Insight seminar year end final
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This document provides a summary of information and training provided by Smith Elliott Kearns & Company, LLC as part of a "Year-End and Payroll Tax Update." It notes that the information is intended for reference only and not as a substitute for personalized professional advice. While Smith Elliott Kearns & Company has made efforts to ensure the accuracy of the information, no warranties are provided. Participants are responsible for their use of the information.
Insight seminar year end final
- 1. Sandra Bruno, CPA and Brooke Murphy, EA November 2013 Information and training provided by Smith Elliott Kearns & Company, LLC as part of “Year-End and Payroll Tax Update” is intended for reference only. As the information is designed solely to provide guidance to the participants, it is not intended to be a substitute for someone seeking personalized professional advice based on specific factual situations. Although Smith Elliott Kearns & Company, LLC has made every reasonable effort to ensure that the information provided is accurate, Smith Elliott Kearns & Company, LLC and its Members, managers and staff, make no warranties, expressed or implied, on the information provided. The participant accepts the information as is and assumes all responsibility for the use of such information.
- 2. 2014 Cost of living adjustments Maryland & Pennsylvania tax updates Affordable Health Care Act (Business & Individual provisions) Sec 125 Plans Independent Contractor vs. Employee 1099 Reporting Federal Ruling on Same-sex Marriage Online Banking Security
- 3. Social Security Wage Base and Tax $117,000 - 6.2% Medicare rate 1.45% New Additional 0.9% Medicare Tax No employer portion Wage excess of $200,000 (Single) and $250,000 (MFJ)
- 4. 401(k), 403(b) and 457 Plans $ 17,500 Catch up - $ 5,500 Simple Plans $ 12,000 Catch up - $ 2,500 IRA $ 5,500 Catch up $ 1,000 Mileage Rate Jan – Dec 2013: $ 0.565, Charity $0.14 (2014 rate not released)
- 5. Effective January 1, 2012 Changes to income brackets, income tax rates and personal exemption limits No tax rate change for single filers less than $100,000 and married joint less than $150,000
- 6. Example: Spouses filing jointly and head of household brackets and rates: For Maryland taxable income of $3,001 through $150,000, the rate is 4.75%; For Maryland taxable income of $150,001 through $175,000, the rate is 5%; For Maryland taxable income of $175,001 through $225,000, the rate is 5.25%; For Maryland taxable income of $225,001 through $300,000, the rate is 5.5%; For Maryland taxable income in excess of $300,000, the rate is 5.75%
- 7. Taxes for counties range from 1.25% to 3.2% Washington 2.8% Frederick 2.96% Baltimore City, Howard & Montgomery 3.2%
- 8. Highlights of Act 32 January 1, 2012 Objective – to remedy lost revenue by streamlining collection and standardizing forms 560 tax collectors reduced to no more than 69 ACT 32 does not apply to: Businesses/employers located only in Philadelphia Businesses/employers not located in PA, even if employing PA residents Self-employed individuals (unless they have employees) Fines and Penalties
- 9. ACT 32 Requirements Register with the tax collector in your business’s jurisdiction Have EVERY employee fill out a Certificate of Residency Form Withhold the higher rate of: Where the employee resides or The nonresident tax rate for the municipality where the employee works File quarterly and annual forms Businesses in multiple areas can elect combined filing with one tax collector but must file and remit electronically on a monthly basis
- 10. Electronic filing is here! Are you ready? January 2013-Unemployment Compensation Management System (UCMS) allows employers and third party administrators to access information and file quarterly reports online
- 11. Effective with the first quarter 2014 filing, employers will be required to electronically file quarterly UC tax and wage reports Department of Labor & Industry will not be mailing forms to employers www.paucemployers.state.pa.us
- 12. Year Taxable Wage Base for Employer Contributions (per employee per year) Maximum State Adjustment Factor 2013 $8,500 1% 2014 $8,750 1% 2015 $9,000 1% 2016 $9,500 1% 2017 $9,750 0.85% 2018 and thereafter $10,000 0.75%
- 13. Changes for business: FSA limits W-2 reporting Summary of benefits Medical Loss Ratio Rebate Small Business Health Care Credit Minimum essential coverage
- 14. Cost of employer-sponsored health insurance must be reported on W-2 in Box 12 – Code DD Reporting is for informational purposes only
- 15. Reporting Requirements Reporting began for 2012 W-2 (filed in 2013) Additional Relief for Small Employers Less than 250 W-2s in prior year are not required to report until further notice
- 16. What to Report on Form W-2 Aggregate reportable cost of the coverage Employee and employer portion IRS website: http://www.irs.gov/uac/Form-W-2-Reporting-of- Employer-Sponsored-Health-Coverage
- 17. Important W-2 Reporting Items Health Savings Accounts S-Corp Shareholder Health Insurance Personal Use of Auto Retirement Plan Withholdings
- 18. Miscellaneous Information Electronic Filing of Employment Returns 941 and 940 2013 Forms W-2 to be filed electronically Maryland - 25 or more Pennsylvania - 250 or more must file electronically Federal – 250 or more
- 19. W-2 Reporting Due Dates Employees January 31, 2014 Paper Forms W-2 to SSA February 28, 2014 Electronic Forms W-2 to SSA March 31, 2014
- 20. Uniform summary of benefits and coverage explanations in plain language Must be provided at plan renewal on or after 9/23/12 Revised summary of changes must be given 60 days prior to effective date Penalty of up to $1,000 per failure to provide
- 21. Insurers required to spend so much of premiums on claims-excess refunded to employer Employer must distribute rebates to participants in some way… Distribute to enrollees/improve benefits/reduce future employee contributions Allocation amongst participants must be fair and reasonable Must be used within 3 months of receiving
- 22. 2010-2013 credit is 35% of the premium cost for small business (25% for nonprofits) Employers must cover at least 50% of the cost of single coverage Must have fewer than 25 full-time equivalent employees Average wages less than $50,000
- 23. 2014 & 2015-credit is available if employer purchases health insurance coverage for their employees through a health exchange Credit is worth up to 50% of premium cost (35% nonprofits)
- 24. 2015- employers with 50 or more employees who DO NOT offer health coverage Must offer insurance to full-time employees or pay a penalty Fine is $2,000 per employee, but first 30 employees are not counted….so with 65 employees penalty is only paid on 35 of them
- 25. 2015- employer with 50 or more employees who DOES offer health coverage…but has at least one full time employee receiving a tax credit in the exchange will pay the lesser of…. $3,000 for each employee receiving a credit or $2,000 for each full time employee
- 26. How can an employee receive a tax credit in the exchange? Family income up to 400% of federal poverty level is eligible for credit if: Value of employer coverage is less than a minimum standard (does not cover 60% of costs) Employer requires employee to contribute more than 9.5% of employee’s family toward coverage
- 27. Changes for individuals: Additional Medicare withholding Medicare Surtax or Net Investment Income Medical expense deduction Failure to maintain health insurance Premium Assistance Credit
- 28. Effective January 1, 2013 Withholding requirement commences in the pay period where paid wages exceed $200,000 regardless of filing status 0.9% Withholding No employer match Form 1040-Earnings over $200,000 for single, head of household, married filing separately, & Qualified Widow(er) with Dependent Child Form 1040-Earnings over $250,000 for married filing joint
- 29. New 3.8% surtax on individual investment income Calculated on the lesser of: Net investment income OR the Excess of taxpayers’ modified AGI over $200,000 ($250,000 for MFJ)
- 30. What is included as net investment income? Interest Dividends Annuities Royalties Rent Capital Gains Passive income from business (limited participation)
- 31. Barack & Michelle, MFJ Salaries $280,000 + net interest income $20,000 = AGI $300,000 Taxes on lesser of 1. Net investment = $20,000 OR 2. Excess of AGI over $250,000 = $50,000 Result: $760= 3.8% surtax on $20,000
- 32. 2013, medical expenses allowable if greater than 10% of AGI Exception- Taxpayer or Spouse is or turns 65 during 2013-2016, 10% threshold is not effective until 2017
- 33. 2014 & 2015 phase in period-penalty on individuals who fail to maintain “minimum essential coverage” Penalty: 2014 = greater of 1% of household income OR $95 per uninsured 2015 = greater of 2% of household income OR $325 per uninsured
- 34. Penalty included on 1040 IRS may not impose interest on late payment Not subject to criminal prosecution or assessment IRS may not file lien or levy property May reduce refund owed to taxpayer Supreme Court ruled this is a tax
- 35. 2014- refundable credit to cover cost for health insurance purchased through a state health exchange Credit based on income Low income individuals
- 36. Types of Plans Premium Only Plans (POP) Dependent Care Assistance Program (DCAP) Flexible Spending Accounts (FSA) Health Reimbursement Accounts (HRA) Benefits to both employee & employer
- 37. Dependent care limit: $5,000 No limitation related to health insurance premiums portion. FSA Deferral limit: $2,500 May be adjusted in future years for cost of living New for 2013: $500 Carryover Option Allowed grace period or carryover, but not both No effect on $2,500 limit Plan must be amended to adopt this change
- 38. Employee or Independent Contractor? Employee – Job to be completed under the control of employer, collects paycheck, employer pays payroll taxes related to individual Independent contractor – self employed or non incorporated business Common-Law Rules Behavioral control Financial control Type of relationship
- 39. Federal Reporting of 1099 Filing requirements (Both IRS & State) $600 or more paid for rents or services $10 or more paid in interest, dividends, or royalties Due dates Due to the contractor by January 31 Due to the IRS & State by February 28, unless filing electronically then due by March 31 Penalties Ranges from $30 - $100 per return with a max of $250,000 - $1,500,000 Small business max ranges from $75,000 - $500,000 Intentional disregard of filing penalty is at least $250 per return, with no max
- 40. PA 1099 Reporting Required for PA-based work & PA-source oil/gas lease payments Federal form may be used, unless the entity is required to file electronically using e-TIDES Due dates are the same for PA as for Federal forms Penalties $50 penalty for each occurrence of failure to file, or providing fraudulent or false information
- 41. IRS Notices Contact vendors to verify correct information Full legal name Correct EIN or SSN If incorrect information may be required to withhold federal tax (28%) from future payments. May want to send Form W-9 to each vendor for them to complete Form I-9 & W-9 have been updated
- 42. Consolidated backup of QuickBooks Files Subpoena of QuickBooks files or IRS audits Contact an SEK employee for additional help with consolidating your QuickBooks files Sunset Rules/Support QuickBooks should be upgraded every 3 years, since that is the amount of time Intuit will support each version After the 3 years, key features may not be available or may not work properly including: Payroll Online Banking Merchant Service Credit Card Download
- 43. For federal purposes, same-sex couples, legally married in a jurisdiction that recognizes the marriage, will be considered married. Will be treated as married for federal income tax, gift, & estate tax purposes Must file either a married filing joint or married filing separate return for 2013 Can possibly amend their 2010, 2011, & 2012 federal income tax returns to file a married return If they were married during the tax year being amended Employment related items Employees who purchased same-sex spouse health insurance from their employer on an after-tax basis may treat the premiums paid as pre-tax & exclude them from income This would be pretax for: Federal Income Social Security Tax Medicare Tax To claim a refund, the payroll tax returns would need to be amended The Treasury & IRS intend to streamline procedures for employers who wish to claim a refund on previously taxed benefits & provide further details for individuals
- 44. Internet risks & fraud trends From the criminals‟ point of view, Internet fraud is a high-growth, profitable industry Organized crime has moved into the business of Internet fraud, driving a significant increase in incidents & sophistication of incidents Personal computers rather than bank systems are typically the target of fraudsters, since they are seen as „the weakest link‟ Fraudsters use targeted social engineering techniques in conjunction with crimeware & malware infections
- 45. Corporate Account Takeover A type of identity theft in which a criminal steals a business‟s valid online banking credentials to initiate fraudulent banking transactions Fraudsters use malware software on the User‟s PC to record keystrokes & gather login information, including usernames & passwords & token values Using stolen credentials, fraudsters perform unauthorized transactions
- 46. Examples of fraud scenarios “Phishing” emails Many payment fraud schemes start with “phishing” emails, which correctly names the recipient & contains either an infected file or a link to an infectious website The email recipient is generally a person within an organization who can initiate funds transfers or payments on behalf of the organization Once the email recipient opens the attachment, or clicks the link to open the website, malware is installed on the recipient‟s computer
- 47. Examples of fraud scenarios Cross-channel fraud User experiences abnormal system behavior & then receives a call from an individual claiming to be from the Bank‟s customer service unit. The caller says they noticed the User was experiencing issues & is calling to help. This is an attempt to obtain log in credentials from the User Company receives an email request from a vendor/supplier to change payment instructions. Often times, the sender stresses a sense of urgency & a need to communicate via email instead of via phone This is an attempt to get the Company to send funds to a fraudster‟s account
- 48. Examples of fraud scenarios Infected browser Individual navigates to a website that appears to be legitimate but is, in fact, fictitious Simply visiting the site infects the individual‟s PC Once malware has been installed on a PC, the fraudster can take over the browser to present a fake webpage to gather login credentials Individuals should be familiar with the standard look & functionality of their bank‟s webpage Potential signs of fraudulent activities include: Lack of full branding Spelling and/or grammatical errors Non-standard log-in screen System messages targeted to get User to wait so fraud can occur or to have another User log in so secondary set of credentials can be captured Becoming increasingly difficult to differentiate between a legitimate webpage & a fake webpage as fraudsters improve their tactics
- 49. Indications your PC may be infected with malware PC performance problems – slowness or dramatic loss of speed, computer locks up so that the User is unable to perform any functions Unexplained system behavior – unexpected rebooting or restarting of computer, inability to shut down or restart, new or unexpected toolbars and/or icons, changes in the way things appear Interruptions from pop ups or spam – unusual pop up messages, an unexpected request for a one-time password
- 50. Best Practices to help reduce fraud risk Computer network security Carry out all online banking activities from a stand-alone & dedicated computer Regularly update the anti-virus & anti-spyware programs on each computer used for internet banking Training your staff Don‟t respond to or open attachments or click on links in unsolicited emails Be very suspicious of emails claiming to be from a financial institution or taxing authority requesting account information, account verification or banking access credentials Verify that you are using a secure session (https, not http) Always end your Online Banking Internet sessions by “logging off” Verify email instructions through a different channel & do not rely upon contact information provided in the email
- 51. Best Practices to help reduce fraud risk System Access Restrict User permissions Create unique IDs for each online banking user Delegate the minimum requirements to a User to get the job done Review user access & permissions on a regular basis Implement Dual Administration of Users Segregate permission to create/modify users & user permissions from the permission to approve such actions Payment Processing Segregate ACH & wire payment functions, by having one individual initiate the transaction & a different individual approve the transaction Establish transaction limits for Users
- 52. Recommendations in the event you become a victim of fraud Immediately cease all activity from computer systems that may be compromised Log-off & shut down PC Unplug the Ethernet or cable modem connections to isolate system from remote access Immediately contact your bank to request that the following actions, & any others you consider appropriate, be taken to help contain the incident: Change online banking passwords Confirm recent accounts transactions Close existing account(s) & open new account(s) as appropriate Ensure that no one has requested an address change, title change, PIN change or ordered new cards, checks or other account documents to be sent to another address Immediately contact your organization‟s security officer or security advisor to ensure you are following your own appropriate security procedures and guidelines to help contain the situation
- 53. Examples of possible security procedures that may be offered by banks: User ID & Password Token device Anti-keystroke logging technology Dual authorization of payment profiles/templates Dual authorization of payments Control totals Verification of payments via different means of communication Email alerts Payment initiation/approval limits
- 54. Review payroll setups for employees & employer, including Medicare, Social Security, FUTA, and SUTA changes Be alert for updates on the Health Care Provisions Make any necessary changes to your Cost of Living Adjustments or Sec.125 Plans Make sure you have correct information for any 1099s to be filed Be alert while conducting any online banking or other financial transactions
Editor's Notes
- #5: All these rates remain unchanged from 2013Catch up over 50
- #12: -If you have not already registered with UCMS to file electronically, the time to do so it nowFor employers with fewer than 100 employees: key online, file upload Employers with 100 or more: file uploadEmployers who do not electronically file may be assessed a penalty of 10% of quarterly contributions due at a minimum of $25 and a maximum of $250
- #13: Part of Act 60 to the PA UC Law, taxable wage base for employer contributions will be increasing each year 2013-2018 will the adjustment factor decreases in 2017.
- #14: Patient Protection and Affordable Care Act passed March 2010-estimated cost $940 billion over 10 yearsExpand coverage to 32 million AmericansProvides changes for businesses and individuals
- #21: Administrators of self insured plans and insured health plans must provide summary of benefits and coverage (SBC)Describes benefits, exceptions, and limitations of coverage, cost-sharing provisions (including deductible and copayment obligations), renewability and continuation provisions
- #23: Calculation complex and there are phase-outs2014 & 2015 the credit is available to a qualified employer that purchases health insurance coverage for its employees through a health exchange which will be set up by the state or by the federal govt
- #25: Full time equivalent employeesLaw addresses seasonal employees
- #27: There are tables to show what the income levels are per number in your household to show what the poverty level thresholds are
- #28: Patient Protection and Affordable Care Act passed March 2010-estimated cost $940 billion over 10 yearsExpand coverage to 32 million AmericansProvides changes for businesses and individuals
- #31: Excluded:1.Active business income2.Qualified retirement plan and IRA distributions3.Self-employment income4. Tax-exempt interest 5. Sale of principal residence
- #32: Excluded:1.Active business income2.Qualified retirement plan and IRA distributions3.Self-employment income4. Tax-exempt interest 5. Sale of principal residence
- #33: - Prior to 2013 threshold was 7.5% of AGI
- #34: 2016 2.5% if household income in excess of filing threshold OR $695 per uninsured adult with a penalty cap of $2085 per household
- #35: Minimum essential coverage under: Medicare, Medicaid, TICARE, veteran’s care, governmental program, employer sponsored group plan, grandfathered health plan, or any coverage recognized by Department of Health & Human Services2016= 2.5% if household income in excess of filing threshold OR $695 per uninsured adult with a penalty cap of $2085 per household
- #42: Discuss Form W-9 Updated in August 2013Discuss Form I-9Updated in March 2013, must use updated form as of May 2013
- #44: Each state were same-sex marriages are legal has different timeframes as to when the marriages were recognized
- #48: System login issues or error messagesCalls can come by either phone orskype
- #49: Branding – missing logo or a variation of the correct logoNon-standard login: requests several credentials on the same screen
- #51: No general web browsing, emailing, social networking
- #54: Verification of payments via out-of-band authentication (e.g. phone call)