QUARTER END
From W2 questions from your employees, to planning your business tax strategy with your CPA, reviewing first quarter end can often come with a lot of questions. We’ll do our best to try and address common questions.
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>>Download ASAP Quarterly Recap (PDF) or review the following.
INDUSTRY NEWS – Recap & Review
Minimum Wage increases to $7.64 per hour ($4.62 for tipped employees)
Publication 15, (Circular E) Employer’s Tax Guide has been updated.
Under the Middle Class Tax Relief and Job Creation Act of 2012, the payroll tax cut has been extended to end of 2012.
NLRB poster requirement delayed. As of April 30, 2012 most employers will be required to post new notice.
IRS offers incentive for employers to ID misclassified workers through their Voluntary Classification Settlement Program.
Bills for Federal Interest Repayment did you receive a Trust Fund Assessment Letter? These are in additional to normal payroll taxes and should be paid directly. >>more
NEW EMPLOYEE FORMS
Update your employee forms to include the new W-4 Form and the new Colo. Affirmation of Legal Work Status Form.
Review 1099 contractor payments: confirm W-9’s are on file and accurate for a smoother 2012 year end.
OTHER HELPFUL REMINDERS 
- Update your 2012 State Unemployment and State Disability Insurance rates*.
- Adjust your 2012 Federal 941 and State payment frequency based on look-back history*.
- Consult with your CPA for any quarter end strategies.
YEAR END/TAX FAQs
Employee Contributions to HSA’s & Box 12W – In our experience, HSA box 12W appears to be one of the most commonly confused personal tax items because it is nonsensical. It must be understood from the context that the taxable wages used to start ones 1040 tax return were reduced from the get go by the HSA amounts withheld from ones paycheck. Any further credit for these same dollars would be doubling the intended taxable benefits.
Confusion 1: People consider the money withheld pretax from their paychecks as “their” contributions to the HSA. However, it is important to understand this in the context that the IRS considers this money as Employer contributions because the amount came directly from the employer without being taxed. While it did originate from your paycheck or put another way while it may have been withheld from your net pay during the year, it was done so prior to calculating your Federal income, Social Security and Medicare taxes….wages totals reflected in W2 boxes 1, 3, & 5 being reduced by these HAS amounts. Thus in a sense the flow of funds occurred directly from the employer to the HSA.
Confusion 2: When an employee attempts to complete Form 8889 or while providing a response to the Q&A via an online tax software such as TurboTax; often they are tripped up by incorrectly providing the amounts withheld pretax from their paychecks through as cafeteria plan as part of their HSA Contributions made during the year. It is important that the amount contributed pretax via payroll is NOT included in line 2 of the Form 8889 because this would incorrectly double the pretax benefit being received. Line 2 is generally reserved only for the funds that were directly deposited into an HSA account outside of the pretax payroll/paycheck calculations – i.e. if you had deposited outside funds on your own, transfer from a primary account or deposited a check.
IRS W2 Instructions “Code W—Employer contributions to a Health Savings Account (HSA). Show any employer contributions (including amounts the employee elected to contribute using a section 125 (cafeteria) plan) to an HSA. See Health Savings Account (HSA) on page 6.”
If you have an HSA you will have to complete a Form 8889 with your tax return.
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Restaurant Tax Credit - Food and beverage establishments may take a business tax credit in the amount equal to the employer’s FICA tax obligation (7.65%) attributable to tips in excess of those treated as wages for purposes of satisfying the federal minimum wage requirement. ASAP can help you and your CPA calculate the Tip Credit amount by providing a year-end report designed to calculate the Excess Social Security and Medicare taxes paid by the employer.
File Form 8846 if you meet both of the following conditions: 1- You had employees who received tips from customers providing, delivering, or serving food or beverages for consumption (if tipping is customary). 2- During the tax year, you paid or incurred employer Social Security and Medicare taxes on those tips.
Claim this credit ONLY for taxes paid by food or beverage establishment where tipping is customary. Consult with your CPA for additional questions.
OTHER RESOURCES
2012 Payroll Limits and Information - 401K, 403B, Catch-up, Simple, and HSA limits. >>review 2012 limits and resources
S-Corp Owners – >>review IRS guidelines
Taxable Auto - >>review IRS guidelines
