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| June, 2003 | The Payroll News | Volume 1, Issue 1 |
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http://www.custompay.us/ |
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The Latest News, Tips and Tools For Payroll and Tax Issues |
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Employment. News and Statistics |
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Tax. News and Tips |
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Facts. Did you know that … |
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Employment. News and Statistics Based on the data provided by the Bureau of Labor Statistics in April 2003 total number of unemployed in the U.S. has increased to 8,786 compare to 8,445 of unemployed in March. Based on preliminary data from the Bureau of Labor Statistics average hourly earnings of non-supervisory workers on private non-farm payrolls have increased in April to $15.11 compare to $15.09 in March. Source: http://www.whitehouse.gov/fsbr/employment.html |
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Tax. News and Tips EARLY RELEASE OF NEW INCOME TAX WITHHOLDING TABLES The Internal Revenue Service has released a revised Notice 1036, Early Release Copies of New Income Tax Withholding Tables, with new wage-bracket and percentage-method withholding tables that are effective for wages paid through December 31, 2004. The tables incorporate reduced income tax rates under the Jobs and Growth Tax Relief Reconciliation Act of 2003, which was signed into law on May 28. Employers are encouraged to put the new tables into use as soon as possible, but no later than July 1. The revised notice also states that the supplemental tax rate has been reduced from 27% to 25% and the back-up withholding rate has decreased from 30% to 28%. |
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S CORPORATION'S TREATMENT OF EMPLOYEE-SHAREHOLDER FRINGE BENEFITS Fringe benefits are employment related benefits provided to an employee in addition to regular compensation. They must be included in taxable income unless specifically excepted under another Code section. A fringe benefit that can be provided tax-free may be a particularly good way to compensate employees. The employee receives a benefit free from income tax, while the employer generally deducts the benefit/s cost. Tax-free fringe benefits are also free from payroll taxes (i.e., Federal (and in some cases, state) unemployment tax, and Social Security and Medicare tax). C corporations can offer a number of tax-advantaged fringe benefits to their employee (who, in closely held businesses, are frequently also the owners). The corporation can deduct the benefits; the employees can exclude them from taxable income. The rules governing fringe benefits for S corporation employee-owners are not as favorable as those applicable to C Corporation; rather, they are similar to the rules for partnerships. The following benefits are available on a tax-advantaged basis (i.e., deductible by the S corporation and excludible from the income of 2% employee-shareholders), because such benefits are available to partners: 1. December care assistance under Sec. 129. 2. Educational assistance programs under Sec. 127 3. Qualified employee discounts, no-additional-cost services, working-condition fringe benefits, on-premises athletic facilities and de minimis fringe benefits, under Sec. 132. Conversely, the following fringe benefits provided to 2% employee shareholders are treated as additional employee compensation: 1. The cost of accident and health insurance plans under Sec. 105 and 106, including uninsured medical expense reimbursement plans. 2. The expense of meals and lodging furnished for the employer's business needs under Sec. 119. 3. The cost of up to $50,000 of group-term life insurance coverage under Sec. 79. 4. Sec.125 cafeteria plans. According to Rev. Rul. 91-26, an S corporation treats taxable fringe benefits paid on behalf of its 2\% employee shareholders as additional compensation subject to Federal tax withholding (and, generally, subject to employment taxes). However, payments made under a plan providing accident and health coverage (including payments of insurance premiums) and treated as compensation to a 2% employee shareholder are not subject to employment taxes, because such payments are not deemed wages for such purposes; see Secs. 3121(a)(2) and 3306(b)(2) and Ann. 92-16. However, the additional compensation is subject to Federal income tax withholding. Rev. Rul. 91-26 specifically provides that a 2% employee-shareholder may be eligible for an above-the-line deduction under Sec.162(1) for the accident and health insurance premium the corporation paid. The deduction is 100%(for 2003) of the amount paid for medical insurance for the employee-shareholder and his or her spouse and dependents, and is reported as an adjustment to income. However, the deduction is not available for calendar months in which the shareholder or spouse is eligible to participate in another employer-subsidized health insurance plan, nor can it exceed the taxpayer's earned income (as defined in Sec. 401©(2). S shareholders can treat their Social Security wages from the S corporation as earned income for purposes of this limit. Source: The Tax Advisor, April 2003 |
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2003 FORM W-4 AVAILABLE The 2003 Form W-4, Employee's Withholding Allowance Certificate (virtually unchanged from 2002) is now available for download below. 2003 Form W-4, Employee's Withholding Allowance Certificate Employees who claimed exempt status in 2002 and wish to continue their exemption for 2003 must submit a new form to the payroll department by February 15, 2003. Those employees should complete only boxes 1, 2, 3, 4, and 7 and sign the form to validate it. Individuals may not claim exempt status in 2003 if (1) their income exceeds $750 (unchanged from 2002) and includes more than $250 of unearned income (e.g., interest and dividends) and (2) they can be claimed as a dependent on another person's tax return. Source: American Payroll Association, www.americanpayroll.org |
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Final regs (T.D. 9043) ease the waiver rules for foreign
taxpayers that fail to file a timely U.S. income tax return where
they acted reasonably and in good faith. Various dates of
applicability.
Source: Practical Accountant, May 2003 |
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Facts. Did you know that … Certified Payroll Professional (CPP) is a credential that validates experience in the payroll profession. Source: American Payroll Association, www.americanpayroll.org |
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8 in 10 is a ratio of 401(k) plan participants who spend fewer than ten hours a year examining their plan choices and performance. Source: Financial Planning Journal, April 2003 |
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52.5% of the 75 million uninsured Americans went for at least nine months or longer without health insurance during 2001 and 2002. Source: Financial Planning Journal, April 2003 |
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With all tax questions please call Natalie Berman, CPA at nberman@nbaccorp.com With payroll questions please call Sepi Jahed, CPP at sjahed@custompay.us With employee benefits questions please call Boris Foxman, RFC at bfoxman@custompay.us |
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