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As we come to the close of the calendar year we want to update you on current laws and remind you of documentation requirements. Due to budget shortages, all taxing agencies are stepping up their audit efforts to bring in additional tax revenue. Please take the time to make sure you are up to date on the current laws and documentation requirements. Please review anything that applies to your business. If you have any questions, please contact us.
If we prepare your W-2’s, payroll reports, 1099’s, sales tax return, or personal property tax return please review the applicable items in this letter and bring in the requested information.
Make sure you have the appropriate documentation for travel, meals, and entertainment. Also, please make sure you have mileage logs supporting documentation for all business vehicles. If you have inventory, please make sure you take a physical inventory at the end of the year.
W-2 Employee Information Verification
A SSN/name mismatch affects the employee’s social security wage benefits; wages reported on Form W-2 with a mismatch error will not be credited to that employee’s personal earnings record. Instead, the wages will be housed in a "suspense file" until the error is corrected. If the error is not corrected, the wages will never be credited to that individual. Reminder/Note: The IRS may charge employers a penalty of up to $100 for each return or Form W-2 that has a missing or incorrect SSN or federal employer identification number (FEIN). We cannot file your federal Forms W-2 electronically if a substantial percentage of the SSNs are missing and you have more than 10 employees. For more information regarding invalid social security numbers, visit the SSA website at
www.ssa.gov/employer/ssnvhighgroup.htm.
Please review your outstanding checks and determine if any payroll checks need to be voided or reissued before year end.
Bonus Checks
Bonus checks paid to your employees must be included in your regular payroll, reported on Form W-2, and taxes must be withheld and deposited. Please let us know immediately if you paid bonus checks which were not included in your payroll so we can calculate your federal and state deposits to minimize potential penalties.
Unclaimed Property Law
Wisconsin law requires businesses to review their financial records each year to determine whether they hold any funds that have been unclaimed for the required dormancy period. Holders are required to file an annual report and deliver the property to the state. Unclaimed wages are included in this report. Please go to the unclaimed property website at
www.statetreasury.wisconsin.gov for more information.
Employees Claiming Exemption from Withholding (Forms W-4 and WT-4)
Wisconsin law requires that a copy of the WT-4 Form be mailed in whenever either of the following conditions exists:
- The employee claims more than 10 exemptions.
- The employee claims complete exemption from Wisconsin withholding and earns over $200 a week.
Send WT-4 Form to the Wisconsin Department of Revenue, Audit Bureau, P.O. Box 8906, Madison, WI 53708-8906.
If any of your employees have filled out a W-4 and/or WT-4 Form, Employees Withholding Allowance Certificate for 2011, that states that they are "exempt" from federal and/or state withholding, you are required to have them complete a new W-4 by February 15, 2012 and Wisconsin Form WT-4 by April 30, 2012. If you do not receive new Forms W-4 and WT-4, you are required to change their withholding to single, zero exemptions. You may want to remind your employees to review their withholding for the year to determine if they need to fill out a revised W-4 and/or WT-4 Form for 2012. Copies of Form W-4 and WT-4 can be found at our website at biwancpa.com.
These forms along with the I-9, U.S. Citizenship and Immigration Services Form, should be filled out by each employee when hired and kept in the employee’s personnel file.
New Hire Reporting Requirement
All employers with a federal employer identification number must report all newly hired or rehired employees to the New Hire Program. A newly hired employee is someone who has not worked for you before or is rehired, recalled, or returning after an unpaid interval of more than 90 days. Employers must report all of their newly hired employees within 20 days after the employee starts working for them (or returns to work when rehired or recalled).
Fax WT-4 Form to 1-800-277-8075 or electronically at
www.wi-newhire.com.
Sales Tax, Federal Withholding, and State Withholding Filing Frequency
Please provide us with any information you receive on filing frequency changes for sales tax and federal and state withholding. Notices have been mailed by the IRS and WDR. If you have not received a notice and your sales or withholding has changed significantly please let us know and we will check it out.
Federal Tax Deposit Rules
It is the employer’s responsibility to determine the correct frequency that they should be using to deposit federal taxes.
- An employer is a monthly depositor for 2012 if the aggregate amount of employment taxes reported for the period July 1, 2010 to June 30, 2011 is $50,000 or less, unless a daily deposit is required as explained in Rule 3 below. Deposits are due on the 15th of the following month. If the 15th falls on a holiday or weekend, the due date is extended to the next banking day. Note: New businesses deposit using the monthly deposit rule, unless a daily deposit is required under Rule 3.
- An employer is a semi-weekly depositor for 2012 if the aggregate amount of employment taxes reported for the period July 1, 2010 to June 30, 2011 exceeds $50,000. Deposits for payments made on Wednesday, Thursday, and/or Friday are due on or before the following Wednesday. Deposits for payments made on Saturday, Sunday, Monday, and/or Tuesday are due on or before the following Friday. In the event of a holiday, employers have three banking days from the end of the semi-weekly period to deposit.
Note: Semi-weekly employers with an accumulated unpaid liability of $100,000 or more during the deposit period must deposit within one banking day of the payroll check date, as stated in Rule 3.
- Employers with an accumulated unpaid liability of $100,000 or more during the deposit period must deposit within one banking day of the payroll check date.
- Form 941 employers with accumulated liability of less than $2,500 for the entire quarter may deposit or remit the amount with a timely filed Form 941, Employer’s Quarterly Federal Tax Return.
- Form 944 employers with accumulated liability of less than $2,500 for the entire year may deposit or remit the amount with a timely filed Form 944, Employer’s Annual Federal Tax Return.
Wisconsin
Wisconsin businesses are required to use My Tax Account unless they have received a waiver from the Wisconsin Department of Revenue. My Tax Account allows you to view your current account status, including your filing frequency, file and amend returns, make payments, remit wage attachment payments, and manage and update account information.
Social Security Payroll Tax Reduction
Employees
received a reduction of two percentage points in Social Security payroll tax in 2011, bringing the rate down from 6.2% to 4.2% for employees. This reduction is scheduled to expire on December 31, 2011. Congress is currently trying to work out an agreement to extend this reduction. Please watch carefully as payroll systems will probably have to be reprogrammed on short notice.
Tipped Employees
If any of your employees received tips during the year, and you have not yet provided this information to us, please provide ASAP to ensure that the proper payroll taxes are withheld from the employee wages.
Retirement Plans
Please review the attached employee listing and determine that the employees who actively participate in your retirement plan are so designated. If you use QuickBooks for payroll processing a similar report, Employee Contact List, can be generated under the Reports menu for Employees & Payroll. For an employee to be an active participant in the plan, the employee or the employer must have contributed to their plan during the year.
Now is also the time to review your employee listing to determine if any employees have met the eligibility requirements during the year. If so, they are eligible to have deferrals of income on the first wages paid to them in January. Those employees who have met the eligibility requirements but elect not to participate should sign enrollment forms electing out of the plan. These forms should be kept in the employee files.
If your employees are 50 years or older they may be able to contribute additional money to your retirement plan through "catch-up" contributions.
Please let us know if you started a new retirement plan in 2011. If you are interested in learning about options for your business, please give us a call.
Employee Benefits
Do you provide any of the following benefits for your employees? If so, please provide details to us ASAP so the appropriate taxes can be paid before year end. If you do, do you have a written plan? Are these benefits pre or post tax? Each employee should be provided with an election form for the benefits provided where they can elect to participate or not participate in the plan.
- Retirement plan
- Health Insurance
- Dental Insurance
- Long Term Care Insurance
- Disability Insurance
- Third-Party sick pay insurance benefits
- Health Savings Accounts, please provide amount contributed for each employee
- Medical Savings Accounts
- Cafeteria Plan or Flex Spending Plan
- Reimbursed Medical Expenses
- Group Term Life Insurance in excess of $50,000
- Dependent Care Assistance
- Educational Assistance Program
- Family employment – Spouse or Child
- COBRA insurance assistance provided to terminated employees
- Prizes or Awards paid to employees
- Transportation fringe benefits - $230/month parking or transit, $20/month bicycle expense
Personal Use of Autos
Personal use of an employer-provided auto is a taxable fringe benefit and needs to be included on the employee’s W-2 as additional compensation. All vehicles should have a written log documenting the business and personal miles for the year. Please fill in the information below for employees who used a business automobile during the year:
- I did not provide any vehicles to employees during the year that were used for personal purposes
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Employee Name
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Vehicle Description
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Business Miles
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Personal Miles
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S Corp Health Insurance
Accident and health insurance premiums (health, dental, disability) paid on behalf of more-than-2% S shareholder-employees are reported as additional compensation to the shareholders and are considered supplemental wages. Under the family attribution rules of
IRC Sec. 1372(b), the spouse, children, grandchildren, and/or parents of a more-than-2% S shareholder-employee are also considered more-than-2% S shareholders and must also have the health insurance premiums reported as additional wages.
Please provide the amount of health insurance premiums paid through the business for each shareholder and their family members below. If the shareholder has paid for their own insurance, the Company must reimburse the shareholder before December 31 to receive a deduction on the shareholder’s return.
- I did not pay health insurance premiums for myself or any family members during the year
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Employee Name
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Premiums Paid
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Premium deducted from Employee Checks
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Wisconsin Unemployment Insurance Program Special Assessment
Wisconsin’s unemployment insurance reserve fund had to rely on federal loans to help fund benefits during and since the recent recession. The federal government waived interest on these loans in 2009 and 2010 but has begun charging interest in 2011. Due to this, Wisconsin’s unemployment insurance program has begun charging this interest to employers with more than $25,000 in taxable wages in 2011 to pay the federal loan’s interest expense. The loan is estimated to be paid off by 2014, so employers can expect to receive a special assessment for interest for the next 3 years.
The next special assessment is set for August 2012 with payment due in September 2012. Following are preliminary estimates for 2012 to help you budget appropriately:
Change in the Federal Unemployment Tax Credit
In order to pay down the federal loan balance which was used to help fund benefits during and since the recent recession, the FUTA allowed tax credit will be decreasing for the next 3 years. The current FUTA tax credit for most employers is 5.4% (net rate of .6%). The FUTA rate from January 1, 2011 to June 30, 2011 was 0.8%. The FUTA tax credit will change to 5.1% for 2011, 4.8% for 2012 and 4.5% for 2013. This means that the net rate paid will increase for the next 3 years by 0.3% per year.
Please plan accordingly for these additional assessments as follows:
- $21.00 per employee or 0.3% of the first $7,000 of 2011 taxable employee earnings due in January 2012
- $42.00 per employee or 0.6% of the first $7,000 of 2012 taxable employee earnings due in January 2013
- $63.00 per employee or 0.9% of the first $7,000 of 2013 taxable employee earnings due in January 2014
Federal and State Employment Posters
All employers are required to be in compliance with the US Department of Labor and the Department of Workforce Development mandatory Federal and State Labor Law Posters. We sent an email in fall detailing the requirements. If you have questions or need posters please go to the following websites:
Federal:
http://www.dol.gov/oasam/programs/osdbu/sbrefa/poster/matrix.htm
State:
http://dwd.wisconsin.gov/dwd/posters.htm
Form 1099 MISC and 1099 INT
When you bring in your information for year end payroll processing, we ask that you also bring the information for us to prepare Form 1099 Miscellaneous and 1099 Interest if we are preparing them. Form 1099 Misc and 1099 Int report payments that you made in your trade or business to unincorporated businesses (including partnerships and LLC’s) for rent, services (including parts and materials), prizes and awards, or other payments. Please include the W-9 forms received from your vendors and amounts paid to each vendor during the year. It is your responsibility to verify the W-9’s are accurate. Form 1099’s must be mailed to recipients by January 31, 2012. The W-9 Form can be found on our website at biwancpa.com. Penalties for non compliance are increasing each year. The penalties are: ?
- $30 per information return if you correctly file within 30 days (March 30 if the due date is February 28);
- $60 per information return if you correctly file more than 30 days after the due date but by August 1;
- $100 per information return if you file after August 1 or you do not file required information returns
The penalty for fraudulent returns is $250. The penalties apply if you fail to timely file, you fail to include all information required to be shown on a return, you include incorrect information on a return, or you report an incorrect TIN (Taxpayer Identification Number).
Personal Property Tax Returns
Personal property tax returns are due March 1, 2012 for assets that you held on January 1, 2012. We have attached a listing of the fixed assets on your depreciation schedule. Please review the list and cross out any assets that you no longer have. Please note how the assets were disposed of and what, if anything, you received for them. If you have purchased new assets during the year, please provide us with the invoices and details of the purchases. We would appreciate it if you could provide us with this information when you drop off your information for year end payroll processing.
- I did not purchase any new assets during 2011
- I did not dispose of any assets during 2011
Sales Tax Returns
Please provide us with the information to prepare your sales tax returns with the payroll information.
Recently, several important changes regarding the collection of sales and use taxes have occurred. These changes will impact retailers conducting business in Wisconsin. The first relates to the collection and remittance of sales and use taxes for sales to customers located in Wisconsin counties/stadium districts where the retailer is not "engaged in business." The second requires any business which sells a motor vehicle, boat, snowmobile, or RV to collect and remit sales and use taxes on items sold even if the business is not a "dealer" or "registered dealer" of these items. In addition, the person registering or titling the item must present proof that the tax has been paid to the retailer. If you would like more information on these changes, please contact our office.
In addition, every state is aggressively pursuing sales & use tax audits. At a recent seminar, the auditors stated that EVERY business has some errors in its interpretation of the sales and use tax law. Please take the time to review all of your exemptions and determine if they are still appropriate. Make sure you have exemption certificates for all sales claiming an exemption. Make sure you properly report the use tax for all out of state purchases. If you conduct business outside of Wisconsin, contact us to determine if you have a liability to collect out of state sales tax.
HIRE Act – "Jobs Bill"
For any qualifying worker hired in 2010 under the "Hiring Incentives to Restore Employment Act of 2010" that the employer has kept on payroll for a continuous 52 weeks, the employer is eligible for an additional non-refundable tax credit after the 52-week threshold is reached, to be taken on their 2011 income tax return. In order to be eligible, the employee's pay in the second 26-week period must be at least 80% of the pay in the first 26-week period. There is no minimum weekly number of hours that the new employee must work.
Please let us know if any of your 2010 new hires qualify for this credit and provide the gross wages paid for the first 26 weeks of employment and the second 26 weeks of employment.
Extension of enhanced small business expensing
The law allows qualifying businesses the option to currently deduct the cost of business machinery and equipment, instead of recovering it via depreciation over a number of years. The business property expensing option for 2011 has an expense limit of $500,000 and an investment ceiling of $2,000,000 but under current law, in 2012, the expense limit drops to $139,000 with a ceiling of $560,000. Additional bonus depreciation on new equipment is scheduled to be reduced to 50% from 100% on January 1, 2012.
Healthcare Reform
Small business employers are eligible for a credit. To qualify, a business must offer health insurance to its employees as part of their compensation and contribute at least half the total premium cost. The business must have no more than 25 full-time equivalent employees ("FTEs"), and the employees must have annual full-time equivalent wages that average no more than $50,000. However, the full amount of the credit is available only to an employer with 10 or fewer FTEs and whose employees have average annual full-time equivalent wages from the employer of less than $25,000.
The credit is initially available for any tax year beginning in 2010, 2011, 2012, or 2013. Qualifying health insurance for claiming the credit for this first phase of the credit is health insurance coverage purchased from an insurance company licensed under state law. For tax years beginning after 2013, the credit is only available to an eligible small employer that purchases health insurance coverage for its employees through a state exchange and is only available for two years. The maximum two-year coverage period does not take into account any tax years beginning before 2014. Thus, an eligible small employer could potentially qualify for this credit for six tax years, four years under the first phase and two years under the second phase.
For tax years beginning in 2010, 2011, 2012, or 2013, the credit is generally 35% (50% for tax years beginning after 2013) of the employer's nonelective contributions toward the employees' health insurance premiums. The credit phases out as firm-size and average wages increase.
Self-employed individuals, including partners and sole proprietors, two percent shareholders of an S corporation, and five percent owners of the employer are not treated as employees for purposes of this credit. There is also a special rule to prevent sole proprietorships from receiving the credit for the owner and their family members. Thus, no credit is available for any contribution to the purchase of health insurance for these individuals and the individual is not taken into account in determining the number of full-time equivalent employees or average full-time equivalent wages.
Most small businesses are exempted from penalties for not offering coverage to their employees.
Although the new law imposes penalties on certain businesses for not providing coverage to their employees (so-called "pay or play"), most small businesses won't have to worry about this provision because employers with fewer than 50 employees aren't subject to the "pay or play" penalty. For businesses with at least 50 employees, the possible penalties vary depending on whether or not the employer offers health insurance to its employees. If it does not offer coverage and it has at least one full-time employee who receives a premium tax credit, the business will be assessed a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment. So, for example, an employer with 51 employees who doesn't offer health insurance to its employees will be subject to a penalty of $42,000 ($2,000 multiplied by 21). Employers with at least 50 employees that offer coverage but have at least one full-time employee receiving a premium tax credit will pay $3,000 for each employee receiving a premium credit (capped at the amount of the penalty that the employer would have been assessed for a failure to provide coverage, or $2,000 multiplied by the number of its full-time employees in excess of 30). These provisions take effect Jan. 1, 2014.
We will continue to follow the provisions of the healthcare bill. We will provide information and assistance to you well in advance of the effective dates of the various elements of final legislation.
Wisconsin New Job Creation Tax Deduction or Credit
To qualify for the tax deduction for new job creation, you must have increased the number of full-time equivalent employees employed in Wisconsin during the taxable year. The deduction is $4,000 per new full-time equivalent employee for businesses with gross receipts of $5,000,000 or less or $2,000 per new full-time equivalent employee for businesses with gross receipts greater than $5,000,000.
To qualify for the tax credit, the business must be certified by the Wisconsin Economic Development Corporation and have increased net employment with eligible employees. The tax credit is 10% of the new employee’s wages or $10,000, whichever is less.
- I did increase employment during 2011 and will provide information to you.
- I did not increase employment during 2011.
Wisconsin Farmland Preservation Credit
This credit is an incentive for Wisconsin farmland owners to preserve their farmland. You must have ownership in farmland covered by a farmland preservation agreement or located in a farmland preservation zoning district. You must have paid or be legally responsible for paying this year’s property taxes. Gross farm revenues must be at least $6,000 for 2011 or a total of $18,000 for 2009, 2010 and 2011 combined. You must be in compliance with soil and water conservation plans and standards as of the end of the taxable year. The amount of credit is dependent on whether the land is covered by a farmland preservation agreement and/or located in a farmland preservation zoning district:
- $10/acre if land is covered by a farmland preservation agreement entered into after July 1, 2009 and in a preservation zoning district
- $7.50/acre if land is in a preservation zoning district but not covered by a farmland preservation agreement entered into after July 1, 2009
- $5/acre if land is covered by a farmland preservation agreement entered into after July 1, 2009 but not in a preservation zoning district
QuickBooks
Intuit will discontinue supporting QuickBooks 2009 sometime in April or May 2012. If you use QuickBooks for payroll processing you will be required to update to QuickBooks 2012. Please watch for sales and special offers. QuickBooks is currently offering a 20% discount through our website.
We would like to encourage everyone using QuickBooks 2009 or older versions to update to 2012. It takes us longer to work with older versions and you would save costs by upgrading. We recently upgraded to Windows 7 computers which don’t support version 2006 and older.
Please remember to change your state unemployment rate before your first payroll in 2012.
We hope this information is helpful. If you would like more details about these laws, the tax strategies to reduce taxes, or anything else please do not hesitate to call. Thank you for allowing us to serve you. If you are happy with our services, please give our name to your family, friends, neighbors, and associates. We would love to expand our firm with quality clients just like you.
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