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American Recovery & Reinvestment Act of 2009 Compliance Updates

American Recovery & Reinvestment Act of 2009 Compliance Updates. Topics. American Recovery & Reinvestment Act of 2009 State Withholding Changes State Unemployment Changes New Taxes Filing Changes Minimum Wage Changes. American Recovery & Reinvestment Act of 2009.

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American Recovery & Reinvestment Act of 2009 Compliance Updates

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  1. American Recovery & Reinvestment Act of 2009Compliance Updates

  2. Topics • American Recovery & Reinvestment Act of 2009 • State Withholding Changes • State Unemployment Changes • New Taxes • Filing Changes • Minimum Wage Changes

  3. American Recovery & Reinvestment Act of 2009 • Making Work Pay Tax Credit • Earned Income Tax Credit • COBRA

  4. Making Work Pay Tax Credit New Federal withholding tables. Provides a tax credit of up to $400 for an individual tax filer. Provides a tax credit of up to $800 for married taxpayer filing a joint return The credit is phased out if your modified adjusted gross income (AGI) is more than $75,000 ($150,000 if married filing jointly).

  5. Earned Income Tax Credit New Advance Earned Income Credit tax tables. An increase in the phase-out threshold for a married couple filing jointly. The maximum Advance Earned Income Credit will remain at $1,826.

  6. 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. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months for those eligible for COBRA during the period beginning September 1, 2008 and ending December 31, 2009 due to an involuntary termination of employment that occurred during that period. The premium reduction started on March 1, 2009 for plans that charge for COBRA coverage on a calendar month basis.

  7. COBRA An "assistance eligible individual" is the employee or a member of his/her family who: Is eligible for COBRA as a result of the employee's involuntary termination between September 1, 2008 and December 31, 2009. Is eligible for COBRA continuation coverage at any time between September 1, 2008 and December 31, 2009 Elects COBRA coverage

  8. COBRA The premium reduction for an individual ends at the first occurrence when: Eligible for other group coverage (or Medicare) 9 months of the reduction The maximum period of COBRA coverage ends If there is no longer a health plan, the employer has shut down and there is not another related or successor responsibility, there often is no COBRA available. This will require the individual to pay 100% of the premium. Failure to timely pay the required premium.

  9. COBRA Premiums paid at 100% prior to periods beginning on or after February 17th, 2009 are not eligible for a refund. If full payments have been made for periods beginning on or after February 17th, 2009, you can apply the credit against future payments as long as it is reasonable to believe that the credit can be used within 180 days of the overpayment otherwise a refund of the amount can be made to the individual. Under a transition rule, the regular premium amount (100% of the premium), may continue to be paid for up to two months (March and April) after the law went into effect on February 17th, 2009.

  10. COBRA There is no additional documentation required when filing the 941, but you must maintain supporting documentation for the credit claimed, including but not limited to: Receipts of amounts and paid dates of the individuals’ 35% of the premium. Proof of timely payment of the full premium. Record of involuntary termination

  11. COBRASpecial COBRA Election Opportunity Individuals involuntarily terminated from September 1, 2008 through February 16, 2009 who did not elect COBRA when it was first offered or who did elect COBRA, were offered a new election which ended in April.

  12. COBRAIncome Limits Modified adjusted gross income for the tax year of $145,000 or $290,000 for joint filers. Repayment is proportionately reduced for modified adjusted gross income between $125,000 and $145,000 or $250,000 and $290,000 for joint filers. The repaid amount is an additional tax on the individuals’ return. Individuals may permanently waive the right to premium reduction but may not later obtain the premium reduction if their adjusted gross incomes end up below the limits. Employer cannot refuse to provide the premium reduction because of income.

  13. COBRATax Deposits The COBRA credit does not: Reduce an employers liability Affect the deposit frequency Reduce an employer's payroll tax liabilities when determining whether $100,000 in liabilities has accumulated for deposit purposes The Schedule B does not change; this is a schedule of liabilities and not deposits.

  14. COBRATax Deposits For deposits paid through EFTPS, the sub-category amounts are optional, and must equal the amount of the deposit; when the deposit is reduced by the amount of the COBRA subsidy credit, omit the sub-category entries to avoid a reject by the EFTPS system. The employer can claim the credit on the current quarter or a subsequent quarter in the same calendar year.

  15. COBRA941 Changes Elimination of lines 7e through 7h Renamed line 7d Total Adjustments (previously line 7h) Line 12a - COBRA premium assistance payments Line 12b - Number of individuals provided COBRA on line 12a “Individuals" represents a count of one for each individual receiving a  subsidy, regardless of the number of individuals benefiting from that policy.

  16. COBRA941 Changes

  17. PayChoice “FM” – Using tax table COBRAM is to be used when the COBRA coverage premium is for a former employee covering multiple beneficiaries. “FS” - Using tax table COBRAS to be used when the COBRA coverage premium is for a former employee with individual coverage. Both codes handle the premium in the same manner.

  18. PayChoiceEntering the Premium Credit The credit is entered in PayChoice, on the Employee Adjustments (F7) screen, as a negative amount in the Taxes section

  19. PayChoice When the COBRA credit exceeds the total federal taxes due, it is recommend that the amount is processed over multiple pay periods. Tax Due Date – Review and adjust accordingly, any periods where the liability is reduced below the $100,000 threshold.

  20. State Withholding Changes Arizona California Delaware Hawaii Wisconsin

  21. Arizona State Withholding Changes were effective May 1, 2009 Additional changes effective January 1, 2010 Effective July 1, 2010 the state will break from the Percent of Federal calculation, and move to a graduated table.

  22. California State Withholding Changes were made in the 2nd quarter of 2009 Recent legislation requires employers to increase the amount of State income tax withheld from employee paychecks by 10% Additional changes effective November 1, 2009 New tax tables expected in mid October

  23. Delaware State Withholding Effective 2010, the top personal income tax rate on taxable income over $60,000 is increasing from 5.95% to 6.95%. New withholding tables expected by the end of October

  24. Hawaii State Withholding Hawaii effective 1/1/2010 employers who are semi-weekly depositors for federal tax purposes are required to remit Hawaii withholding taxes on a semi-weekly basis in accordance with federal payment deadlines.

  25. Wisconsin State Withholding Advance Earned Income Credit Reciprocity

  26. Wisconsin EIC A percentage of the Federal Advance EIC 4% for one child 14% for two children 43% for three or more children If the federal advance EIC is discontinued, so would the state EIC. Reported on the W-2 box 14

  27. Reciprocity On Friday, September 18, 2009 the income tax reciprocity agreement between Minnesota and Wisconsin was terminated effective after December 31, 2009.

  28. State Unemployment Changes South Dakota is expected to impose a 1.5% surcharge after the September 30th trust fund balance review. Iowa has a new system called “myIowaUI,” to file quarterly reports and manage UI tax accounts online, expected to be ready in February 2010 New Jersey employee contribution increases to 1.045% in 2010; the NJFL is increasing to .12% from .09%.

  29. State Unemployment Wage Limits Effective January 1, 2010 the published changes are: 2009 Rate 2010 Rate Arkansas 10,000 12,000 Florida 7,000 8,500 Iowa 23,700 24,500 Indiana 7,000 9,500 Missouri 12,500 13,000 Montana 25,100 26,000 New Hampshire 8,000 10,000 New Jersey 28,900 29,700 New Mexico 20,900 20,800 Nevada 26,600 27,000 South Dakota 9,500 10,000 Vermont 8,000 10,000 Washington 35,700 36,800 Wyoming 21,500 22,800

  30. New York Metropolitan Commuter Tax For most employers effective March 1, 2009 Exception for 2009, the first period covers March 1 through September 30, 2009. Paid quarterly Employer paid tax .34% of wages earned in the MCMTD Additional requirements are being issued in late September

  31. Massachusetts QUEST Effective with the 4th quarter 2009 filing, information on the website www.mass.gov/dus/quest Employers will need to re-register, target date is November 2009 Agents will need to register to get a Third Party Administrator (TPA) Id Employers will need to authorize the TPA to act on their behalf DUA will calculate the contribution due and collect withholding information

  32. FUTA Tax Credit Loan Repayment Credit Reduction First year .3 % reduction Grace period until November 10 Program is on the PayChoice main menu Michigan employers are expected to pay FUTA at a 0.3% higher tax rate ($21 per employee)

  33. FUTA Tax Credit Indiana and South Carolina employers will be subject to a 0.3% FUTA tax increase on their 2010 Form 940 if their states do not repay the federal loan by Nov. 10, 2010 Arkansas, California, Florida, Idaho, Illinois, Indiana, Kentucky, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Texas, and Wisconsin all have loans, but these are not due until 2011.

  34. Minimum Wage 2009 Maine $7.50 10/1/09 2010 Alaska $7.75 1/1/10 Connecticut $8.25 1/1/10 Kansas $7.25 1/1/10 Illinois $8.25 7/1/10

  35. Additional Information Tax Talk Today – a live internet program that airs on the second Tuesday of the month at www.TaxTalkToday.TV. The next program is October 6, 2009, and the topic is “ARRA 2009: What You Should Know” This show will cover provisions of the American Recovery and Reinvestment Act of 2009 related to an individual 2009 tax returns.

  36. Additional Information The IRS offers PSA’s on YouTube at www.youtube.com/irsvideos to increase public awareness about the tax credits. Information about ARRA at www.irs.gov/recovery.

  37. Additional Information Review Tax changes or enter a support issue on the Support website.

  38. Additional Information Are you getting the information you need to remain compliant? How can we improve to help you be compliant? Contact email - stephen.mulville@paychoice.com

  39. Thank You

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