Payroll Tax and 1099 Update - Hungerford Nichols …...Michigan Unemployment What’s New? • Rate...

Payroll Tax and 1099 Update

December 5, 2013

Krista Koster, CPA, MSA

[email protected]

hungerfordnichols.com © 2013 Hungerford Nichols


Circular 230 Disclosure: Any advice contained in this presentation (including any handouts unless expressly stated otherwise) is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer under the Internal Revenue Code or applicable state or local law provisions.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax advisor.

Rates and Wage Bases


Standard Mileage Rates Type 2014 2013

Business Miles * 56.5 cents

Medical/moving * 24 cents

Charitable * 14 cents

*Not yet released


Flexible Spending Accounts

Type 2014 2013

Employee Contributions

$2,500 $2,500

Carryover * $500* $0*

*Must amend plan, grace periods removed *Must amend by last day of plan year


Social Security Wage Base

Year Wage Base

2014 $117,000

2013 $113,700


Social Security and Medicare Rates SS MED

Employer Rate 6.2% 1.45%

Employee Rate – Base 6.2% 1.45%

Employee Rate – Wages over $200K N/A .9%


Federal Unemployment 2014 2013

Taxable Wage Base $7,000 $7,000

Tax Rate 6.00% 6.00%

Maximum Credit 5.40% 5.40%


Michigan Unemployment 2014 2013

Taxable Wage Base $9,500 $9,500

Base Tax Rates .06 % to 10.3%

.06 % to 11.05%

O.A. Ratio * Not yet

released .145015

*Used to determine obligation assessment rate


Form Updates and Reminders


Forms W2 and W3 What’s New? • $2,500 limit on flexible spending

arrangements • Additional Medicare tax (employee only) • New Charts

• When to check retirement plan box • Nonqualified deferred compensation

reporting examples


Forms W2 and W3

Filing Type Employee Copies SSA Copies

Paper Filing January 31, 2014 February 28, 2014

Electronic Filing

January 31, 2014 March 31, 2014

Due Dates:


Forms W2 and W3 Reminders: • S-Corp Health • Personal use of auto • Group health insurance coverage • Group term life > $50K • Other taxable benefits


Forms W2 and W3 Reminders: • Common errors • Reconcile 941 totals to W-3 • Cost of group health insurance coverage

if not subject to transitional relief • E-file required > 250 forms • Enhanced Business Services Online –

www.socialsecurity.gov/bso • Future developments: www.irs.gov/W2


http://www.irs.gov/W2

Federal Unemployment

• Form 940 due by January 31, 2014 • 13 credit reduction states for 2013

AR GA NC Virgin Islands

CA IN NY

CT KY OH

DE MO RI

• Complete Schedule A to calculate additional due for credit reduction states


Michigan Unemployment What’s New? • Rate Calculations changed for 2013

• 36 months for experience rate calculation

• Phase-in for online filing (form 1028) • 2013 – More than 25 employees • 2014 – More than 5 employees • 2015 – All employers must use MIWAM

• Provision to apportion first quarter payment over four quarters (limited)

• UIA to use IRS 20 Factor test for worker classification


Michigan Unemployment Reminders: • 2013 – year 2 of obligation assessment • Quarterly form/payment due by 25th of month

following quarter • postmarks not accepted for mailed forms

• Rounding of base tax • Provision to apportion first quarter payment

over four quarters (limited) • Family owned


Group Health Insurance Coverage


Group Health Insurance Reminders: • Report in box 12 on W-2, using code “DD” • Mandatory reporting for employers who file

more than 250 W-2s • Transitional relief continues for employers

under 250 threshold, pending final IRS guidance

• Informational purposes only (not taxable)


Group Health Insurance Reminders: • Coverage types to report

• http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage

• Employer and employee amounts


http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage


















1099 Forms


1099 Forms

Filing Type Employee Copies IRS Copies

Paper Filing January 31, 2014 February 28, 2014

Electronic Filing

January 31, 2014 March 31, 2014

Certain Returns*

February 18, 2014 March 31, 2014

Due Dates:

*Includes 1099-B, 1099-S, and 1099-MISC returns related to substitute payments and gross proceeds (boxes 8 and 14)


1099 Forms What’s new • Truncating of payee ID numbers allowed

• “*” or “X” • Payee forms only (copy B) • Full ID numbers on government copies • Filer’s id number may not be truncated • Not a requirement


1099 Forms Reminders • Must e-file if 250 or more returns

• E-file requirement applies separately to originals and corrections

• Fire.irs.gov

• Backup withholding • Multiple filings • Process to collect W-9s • TIN matching available • State/local copies may be required


1099 Forms Common Forms Title

1099-MISC Miscellaneous Income

1099-B Proceeds from broker and barter exchange transactions

1099-INT Interest income

1099-R Distributions from Pensions, Annuities, Retirement or Profit Sharing Plans

1099-DIV Dividends and Distributions

1099-K Payment card and third-party network transactions


1099 MISC Box 1 – Rents

• Payments of $600 or more for office lease, machine rental

• Payments to corporations are not reportable


1099 MISC

Box 7 – Nonemployee compensation • Payments of $600 or more for services • Payments to corporations are not

reportable (except attorneys)


1099 MISC Box 6 – Medical and health care payments

• $600 or more • Payments to providers of medical or health

care services, not under FSA or HRA plan • Reportable to corporations


1099 MISC

Box 14 – Gross proceeds paid to Attorneys • $600 or more • Payments made as part of court order or

legal settlement • Legal fees paid in normal course of

business should be reflected in box 7 • Reportable to corporations


1099 MISC B Notices • Sent by IRS when the name/tin

combination does not match IRS records • Follow-up timely

• Send copy of B-Notice, W-9, and return envelope to payee

• Begin backup withholding if updated information not received timely

• Request annually if no info received • 2nd TIN notice box on 1099-MISC


Questions?

Krista Koster, CPA, MSA [email protected]

(616) 949-3200

mailto:[email protected]

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