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Government & Community Updates

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 buildersHomeowners, 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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