7.25 an hour on July 24, 2009. The bill also extends the
Fair Labor Standards Act in phases to the U.S. territories of
American Samoa and the Commonwealth of the Northern Mariana
Islands.
State Effect of Increase in Federal Minimum Wage
The increase in the federal
minimum wage effects many states whose own minimum wage is tied to
the federal. These states include Georgia, Idaho, Indiana, North
Dakota, Oklahoma, South Dakota, Texas, Utah and Virginia starting
on July 24, 2007 and New Hampshire will increase on that date and
again on September 1, 2007 when it goes to $6.50 per hour. The
District of Columbia will keep their current rate of $7.00 per
hour until the increase in 2008. At that time it will increase to
$7.55 per hour. Other states have their rate tied to the federal
must the rate must exceed the current state rate in order to have
any effect. These states include Delaware, Maryland, New York and
North Carolina.
IRS Issues Final Regs on Student
FICA/FUTA Exemption
The Internal Revenue Service has
issued final regulations (T.D. 9167) on employment tax exemptions
for students who work at the school, college, or university where
they are enrolled and regularly attend classes. These regulations
are applicable to student services performed on or after April 1,
2005. IRS also issued Rev. Proc. 2005-11--applicable to services
performed on or after April 1, 2005--that provides a safe harbor
for determining employment tax liability in conjunction with the
final regulations.
IRS Releases Publication 1494 for
2005
The Internal Revenue Service has
released Publication 1494, Table for Figuring Amount Exempt from
Levy on Wages, Salary, and Other Income, for 2005 (Notice
2004-81). The tables in this publication show the amount of an
individual's income that is exempt from a notice of levy used to
collect delinquent tax. For example, a single taxpayer who is paid
weekly and claims two exemptions (including one for the taxpayer)
has $219.23 exempt from levy.
FUTA Tax Deposit Threshold
Increases to $500 in 2005
Effective January 1, 2005, the
Federal Unemployment Tax Act (FUTA) tax deposit threshold
increases from $100 to $500 (IR-2004-143). This increase will
eliminate the requirement imposed upon more than 4 million small
businesses to make up to four FUTA tax deposits a year, according
to IRS.
Signing Bonuses to Be Considered
Taxable Wages, IRS Rules
Bonuses paid for signing a
contract establishing an employer-employee relationship will be
considered taxable wages after Jan. 12, 2005, unless the payments
are made independent of the employer-employee relationship,
according to Internal Revenue Service Revenue Ruling 2004-109.
Severance payments made after early termination of an employment
contract will be considered taxable wages after Jan. 12, 2005,
according to Rev. Rul. 2004-110.
IRS Releases 2006 Standard Mileage
Rates
The 2006 optional standard mileage
rates for computing the deductible costs of operating an
automobile for business, moving, medical, and charitable expense
purposes have been released by the Internal Revenue Service
(Revenue Procedure 2004-64; IR-2004-139). These rates are: 44.5
cents per mile for business expense purposes (up from 40.5 cents
per mile); 15 cents per mile for moving and medical expense
purposes (up from 14 cents per mile); and 14 cents per mile for
charitable expense purposes (unchanged). The standard automobile
cost decreases from $28,100 to $27,600.
Federal Per Diem Rates for 2005
Released by GSA
The General Services
Administration has updated the federal per diem rates for fiscal
year 2005, which begins Oct. 1, 2004. The per diem substantiation
method is used to determine business meal and lodging expenses for
traveling workers. The FY2005 CONUS Per Diem Bulletin 05-1
increases and decreases the maximum lodging amounts in certain
existing per diem localities and adds over 20 new per diem
localities. The incidental expense amount remains $3 for all per
diem localities, while the maximum per diem rate for all CONUS
destinations under the per diem substantiation method will
increase to $91 ($60 for lodging and $31 for meals and incidental
expenses).
IRS Interest Rates Increase for
Fourth Quarter 2004
The interest rates imposed on
corporate and noncorporate tax under- and overpayments increase
one percentage point for the fourth quarter of 2004, the Internal
Revenue Service announced in Revenue Ruling 2004-92. Those
interest rates will be: 5 percent for overpayments (4 percent in
the case of a corporation); 5 percent for underpayments; 7 percent
for large corporate underpayments; and 2.5 percent for the portion
of a corporate overpayment exceeding $10,000.
IRS
Issues 'Reasonable Cause' for Name/SSN Mismatches
An employer's solicitation of an
employee's correct Social Security Number via Form W-4, for use on
Form W-2, is the "most important" factor for determining
‘reasonable cause' to abate potential penalties for filing W-2s
with name/number mismatches, the Internal Revenue Service said.
In revised Publication 1586,
"Reasonable Cause Regulations and Requirements for Missing and
Incorrect Name/TINs," IRS has added information on reasonable
cause for Forms W-2 errors. The information—much of it in a
question-and-answer format—addresses the establishment of a
‘reasonable cause' defense for an employer's supplying the wrong
tax identification number to IRS or the Social Security
Administration on an information return.
IRS Issues Three New Revenue
Procedures
Revenue Procedure 2004-50 updates
the specifications for magnetic or electronic filing of Forms
1098, 1099, 5498, and W-2G either through the IRS FIRE (Filing
Information Returns Electronically) System or using tape
cartridges or 3 1/2-inch diskettes for tax year 2004.
Revenue Procedure 2004-53 explains
the use of the forthcoming Schedule D (Form 941) for employers to
report employment tax discrepancies created by a merger,
acquisition, or consolidation. This new schedule will allow
employers and IRS to more consistently reconcile discrepancies
between Forms W-2 and 941.
Revenue Procedure 2004-54 provides
the general rules and requirements of IRS and SSA for reproducing
paper substitutes for Form W-2, Wage and Tax Statement, and Form
W-3, Transmittal of Wage and Tax Statements, for wages paid during
the 2004 calendar year.
SIFL Rates Increase for Second
Half of 2004
The Standard Industry Fare Level (SIFL)
formula rates, effective July 1 through Dec. 31, are $35.21 for
the Terminal Charge, plus 19.26 cents per mile (0-500 miles),
14.69 cents per mile (501-1,500 miles), and 14.12 cents per mile
(over 1,500 miles). The SIFL rates, along with an aircraft
multiple based on the weight of an employer-provided aircraft, are
used to determine the amount of taxable income an employee
receives from a personal trip on an employer's aircraft.
IRS Seeks Comments on Debit Card
Use for Transportation Benefits
The Internal Revenue Service is
asking for comments on the use of debit cards to provide qualified
transportation fringe benefits under I.R.C. Section 132(f) (Notice
2004-46). IRS is specifically asking for comments on such issues
as whether an employer provides an advance or reimbursement when
it provides a debit card to purchase transportation benefits.
Comments must be submitted in writing or electronically by Oct.
19.
SSA Issues Electronic
Specifications for Filing 2004 Forms W-2, W-2c
The Social Security Administration
has issued an updated version of Publication MMREF-1 that contains
instructions for filing 2004 Form W-2 Copy A information on
magnetic media or electronically. SSA has also released a revised
Publication MMREF-2 for electronic/mag media filing of Form W-2c.
IRS's Tax Deposit Penalty Refund
to Encourage EFTPS Use
The Internal Revenue Service will
refund previously paid federal tax deposit penalties to encourage
use of the Electronic Federal Tax Payment System (EFTPS). This
offer is available to employers that are not mandated to use EFTPS.
To qualify, an employer must use EFTPS for one year, make all Form
941 payments on time, and have previously fully paid the penalty.
IRS's Strategic Plan to Focus on
Efficiency, Enforcement
IRS's updated, five-year strategic
plan for agency operations will focus on three broad goals:
modernized business processes and technology, enhanced enforcement
of the tax laws, and improved service to taxpayers. IRS wants to
discourage and deter noncompliance and improve the efficiency of
the tax administration system through modernization efforts that
build upon the success of electronic filing and other electronic
tools.
U.S., Mexico Sign Social Security
Totalization Agreement
The United States and Mexico
recently signed a Social Security Totalization Agreement that will
result in a tax savings of $140 million over its first five years
for 3,000 U.S. workers and their employers. The agreement frees
U.S. and Mexican employees from double Social Security taxation
while working in the other country. This agreement must be
reviewed by the U.S. Congress and approved by the Mexican Senate
before it can take effect.
DOL Postpones Proposed Changes to
FMLA Until March
The Department of Labor will not
issue proposed revisions to Family and Medical Leave Act
regulations until March 2005, according to DOL's latest semiannual
regulatory agenda published in the Federal Register (69 Fed. Reg.
37788).
IRS Issues Form 8802 for U.S. Tax
Certification
U.S. individuals and businesses
that want to establish that they are entitled to lower foreign tax
rates provided by U.S. income tax treaties can fill out Form 8802,
Application for United States Residency Certification, instead of
writing a letter to IRS. IRS will then issue a letter confirming
the taxpayer's tax status for purposes of claiming treaty
benefits.
DOL Releases New Overtime
Regulations
The Department of Labor has
released new regulations that revise the exemptions under the Fair
Labor Standards Act's "white collar" overtime rules. These new
regulations, which will become effective Aug. 23, can be found on
DOL's Web site at www.dol.gov/fairpay.
The new regulations eliminate the
"long" and "short" tests used to determine an employee's exempt
status. In their place, DOL has established one "standard" test
for each "white collar" employee category. Exempt executive
employees, for example, must have the authority to hire or fire
other employees. Included in the standard test is the requirement
that an employee be paid $455 per week, or $23,660 per year,
before he/she can be considered exempt.
The new regulations provide that
an employee earning a minimum of $100,000 a year generally will be
exempt from overtime if he/she primarily performs office or
nonmanual work and customarily and regularly performs at least one
of the exempt duties or responsibilities of an exempt executive,
administrative, or professional employee. Unpaid disciplinary
suspensions of one or more full days imposed in good faith for
workplace conduct rule infractions will not jeopardize an
employee's exempt status under these new rules.
Employees May Receive Form W-2 in
E-Mail Attachment
Employees may now receive Form
W-2, Wage and Tax Statement, either as an attachment to an e-mail
or posted on a Web site under final rules (T.D. 9114) regarding
electronic delivery of Form W-2 published by the Internal Revenue
Service. Form W-2s furnished on a Web site must be retained
through October 15 of the year following the calendar year to
which the form relates (or the first business day after Oct. 15 if
that day falls on a Saturday, Sunday, or legal holiday), IRS says.
Employers must disclose certain information prior to or at the
time of the employee's consent, including that the employee will
receive a paper statement if he/she doesn't consent. Employers
must notify the employee (by mail, e-mail, or in person) on or
before Jan. 31 of the year after the year to which the statement
relates that it is available on a Web site, if so posted. The Web
site notice must include the following statement in capital
letters (must be in the subject line if provided by e-mail):
"IMPORTANT TAX RETURN DOCUMENT AVAILABLE."
IRS Releases 2004 Pubs. 15, 15-A,
15-B
The Internal Revenue Service has
released electronically the 2004 versions of Publication 15,
Circular E, Employer's Tax Guide; Publication 15-A, Employer's
Supplemental Tax Guide; and Publication 15-B, Employer's Tax Guide
to Fringe Benefits. In Pub. 15-A, employers are reminded that,
subject to certain disclosure requirements, they may set up a
system to provide their employees with electronic Forms W-2 if the
employees choose to receive them in that format. Pub. 15-B removes
all references to Form 5500. The withholding tables contained in
Pubs. 15 and 15-A are effective until December 2004.
IRS Circulates Form 941 'Vision
Draft'
The Internal Revenue Service has
circulated a so-called "vision draft" of Form 941, Employer's
Quarterly Federal Tax Return (and its complementary Form 941
Schedule B), for 2005 to major stakeholder associations--including
the American Payroll Association--for comment. The Form 941
"vision draft" is two pages with a modified layout. Line 7 would
be used for reporting adjustments, replacing the current line 9
with lines 7a through 7f. The forms will have barcodes to
facilitate scanning. IRS plans to develop a similar "vision draft"
of Form 940, Employer's Annual Federal Unemployment Tax Return.
Over-the-Counter Drug Costs Are
Reimbursable by Health Care FSAs
Over-the-counter drugs can be paid
for with pre-tax dollars through health care flexible spending
accounts under IRS Revenue Ruling 2003-102 (IR-2003-108).
Reimbursements by health FSAs and other employer health plans for
the cost of over-the-counter drugs will not be subject to tax if
properly substantiated by the employee, but the drug costs will
still be nondeductible for purposes of the itemized medical
expenses deduction.
IRS Proposed Rules Would Ease FUTA
Deposit Requirements
The Internal Revenue Service has
issued proposed regulations (REG-144908-02) that would not require
employers that qualify for the de minimis ($2,500 a calendar
quarter) exception to the deposit requirements applicable to
Federal Insurance Contribution Act (FICA) and withheld income
taxes to deposit Federal Unemployment Tax Act (FUTA) amounts for a
quarter, even if the accumulated amount of FUTA tax due exceeds
$100 that quarter. Employers will be required to deposit
accumulated FUTA taxes for any quarter in which the amount of
accumulated FICA and withheld income taxes is at least $2,500 and
the amount of accumulated FUTA taxes exceeds $100. Employers that
are de minimis depositors for the last calendar quarter would be
allowed to remit the balance of their FUTA tax liability for the
year with a timely filed Form 940.
IRS Allows Automatic Extensions
for Information Return Filings
The Internal Revenue Service has
issued final, temporary, and proposed regulations that remove the
requirement for a signature and explanation when filing Form 8809,
"Request for Extension of Time to File Information Returns", in
order to receive an automatic 30-day extension of time to file
certain information returns. These rules also allow IRS to develop
an online version of the extension request.
IRS Issues Proposed ISO Regs
The Internal Revenue Service has
issued proposed regulations (REG-122917-02) on incentive stock
options that provide a new set of comprehensive rules that would
incorporate many of the rules contained in proposed regs released
in 1984. These new rules would address disqualifying dispositions,
stockholder approval of ISOs, the $100,000 limitation, and
permissible provisions, IRS said.
Businesses Can Obtain EINs from
IRS's Web Site
Businesses can now obtain employer
identification numbers from the Internal Revenue Service Web site.
The system will issue a permanent EIN that can be used
immediately, unless IRS determines that it issued another EIN to
the same business. No preregistration is required to request an
EIN, IRS said.
Tax Law Reduces Rates, Increases
Child Credit
The Jobs and Growth Tax Relief
Reconciliation Act of 2003 (P.L. 108-27) reduces the marginal tax
rates, increases the child credit to $1,000 for 2003-04, and
reduces the tax rates on dividends and capital gains. The new tax
rates in excess of the 15% rate are 25%, 28%, 33%, and 35%. These
rates remain in effect until December 2004. The supplemental
withholding rate is 25%, while the backup withholding rate is 28%.
SSA Revises "No-Match" Letter Rule
for 2003
The Social Security Administration
will only send "no-match" letters to employers that submit wage
reports containing more than 10 Form W-2s that do not match SSA's
records and when those mismatches constitute more than one-half of
one percent of the total Form W-2s in the report, SSA has
announced.
IRS Makes Electronic Filing
Available for Forms 940, 941
IRS's Employment Tax e-file System
is now available for filers of Forms 940, 940PR, 941, 941PR,
941SS, 941c, and 941 Schedule B. Forms 940 and 941 can now be
filed in a single transmission file, and Electronic Return
Originators (EROs) can offer their clients electronic employment
tax filing.
To participate, complete Form
9041, Application/Registration for Electronic Filing, and mail to
the Austin Submission Processing Center in Austin, TX. New EROs
must complete Form 8633, Application to Participate in the IRS
e-file Program, and send it to the Andover Submission Processing
Center. EROs approved for the Form 1040 e-file program don't need
to take further action.
IRS Expands TIN Matching Program
The Internal Revenue Service has
established an expanded, online, interactive taxpayer
identification number matching program for all payors of
reportable transactions (Rev. Proc. 2003-9). The TIN matching
program allows payors to verify payee TINs required to be reported
on information returns and payee statements.
The TIN Matching online
interactive program will provide the results of up to 25 requests
in real time. A bulk file containing up to 100,000 TIN match
requests can be processed overnight using a secure mailbox. Rev.
Proc. 2003-9 will be effective when IRS issues a notice announcing
the availability of E-Services.
IRS Releases Revised Forms W-2c,
W-3c
Revised versions of Forms W-2c,
Corrected Wage and Tax Statement, and W-3c, Transmittal of
Corrected Wage and Tax Statements, are available electronically
for employer use. Both forms are in a one-form-per-page format.
The December 2002 revisions of the forms must be used. Magnetic
media or electronic filing methods must be used when 250 or more
Forms W-2c are filed with SSA.
What’s New in Washington is contributed by
the WMAC’s Government Liaison Officer,
Keith Hill. Questions, comments, or
suggestions should be directed to Keith at
khill@bna.com.
Tax Practitioner News - March 2006
Find the latest Tax Talk Today programs at
http://www.taxtalktoday.tv/
The IRS has developed an
on-line ordering tool on IRS.gov for
ordering information returns and employer forms. Requests
exceeding 1,000 forms and/or 25 instructions cannot be entered
on-line.
http://www.irs.gov/businesses/page/0,,id=23108,00.html
Lien
release procedures have
been centralized.
Publication
4437
has Tax Hints - the Practitioner's Guide to the Filing Season.
Energy Bill:
Highlights of the energy bill for individuals,
Home
builders, Homeowners, and
Companies seeking credits for coal and gasification projects
is now available.
Notice 2006-29
informs taxpayers of amendments that will be made to the final
regulations under § 1.671-5 (Reporting Requirements for Widely
Held Fixed Investment Trusts) regarding certain reporting rules
for non-mortgage widely held fixed investment trusts. Until
amendments reflecting these changes are issued, taxpayers may rely
on this notice.
FS-2006-17
has Election Year Activities and the Prohibition on Political
Campaign Intervention and you can read a report on the
Political Campaign Intervention Initiative.
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