2012 Tax Compliance Update

Tax Compliance Update

Paycor has a brief webinar which will walk you through the compliance changes in payroll for this upcoming year. The 16-minute webinar includes updates on:

• Federal and state unemployment
• Social Security employer and employee information
• Federal, State and local withholding taxes
• State minimum wage
• Deferred compensation

Click here to download the PDF version of the presentation.

If the embedded video does not work on your computer, click here to watch the recorded webinar.

If you have any questions please contact your Paycor payroll specialist.

Recorded January 4, 2012
Tina: Hi, and welcome to the 2012 Payroll Compliance Changes Webinar. Today’s presenter is Vicki Orwig. Vicki Orwig has more than 30 years of payroll experience. She is Paycor’s resident tax expert, and a long-standing member of the American Payroll Association.

Vicki works closely with a number of taxing authorities, and is a participant and Paycor representative for various IRS issues. Vicki’s knowledge is wide-ranging, and the focus today will be on 2012’s Payroll Compliance Changes. I’m going to turn it over to Vicki now.

Vicki: Thank you, Tina. We at Paycor have started a new process to provide tax change information to our clients, and release a quick recorded webinar that details known changes in the near tax year. We hope you will find this webinar informational, and the charts included, helpful.

We’ll start with the 2012 federal changes. Specifically, I want to talk about the Social Security rate for employees. I am certain everyone watched the news, as this was a topic of discussion by Congress until just before Christmas. The Senate had passed a two-month extension, which the House rejected. It looked like Congress was going to not vote on anything until after the Christmas holiday. Since legislation as it stood had the rate changing back to 6.2%, for the employees affected January 1, 2012; Paycor changed the rate to 6.2% on December 20th. That being said, on December 23rd, the House and the Senate did agree to the two-month extension for the Social Security tax holiday, so the rate did remain at 4.2%, effective 1/1/2012.

Immediately after the legislation was signed into law, Paycor changed the rate back to 4.2% on December 23rd. We did have a couple clients that ran during that period when the rate was set to 6.2%. If you find that you ran during that time, please contact your payroll specialist and we’ll make arrangements to adjust your employees that were over-withheld.

While we’re talking about the Social Security tax holiday and the extension through 2/29/2012, under the terms negotiated by Congress, this law includes a recapture provision that applies to individuals who will be paid more than $18,350 in wages during the two-month period, from January 1st to February 29th, 2012. This provision will not pass the burden on the employer to make up the additional taxes that will be due (if they earned more than the $18,350), the burden will fall on the individual taxpayer and the additional 2% Social Security tax will be an additional tax due when the individual files their personal income tax return for 2012, which will be filed in 2013.

To read more information on the recapture provision – I know I went through that quickly – there is a link at the end of this presentation, the IR2011-124. It’s the first link on the Resources page. Hopefully that made some sense. Again, it’s unfortunate that it took so long, and it was done right before the holidays.

Since this extension was only through the end of February, we have something to look forward to in February, to see whether it’s actually extended through the end of 2012.

The Social Security employer rate remains the same at 6.2%, with a cap of $110,100. So the maximum employer liability for 2012 is $6,826.20. The Medicare rate is the same for the employee and the employer, at 1.45%, and for Medicare there is no cap.

We’ve also included, on this slide, the change to the federal mileage rates. Effective 1/1/2012, the standard business rate is $0.555. The charitable rate is $0.14, and the relocation and medical rate is $0.23.

The personal exemption amount for federal withholding will increase for 2012 from $3,700 to $3,800. Because this personal exemption amount changed, the IRS issued new tax charts as well. These charts were updated in the Paycor’s global database, and a link to the new chart is included on the report slide. It’s the last item, Notice 1036.

There was an industry call yesterday between payroll professionals and the IRS, the question was asked when will the Circular E – Employer’s Tax Guide be released? The IRS stated that this would be released the week of January 9th.

For federal unemployment, the taxable wage base remains $7,000.00 and the tax rate for 2012 remains at 0.60%. This is the same rate as the last 6 months of 2011. The maximum employer liability for 2012 is $42 per employee.

This slide shows the states that have changes to their withholding for 2012. Some states have changed their standard exemptions, some only their standard deduction (like Kentucky), and some states actually have changed their tax charts. Here’s a map that you can use of the states that have had a change.

Delaware did just release their new tax charts this week, on the 4th. I will be updating our global database this evening. So depending on what platform you are on, if you are Hosted or Internet Entry you will receive this change over the weekend and will have these new calculations on Monday. As an Internet Entry or Hosted client you receive any changes to the tax calculations nightly.

Some states that have updated their withholding taxes for 2012 are California, Delaware, District of Columbia, Idaho, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Missouri, New Mexico, New York, North Dakota, Oregon, Rhode Island and Vermont.

Now I want to talk about state unemployment changes. I don’t want to delve into too many details, but Michigan announced an increase to their wage-base in late December. It went from $9,000 to $9,500.

Another change I would like to point out is in Rhode Island’s taxes. This is the first time in the 30 years I’ve been in the payroll industry where I’ve ever seen two separate unemployment wage bases, $21,100 and $19,600. Paycor is working on, and should have available the functionality to handle these two wage bases soon. Currently, we are using the wage base of $19,600 because that is the wage base that applies to most employers. Only those employers with an unemployment rate of 9.79% will be required to use the higher wage base.

We monitor our clients and if we find that you as an employer have a rate of 9.79%, and need any adjustments when we add the new functionality to handle the two wage caps, we will be contacting you. We will be making the required adjustments needed utilizing the higher wage cap. If you have any questions on that, you can contact me directly. I’ll give you my phone number at the end of this presentation as it isn’t included in the documentation.

I am speaking to you from Cincinnati and since we have a large presence of clients located in Ohio and in Kentucky, I’ve included in this presentation some Ohio and Kentucky information.

The first slide details Ohio city and school district changes, these are changes to tax rates for 2012. In the first slide for tax code OHADE – Adena LSD, the tax expired on December 31, 2011. This is a school district income tax and these types of taxes always expire at the end of a calendar year. In addition, if any new school district income taxes or any school districts have an income tax rate change are voted on during the current calendar year the voted on changes will go into effect January 1 of the next calendar year.

The next slide shows some new tax codes that were added for new cities or school districts that implemented income taxes effective 1/1/2012. The next couple slides detail changes to Kentucky city or county taxes.

We also wanted to provide information on state minimum wage rates and the rate changes effective 1/1/2012. There are actually a total of eight states that have minimum wages changes: Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont and Washington.

The chart that we put together, shows the 2011, current minimum wage, and we show the information for the new year. The other column, “The Minimum Wage Effective 1/01/2012,” shows the new minimum wages.

If you are a tipped employer, we’ve also included the tips credit amount and the wage rate for tipped employees. What I’d like to also say here is for minimum wage change, it’s not based on when wages are paid, it’s when the wages are earned. If you have a minimum wage increase, like we did here in Ohio to $7.70, the $7.70 is effective for wages earned starting January 1st, 2012.

Finally, we thought we would include the deferred compensation changes for 2012. These are qualified and non-qualified plans—we specifically listed the changes for 401K, 403B, 457 and Simple plans. The maximum contribution increased from $16,500 for 2011 to $17,000 for 2012 for 401k, 403b and 457 plans. The catch up contribution did not change and remains at $5,500. The simple plan maximum contribution remains the same as 2011 at $11,500 and the catch up remains $2,500. We’ve also indicated in here what code, from the W-2, the specific plans will appear in Box 12.

This concludes our recorded webinar. If you have any questions, please contact your payroll consultant.

This is a resources slide I eluded to a couple of times earlier in the presentation. The first link is to more information regarding the Social Security employer holiday that was extended through 2/29/2012. The second link is a very helpful link I use all the time. It’s available at AmericanPayroll.org. This link brings up a state map and if you click on a state you will find links to different state agency, such as unemployment, labor, revenue as well as new hire information. For those states with local taxes there are links to these as well.

The third link is on www.paycor.com. When legislative changes happen, we like to be the first to post information under the Resource Center, so we invite you to visit that link regularly. And our last link is the link to the federal tax chart for 2012.

Should you have any questions about information provided within this presentation please feel free to contact me directly at 513.345.6819 or send me an email at vorwig@paycor.com.

Thank you for listening today and have a great New Year.