Author Archives: robin

8 Ways to Lose a Good Hire

Posted on by February 18, 2016

Many hours go into hiring a good candidate. In some cases it can take months of recruiting,
interviewing, screening candidates only to lose them within the first 30 days.

1-Not being prepared with a documented, on board process for the new candidate
2-You become involved in an emergency and the candidate is assigned to someone else
3-Believe the candidate needs a year to acclimate to the position
4-Not expect high levels of performance until a year has passed
5-Put on a meeting show for the candidate to observe
6-Expose the new candidate to office politics
7-Give the new hire responsibility with no authority’
8-Candidates are not making use of their talent and experience

To receive a copy of the Research ReportACCESS HERE:

How to Reduce Operating Costs and Increase Profitability

Posted on by February 9, 2016

Technology has helped businesses perform at higher levels of efficiency and has contributed to reducing operating costs and increasing profitability.

There is a tool available that will help your human resource department operate more efficiently and open communications between the company and its employees.

And, provide an opportunity for your human resource people to focus on more important tasks…

If you don’t have a formal human resource department this tool is even better.

If you would like to learn more about this tool
ACCESS HERE:

What Drives the Users’ Demand for Self Service?

Posted on by October 26, 2015

Do technology breakthroughs increase the user’s expectation of the convenience and immediacy of self service. Or, did the the need exist before technology could deliver self service.

The desire for self service did not start in this millennium. The first vending machine was actually made in the late 1800s, soon followed by self service gas pumps in the early 1900s. Although quickly getting candy and fuel was good, easy access to information was the ultimate desire. Nothing would be more valuable to us than easy access to information.

Large amounts of data began to be collected in the 1970s and stored in large computer mainframes. The computer room, in those days, was labeled  ‘the glass house’ because many businesses built their computer rooms within a glass enclosure. You could see the computer, but you could not get in to touch it. Access was strictly restricted, as was your personal information the computer contained.

When the Internet became available to the average person in the 1980s, we were given access to public information never before imagined. In the 1990s, we saw services start up such as Amazon, ebay and Google to name only a few of the ground-breakers. Company’s recognized the ability to unlock the personal information they were holding in their computers. Businesses began to deploy online services with access allowed through account names and passwords using Internet access; enabling the user to have immediate access to personal information.

The Forrester Research recognizes Social Media today as another technology enabler. Social Media is empowering the user to engage with their service providers. So, the movement continues. Providers of services to end users need to continue to innovate. As stated in Consumers’ Newfound Power Is Causing Them to Raise Their Standards, “On the surface, four classic factors of brand equity appeared intact: credibility, leadership, relevance and uniqueness. But within each pillar, we found that consumers are forming higher standards for brands to live up to.” As technologies advance, companies must continue to stay in step with expectations of the user.

Payroll self service is an example of a service commonly used by many. Employees expect immediate access to personal information sucha s:

  • Pay History
  • Contact Information
  • Position & Earnings
  • Deductions
  • Taxes
  • Direct Deposit Information
  • Accruals

Technology advancements feed the users’ requriements for immediate access to information. But, the need has always been there. Users demand their personal data to be made immediately and securely available to them today. The business holding this information is expected to provide the means to make personal information available on-demand. Payroll Unlimited recognizes the continued growth in users’ expectations for self service. To discuss the needs and solutions of self service, contact Payroll Unlimited Inc. at 201-703-1313.

Tax Benefits of a Casualty Loss in a Federally Declared Disaster

Posted on by October 26, 2015
In the aftermath of Hurricane Sandy, too many of our family, clients and friends are picking up the pieces of the damage and destruction done to their businesses, residences, and personal property. During this time many are discovering that the damage may not be covered by insurance or may not be adequately covered to restore the property to what it once was. If you have experienced losses in the Sandy disaster on a personal residence, vehicle, or other personal property in your household, the tax code permits a taxpayer to claim what is referred to as a casualty loss deduction which may provide some tax relief. Business property is also eligible for casualty loss deductions.

The general principles and limitations on the casualty loss deduction for Sandy victims are as follows:

  • The deduction can be claimed on the taxpayers’ 2012 tax return or the taxpayer can elect to amend and claim the tax benefit on their 2011 return if a greater benefit is derived.
  • The loss is measured as the lesser of (a) the drop in value of your property and (b) your basis in the property (usually, your cost plus improvements [less depreciation for a business asset]). To the extent you are insured, you must reduce your loss by your insurance proceeds or any salvage value received. However, you shouldn’t fail to file an insurance claim in the hope of increasing your deduction. If you do, IRS will reduce your loss by the insurance reimbursement you could have received.
  • The deduction for personal use property is an itemized deduction which must exceed 10% of a taxpayer’(s) adjusted gross income and a $100 casualty loss exclusion. This 10% of AGI limit on personal casualty losses has been waived in some prior federally declared disasters though I am aware of no similar announcement at this time related to Sandy.
  • Non-itemizers generally can’t take a disaster loss deduction for personal use property, although non-itemizers were allowed an additional standard deduction for net losses from federally declared disasters occurring in 2008 or 2009.
  • Casualty gains. Sometimes, a disaster may actually result in a gain for tax purposes. This may occur where the insurance proceeds you receive exceed your tax basis in the destroyed property. If that happens, there are several ways to exclude or postpone the tax on the gain. If you think you might be in a gain position, please let us know and we can review these options.

Other Important Information

  • Document your loss: Create an Inventory of all damaged items, Take pictures and/or videos of all damaged or destroyed items. Any records of purchase included in your claim should try to be salvaged. If your claim will be based in part on the market value of your property before and after the disaster, appraisals may be required.
  • Real estate taxes: If your home or other real estate was substantially damaged or destroyed by Hurricane Sandy contact your local tax assessor to inspect your property. You may be entitled to a reduced 2013 tax assessment and property taxes as a result of the damage to your property. Contact your assessor as soon as possible but no later than December 31, 2012.
  • IRS Relief: The IRS recently announced that taxpayers affected by Hurricane Sandy in New Jersey, New York and Connecticut, will receive certain tax disaster relief. The tax relief postpones various tax filing and payment deadlines that occurred starting in late October. As a result, affected individuals and businesses will have until Feb. 1, 2013 to file these returns and pay any taxes due. This includes the fourth quarter individual estimated tax payment, normally due Jan. 15, 2013. It also includes payroll and excise tax returns and accompanying payments for the third and fourth quarters, normally due on Oct. 31, 2012 and Jan. 31, 2013 respectively. It also applies to tax-exempt organizations required to file Form 990 series returns with an original or extended deadline falling during this period. The IRS automatically provides this relief to any taxpayer located in the disaster area. Taxpayers located outside the disaster areas may qualify for this relief if their books and records or tax professional are located in the areas affected by Hurricane Sandy.

Important information on dealing with a disaster’s aftermath is available on line from the Federal Emergency Management Agency (FEMA) at www.fema.gov

Employers Hiring Veterans by Year’s End May Get Expanded Tax Credit

Posted on by October 26, 2015

IRS Special Edition Tax Tip 2012-14

Employers planning to claim an expanded tax credit for hiring certain veterans should act soon, according to the IRS. Many businesses may qualify to receive thousands of dollars through the Work Opportunity Tax Credit, but only if the veteran begins work before the new year.

Here are six key facts about the WOTC as expanded by VOW to Hire Heroes Act of 2011.

  1. Hiring Deadline: Employers may be able to claim the expanded WOTC for qualified veterans who begin work on or after Nov. 22, 2011, but before Jan. 1, 2013.
  2. Maximum Credit: The maximum tax credit is $9,600 per worker for employers that operate for-profit businesses, or $6,240 per worker for tax-exempt organizations.
  3. Credit Factors: The amount of credit will depend on a number of factors. Such factors include the length of the veteran’s unemployment before being hired, the number of hours the veteran works and the amount of the wages the veteran receives during the first-year of employment.
  4. Disabled Veterans: Employers hiring veterans with service-related disabilities may be eligible for the maximum tax credit.
  5. State Certification: Employers must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their state workforce agency. The form must be filed within 28 days after the qualified veteran starts work. For additional information about your SWA, visit the U.S. Department of Labor’s WOTC website.
  6. E-file: Some states accept Form 8850 electronically.

Visit the IRS website and enter ‘WOTC’ in the search field for forms and more details about the expanded tax credit for hiring veterans.

Links:

 

Planning for the 3.8 Percent Medicare Tax on Investment Income

Posted on by October 26, 2015

The health care reform package (the Patient Protection and Affordable Care Act and the Health Care and education Reconciliation Act of 2010) imposes a new 3.8 Medicare contribution tax on the investment income of higher income individuals. Although the tax does not take effect until 2013, it is not too soon to examine methods to lessen the impact of the tax.

Net investment income. Net investment income, for purposes of the new 3.8 percent Medicare tax, includes interest, dividends, annuities, royalties and rents and other gross income attributable to a passive activity. Gains from the sale of property that is not used in an active business and income from the investment of working capital are treated as investment income as well. However, the tax does not apply to nontaxable income, such as tax-exempt interest or veterans’ benefits. Further, an individual’s capital gains income will be subject to the tax. This includes gain from the sale of a principal residence, unless the gain is excluded from income under Code Sec. 121, and gains from the sale of a vacation home. However, contemplated sales made before 2013 would avoid the tax.

The tax applies to estates and trusts, on the lesser of undistributed net income or the excess of the trust/estate adjusted gross income (AGI) over the threshold amount ($11,200) for the highest tax bracket for trusts and estates, and to investment income they distribute.

Deductions. Net investment income for purposes of the new 3.8 percent tax is gross income or net gain, reduced by deductions that are “properly allocable” to the income or gain. This is a key term that the Treasury Department expects to address in guidance, and which we will update you on developments. For passively managed real property, allocable expenses will still include depreciation and operating expenses. Indirect expenses such as tax preparation fees may also qualify.

For capital gain property, this formula puts a premium on keeping tabs on amounts that increase your property’s basis. It also puts the focus on investment expenses that may reduce net gains: interest on loans to purchase investments, investment counsel and advice, and fees to collect income. Other costs, such as brokers’ fees, may increase basis or reduce the amount realized from an investment. As such, you may want to consider avoiding installment sales with net capital gains (and interest) running past 2012.

Thresholds and impact. The tax applies to the lesser of net investment income or modified AGI above $200,000 for individuals and heads of household, $250,000 for joint filers and surviving spouses, and $125,000 for married filing separately. MAGI is AGI increased by foreign earned income otherwise excluded under Code Sec. 911; MAGI is the same as AGI for someone who does not work overseas.

Example. Jim, a single individual, has modified AGI of $220,000 and net investment income of $40,000. The tax applies to the lesser of (i) net investment income ($40,000) or (ii) modified AGI ($220,000) over the threshold amount for an individual ($200,000), or $20,000. The tax is 3.8 percent of $20,000, or $760. In this case, the tax is not applied to the entire $40,000 of investment income.

The tax can have a substantial impact if you have income above the specified thresholds. Also, don’t forget that, in addition to the tax on investment income, you may also face other tax increases proposed by the Obama administration that could take effect in 2013. The top two marginal income tax rates on individuals would rise from 33 and 35 percent to 36 and 39.6 percent, respectively. The maximum tax rate on long-term capital gains would increase from 15 percent to 20 percent. Moreover, dividends, which are currently capped at the 15 percent long-term capital gain rate, would be taxed as ordinary income. Thus, the cumulative rate on capital gains would increase to 23.8 percent in 2013, and the rate on dividends would jump to as much as 43.4 percent. Moreover, the thresholds are not indexed for inflation, so a greater number of taxpayers may be affected as time elapses. Congress may step in and change these rate increases, but the possibility of rates going up for upper income taxpayers is sufficiently real that tax planning must take them into account.

Exceptions. Certain items and taxpayers are not subject to the 3.8 percent tax. A significant exception applies to distributions from qualified plans, 401(k) plans, tax-sheltered annuities, individual retirement accounts (IRAs), and eligible 457 plans. At the present time, however, there is no exception for distributions from nonqualified deferred compensation plans subject to Code Sec. 409A, although some experts claim that not carving out such an exception was a Congressional oversight that should be rectified by an amendment to the law before 2013.

The exception for distributions from retirement plans suggests that potentially taxed investors may want to shift wages and investments to retirement plans such as 401(k) plans, 403(b) annuities, and IRAs, or to 409B Roth accounts. Increasing contributions will reduce income and may help you stay below the applicable thresholds. Small business owners may want to set up retirement plans, especially 401(k) plans, if they have not yet established a plan, and should consider increasing their contributions to existing plans.

Another exception covers income ordinarily derived from a trade or business that is not a passive activity under Code Sec. 469, such as a sole proprietorship. Investment income from an active trade or business is also excluded. However, SECA (Self-Employment Contributions Act) tax will still apply to proprietors and partners. Income from trading in financial instruments and commodities is also subject to the tax. The tax does not apply to income from the sale of an interest in a partnership or S corporation, to the extent that gain of the entity’s property would be from an active trade or business. The tax also does not apply to business entities (such as corporations and limited liability companies), nonresident aliens (NRAs), charitable trusts that are tax-exempt, and charitable remainder trusts that are nontaxable under Code Sec. 664.

 

How To Choose The Right Payroll Company

Posted on by October 26, 2015

You might think that choosing a company to process your payroll is a simple and straightforward proposition.  Just look through the phone book or search the Web are you are likely to find dozens of companies in the local area.  Here in New Jersey there are hundreds of payroll companies.  So, how do you choose the right one?

Many companies focus on cost first.  This is usually a big mistake!  Focus first on a number of important questions.  First, think about exactly what payroll and ancillary services the company offers.  For example, many payroll companies (including Payroll Unlimited) do much more than simply calculate and distribute checks.  They issue tax forms (like W-2s), manage benefit plans, distribute funds to retirement accounts, provide management with reports,  integrate with human resource management systems, and more.  You might need some or all of these services.  So, before even discussing the cost – consider your payroll needs and find a company that provides those services.

Eye on Washington: Health Care Reform

Posted on by October 26, 2015

Health Care Reform Will Affect Premium-Only Cafeteria Plans – But How?

Premium-only cafeteria (“POP”) plans have been a popular way for employers to help employees obtain favorable tax treatment for their share of premiums for health insurance and other qualified benefits. POP plans provide a “win-win” solution – employees save by paying their share of insurance premiums on a pre-tax basis, and employers save by not paying FICA and federal unemployment taxes on those amounts.

Under current law, the term “qualified benefit” is broadly defined to include many types of insurance coverage, whether offered on a group or individual basis (for example, medical, dental, vision, disability, AD&D, and group term life insurance). Beginning January 1, 2014, the Affordable Care Act (“ACA”) adds a new section 125(f)(3) to the Internal Revenue Code (“Code”). This provision significantly narrows the definition of “qualified benefit” to exclude individual insurance coverage offered through a State Exchange. Although the scope of the ACA change remains unclear, and the precise impact on POP plans remains unknown, we expect POP plans will continue as a tax-favored vehicle after ACA. This article outlines the new rules, and describes the potential impact.

Background

The ACA provides incentives for States to establish and operate two types of Exchanges – American Health Benefit Exchanges (“Individual Exchanges”) and Small Business Health Option Program Exchanges (“SHOP Exchanges”). Individual Exchanges will help people purchase individual health insurance coverage, and SHOP Exchanges will help qualified employers purchase group health insurance coverage. States also have discretion to consolidate Individual and SHOP Exchanges into a single Exchange. If a State chooses not to set up Exchanges, then the Federal Government will establish and operate Exchanges in that State.

The Exchanges will sell only qualified health plans. These are health insurance plans that cover essential health benefits, meet specific cost-sharing rules and satisfy actuarial value requirements (bronze, silver, gold, platinum and a catastrophic plan for individuals under 30). Exchanges are not exclusive – subject to State regulation, individuals and employers will also be able to purchase individual and group health insurance coverage “off” the Exchanges. But people with income between 100% and 400% of the federal poverty level have a strong incentive to purchase individual health insurance coverage on the Individual Exchange – premium tax credits are not available for coverage purchased “off” the Exchange.

There are a multitude of definitions related to Exchanges. A “qualified employer” is a small employer that makes all full-time employees eligible for small group health insurance coverage on a SHOP Exchange. A “small employer” is an employer with no more than 100 employees, although States may choose to use a narrower definition for 2014 and 2015 (an employer with no more than 50 employees). Beginning in 2017, States may also choose to allow larger employers to purchase group coverage on a SHOP Exchange.

New Restrictions on Qualified Benefits

New Code section 125(f)(3) includes a general rule and an exception. Under new Code section 125(f)(3)(A), the general rule is that the term “qualified benefit” does not include a qualified health plan offered through an Exchange. The legislative history suggests this rule is intended to prevent employers from using cafeteria plans to allow employees to make pre-tax purchases of individual health insurance coverage from an Individual Exchange. And new Code section 125(f)(3)(B) provides the exception – the general rule does not apply to “qualified employers” (as defined above) that offer employees the opportunity to enroll in a qualified health plan through an Exchange. The legislative history suggests this rule is intended to allow qualified employers to use cafeteria plans to allow employees to pay their share of premiums for group health insurance coverage from a SHOP Exchange.

Winners and Losers?

Predicting winners and losers at this point is dicey. One challenge is that the law includes ambiguities, and the IRS has not yet issued guidance. Another challenge is that several interpretations are left to the States – how to define the term “small employer” for 2014 and 2015, whether to let larger employers purchase coverage on the SHOP Exchange beginning in 2017, and whether to combine the Individual and SHOP Exchanges.

Are POP plans doomed? Not at all. But POP plans will need to change modestly to reflect the new restrictions. For example, POP plans will not be able to facilitate the pre-tax purchase of individual health insurance from an Individual Exchange. This will be true for both small and large employers. But otherwise, POP plans will remain quite viable. For example, POP plans can facilitate the pre-tax payment of an employee’s share of premiums for qualified employers that purchase group coverage on an Exchange. In addition, POP plans can facilitate the pre-tax purchase of individual health insurance “off” an Individual Exchange. And POP plans can also facilitate the pre-tax payment of an employee’s share of premiums for large employers that purchase group coverage “off” the Exchange.

Summary

Based on what we know today, we believe that POP plans will generally continue to be available as a vehicle to provide tax favorable premium conversion benefits for employers and employees. However, beginning in 2014, employers will not be able to use POP plans to help employees make pre-tax purchases of individual health insurance coverage on an Individual Exchange.

Legislative Updates

Posted on by October 26, 2015

IRS Releases Guidance on Additional Medicare Tax on High-Income Earners

On June 11, 2012, the Internal Revenue Service (IRS) released new guidance, in a 20 questions and answers (Q&A) format, on the 0.9% additional Medicare tax scheduled to go into effect in 2013. The Q&As are intended to assist employers and payroll service providers in adapting systems and processes that may be affected by the new tax.

Background:

As a result of the enactment of the Affordable Care Act (ACA), effective for wages paid on or after January 1, 2013, the Medicare tax rate increases from 1.45 percent to 2.35 percent on wages earned above $200,000 for single filers and $250,000 for joint filers ($125,000 for a married individual filing separately). This increase only applies to the employee Medicare portion of the Federal Insurance Contributions Act (FICA) tax. Consequently, employers do not have to match the increased Medicare tax amount from employee’s wages. However, employers are still responsible for the withholding and reporting obligations with respect to the increased employee Medicare tax. If an employer fails to withhold and deposit the additional Medicare tax amount AND the employee pays it with his or her tax return, the employer will not be required to pay the missed amount, but the employer will be subject to penalties for the failure to withhold the tax.

NOTE: The employer is required to withhold the increased amount from all workers with wages exceeding $200,000 regardless of the marital status claimed on the employee’s Form W-4. Over and under withholding for the employee will be reconciled upon the filing of his/her tax return.

Some of the highlights of the Q&As are as follows:

  • All wages that are currently subject to Medicare tax are also subject to the additional Medicare tax if they are paid in excess of the applicable threshold for an individual’s filing status (see above). (Q&A 4)
  • The additional Medicare tax also applies to employees who are nonresident aliens and U.S. citizens living abroad if their wages exceed the applicable thresholds. (Q&A 6)
  • An employer must begin withholding the additional Medicare tax once an employee’s wages are over the threshold, even if the employee may not ultimately be liable for this tax. For example, consider a situation where one spouse earns $210,000 and the other spouse earns $25,000, and the couple files a joint return. Although the employer would be required to withhold on the higher earner’s wages to the extent they exceed $200,000, the couple would not be liable for the additional Medicare tax because their combined income is less than the applicable $250,000 threshold. Any excess additional Medicare tax withheld will be credited against the total tax liability shown on the employee’s personal income tax return. (Q&A 7)
  • An employer is not required to notify an employee when it begins withholding the additional Medicare tax. (Q&A 8)
  • Although an employee can’t request additional withholding specifically for the additional Medicare tax, an employee who anticipates being liable for it may request that his employer withhold an additional amount of income tax withholding on Form W-4, which will be applied against all taxes (including any additional Medicare tax liability) shown on the employee’s income tax return. (Q&A 10)
  • An employer begins withholding the additional Medicare tax in the pay period in which it pays wages to the employee exceeding the $200,000 threshold and not earlier, even if the employee’s annual wages are expected to exceed the threshold. (Q&A 11)
  • If an employee receives wages from an employer in excess of $200,000 and the wages include noncash fringe benefits, the employer calculates wages for purposes of withholding the additional Medicare tax in the same way that it calculates wages for withholding the existing Medicare tax. The employer is required to withhold additional Medicare tax on total wages, including noncash fringe benefits, in excess of $200,000. The value of noncash fringe benefits must be included in wages and the employer must withhold the applicable additional Medicare tax and deposit the tax under the rules for employment tax withholding and deposits that apply to noncash fringe benefits. (Q&A 13)
  • To the extent that tips and wages exceed $200,000, an employer applies the same withholding rules for additional Medicare tax as it does currently for the existing Medicare tax. An employer withholds additional Medicare tax on the employee’s reported tips from wages it pays to the employee. If the employee does not receive enough wages for the employer to withhold all the taxes that the employee owes, including additional Medicare tax, the employee may give the employer money to pay the rest of the taxes or the employee may need to make estimated tax payments to cover any shortage. (Q&A 14)
  • If an employee receives third-party sick pay, wages paid by the employer and by the third party need to be aggregated to determine whether the $200,000 withholding threshold has been met. (Q&A 16)
  • If an employee has amounts deferred under a nonqualified deferred compensation (NQDC) plan, the employer calculates wages for purposes of withholding additional Medicare tax on the NQDC in the same way that it calculates wages for withholding the existing Medicare tax. (Q&A 17)

For a copy of the IRS FAQ’s, please click on the link provided below:
http://www.irs.gov/businesses/small/article/0,,id=258201,00.html