Payroll News

Tax Relief Act of 2010

The Hiring Incentives to Restore Employment (HIRE) Act passed in Congress and was enacted into law on March 18, 2010.

The Hiring Incentives to Restore Employment (HIRE) Act will offer a credit of the 6.2 percent of the employer tax on qualified Social Security wages for the remainder of 2010 to businesses that hire qualified employees after February 3, 2010, and prior to January 1, 2011, who have been out of work for at least 60 days.  Additional requirements require the qualified employee to certify, by a signed affidavit, that they were not employed for more than 40 hours during the prior 60 day period ending on the date the employment began; is not related to the employer; and is not employed to replace another employee unless the former employee was separated voluntarily or for cause.

The credit will be reported on Form 941, which has been revised for the second quarter, 2010. Eligible employers will be able to claim the credit on the 941.

In 2011, an additional credit of $1,000 per employee can be taken for the general business tax credit, provided the employer retains the employee for at least 52 weeks at specified wage levels.

The American Recovery and Reinvestment Act of 2009 (ARRA) (This subsidy has now been extended through May 31, 2010.)

The American Recovery and Reinvestment Act of 2009 (ARRA), as amended on December 19, 2009 by the Department of Defense Appropriations Act, 2010 (2010 DOD Act) provides for premium reductions for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee’s employment. The involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.

The American Recovery and Reinvestment Act of 2009, signed into law in February, has several

provisions that will impact payroll taxes: the Making Work Pay credit and the COBRA Continuation Coverage Assistance.

Making Work Pay credit

The Act provides for a Making Work Pay credit that Congress hopes will give 95% of all working taxpayers the lesser of:

• 6.2% of the taxpayer’s earned income, or
• $400 ($800 if a joint return).

There is a phase-out whereby the credit is reduced by 2% of the amount by which the taxpayer’s modified adjusted gross income exceeds $75,000 ($150,000 if a joint return). This provision is effective for 2009 and 2010. It will be provided through decreased payroll withholding. The IRS has already issued new withholding tables that incorporate the Making Work Pay credit. PayPros, Inc. has already made the changes to the tax tables.  Most employees will see a slight increase in their net pay, due to the drop in federal income tax withholding.

COBRA Changes (affects companies with a group health insurance plan with over 20 employees)

The Act includes major changes to “COBRA” laws, which mandate the continuation of group health coverage for employees experiencing a “qualifying event” – such as the termination of employment – resulting in the loss of that coverage.

Before the passage of this Act, a qualified beneficiary who elected COBRA was wholly responsible for the payment of 100% of his or her COBRA premiums for the duration of the COBRA coverage period.

The new Act changes this by allowing employees who were involuntarily terminated from employment between the dates of September 1, 2008 and December 31, 2009 to have 65% of their COBRA federally subsidized for nine months. This includes employees who have already declined COBRA coverage during this period. This subsidy will only be available to participants with a modified adjusted gross income of less than $125,000 for the taxable year ($250,000 in the case of a joint return) and will be paid through credits against employers’ payroll tax liability. The Act is to become effective immediately.  PayPros, Inc. is ready to handle this reduction in federal tax deposits for you for coverage periods beginning February 17, 2009.  We need the following information:

Please report 65% of the former employee’s premium for COBRA coverage that covers multiple beneficiaries during the coverage period.

Please report 65% of the former employee’s premium for COBRA coverage that covers a single beneficiary during the coverage period.
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Small Business Health Care Tax Credit for Small Employers

This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

Eligibility Rules

*Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
*Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
*Average annual wage. A qualifying employer must pay average annual wages below $50,000.
*Both taxable (for profit) and tax-exempt firms qualify.

Amount of Credit

*Maximum Amount. The credit is worth up to 35 percent of a small business’ premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
*Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.

Important Dates for Quarter End

Quarter End Cutoff Date is normally 2 business days prior to the last day of the Quarter End.  Quarters end on 3/31, 6/30, 9/30 and 12/31.

• Please submit any rate updates from the state unemployment authorities to our fax at 888-894-5252.

Minimum Wage By State (Revised for 2011)

Important: Federal Banking & US Postal Service Holidays
These dates affect direct deposit, please read.

Payroll and direct deposits are not processed on Federal Reserve bank holidays, Saturdays, or Sundays. Please check with your financial institution for information about state and local holidays that might affect payroll processing. These are also Postal Holidays, meaning there will be no mail delivery. Please plan accordingly.

UPS Holidays
This is subject to change, please see UPS Website http://www.ups.com/content/us/en/resources/ship/imp_exp/operation.html .

UPS 2010 Holiday Schedule
In the United States, UPS observes the following holidays:

Memorial Day – May 31, 2010*
Independence Day (observed) – July 5, 2010*
Labor Day – September 6, 2010*
Thanksgiving Day – November 25, 2010*
Day after Thanksgiving – November 26, 2010**
Christmas Day – December 25, 2010*
New Year’s Eve – December 31, 2010**
New Year’s Day – January 1, 2011*

*   UPS Express CriticalSM available 365 days each year
**  Delivery and pickup of air and international packages only
*** Regular delivery day; pickup of air and international packages only

PayPros, Inc. Holidays & Early Closings
This is subject to change.

New Years Day (Observed), December 31, 2010 Closed

Memorial Day, Monday, May 30, 2011 Closed

Independence Day Observed, Monday, July 4, 2011 Closed

Labor Day, Monday, September 7, 2011 Closed

Thanksgiving Day, Thursday, November 24, 2011 Closed

Friday, November 25, 2011 Closed

Christmas Day (Observed), Monday, December 26, 2011 Closed

New Years Day (Observed), Monday, January 2, 2012 Closed