Payroll Benefits and Year End Reminders for 2016 - PowerPoint Presentation

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Payroll Benefits and Year End Reminders for 2016 and Changes for 2017Presented by:Greg Kenworthy, CPAPartnerSlide2

Topics

Fringe BenefitsW-2 Add BacksNew Payroll Overtime RulesIndependent Contractor Issues1099 Rules and New Due DatesACA ReportingSlide3

Key Tax Fact Sheet

2017 2016 Social Security Rate – Employee and Employer 6.20% 6.20% Social Security Base Wage Limit $127,200

$118,500

Medicare

Rate – Employee and Employer

1.45

% 1.45% Medicare Rate - Wages over $200,000 0.90% 0.90% employee tax only, no employer match Medicare Base Wage Limit No Limit No Limit Federal Unemployment Rate 0.60% 0.60% Federal Unemployment Wage Limit $7,000 $7,000 WI Unemployment Rate Assigned Assigned WI Unemployment Wage Limit $14,000 $14,000 Federal Minimum Wage - 7/24/09 $7.25 $7.25 IRS Mileage Rates - General (not released yet) $0.54 per mileMedical/Moving (not released yet) $0.19 per mileCharitable (set by Congress) $0.14 per mile $0.14 per mile Slide4

Key Tax Fact Sheet

2017 2016 401(k), 403(b) and 457 Plan Limits $ 18,000 pre-tax $18,000 pre-tax Over age 50 Catch up 6,000 pre-tax

6,000 pre-tax

Simple Contribution Plan

Limit

$12,500

$12,500 Over age 50 Catch up 3,000 3,000 IRA Contribution General Limits $5,500 subj to AGI $5,500 subj to AGI Over age 50 Catch up 1,000 subj to AGI 1,000 subj to AGI Health Savings Accounts - Max Annual Contribution Single $3,400 $3,350Family $6,750 $6,750 Catch up (55 & older) $1,000 $1,000 Flex Spending $2,600 $2,550 Dependent Care $5,000 $5,000 CAFETERIA PLAN - Pretax Federal, State, Social Security, Medicare, FUTA & SUTA 401(K) - Pretax Federal and State Withholding; Taxable to Social Security & Medicare, FUTA and

SUTAHEALTH INSURANCE - 2% SHAREHOLDERS - Taxable for Federal withholding & State withholding

only

PERSONAL USE OF AUTO - Taxable to all

HEALTH SAVINGS ACCOUNTS - Pretax Federal, State, Social Security, Medicare, FUTA &

SUTA Slide5

Taxable Wages – W-2Slide6

Taxable Wages – Federal

Federal taxable wages are total wages less Pension/401K Plan amountsFederal wages go in Box 1 on W-2 Slide7

Taxable Wages – Social Security6.2% is withheld on the first $118,500 wages for Social Security in 2016

Section125 Plan items are not subject to social securitySocial security wages go in Box 3 on W-2Slide8

Taxable Wages – Medicare

1.45% is withheld for Medicare – no limitAdditional 0.9% is withheld for Medicare for wages over $200,000Medicare wages go in Box 5 on W-2Slide9

401K DeductionsOn W-2, Box 3, 5, and list out total (including catch up amount) in Box 12 – Code D

Check the Retirement Plan Box in Box 13401K Roth Contributions are after-tax contributions – listed in Box 12 with Code AA401K max deduction is $18,000 for 2016 (add’l $6,000 catch up for individuals 50 and over)Slide10

401K DeductionsIf 401K withheld was more than max allowed amount, a refund may be issued if done prior to year-end

Note – 401K and Roth 401K combined total may not go over the max allowedSlide11
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Dependent Care

Box 10 on W-2 – actual amount paid out regardless if over limitIf amount is over the limit, it is fully taxable and is included in Box 1, 3, 5 and State Wages (also taxable for FUTA and SUTA)Employers amount of dependent care spent on behalf of employees is excluded from income under the following limitations:Amount cannot exceed $5,000 per year ($2,500 for married filing separate)Expenses are for when incurred not when paidSlide13

Dependent Care

Care must be necessary (under age 13)Cannot discriminate Eligible employees must be made aware of planEmployer must give employee an annual statement (Box 10 on W-2 is sufficient)On site day care valued at arm’s lengthSlide14

Employer Provided VehiclesPersonal use of vehicle is subject to federal, social security, and

medicare taxes. Also subject to FUTA tax.Reported on W-2 box 1,3,5, and 14Employee must substantiate (track) mileage between business and personal usageOr full use of vehicle can be included in the employee’s income by using 1 of 4 valuation methodsSlide15

Valuation MethodsSee Publication 15-B

http://www.irs.gov/pub/irs-pdf/p15b.pdfGeneral Valuation MethodCost of employee to lease vehicle in arm’s length transaction in same areaSpecial Valuation MethodCents-Per-Mile valuationAnnual lease valuationCommuting valuationSlide16

Commuting Valuation

Employer can value PUA (personal use auto) at $1.50 per one-way commute and $3.00 per round trip if:Employer owned vehicle is provided to employee for company businessEmployer requires employee to commute in the vehicle for bona fide non-compensatory business reasonsEmployer must have written policy prohibiting employee from personal useEmployee is not a control employee (not elected, compensation less than $150,200)Slide17

Cents-Per-Mile Method

FMV for personal use is determined by using standard mileage rate of $0.54 per mile in 2016The following conditions must also be met:Employer expects employee to regularly use the vehicle or vehicle must be driven at least 10,000 miles annually (including personal use) and be primarily used by employeesFMV of vehicle when first put into use cannot exceed $15,900 for passenger vehicle or $17,700 for a truck or van for 2016Mileage rate is reduced by $0.055 per mile if employee pays for fuelSlide18

Annual Lease Valuation

FMV is determined by multiplying the annual lease value by percentage of personal miles Determine FMW of vehicle as of the first day it was made available (total cost of car at arm’s length). Value of leased vehicles can be determined by blue book value and can be recalculated after four years.Use the IRS Annual Lease Value Table Calculate percentage of personal miles driven Personal miles/total miles = % of personal miles drivenSlide19

IRS Annual Lease Value Table

IRS ANNUAL LEASE VALUE TABLE Automobile Fair Automobile Fair Market Value Annual Lease Value Market Value Annual Lease Value$ 0 – 999

$ 600

$

22,000 – 22,999

$ 6,100

1,000 – 1,999

850 23,000 – 23,999 6,350 2,000 – 2,999 1,100 24,000 – 24,999 6,600 3,000 – 3,999 1,350 25,000 – 25,999 6,850 4,000 – 4,999 1,600 26,000 – 27,999 7,250 5,000 – 5,999 1,850 28,000 – 29,999 7,750 6,000 – 6,999 2,100 30,000 – 31,999 8,520 7,000 – 7,999 2,350 32,000 – 33,999 8,750 8,000 – 8,999 2,600 34,000 – 35,999 9,250 9,000 – 9,999 2,850 36,000 – 37,999

9,750 10,000 – 10,999 3,100 38,000

– 39,999

10,250

11,000 – 11,999 3,350 40,000 – 41,999 10,750

12,000 – 12,999 3,600

42,000

– 43,999

11,250

13,000 – 13,999 3,850

44,000

– 45,999

11,750

14,000 – 14,999 4,100

46,000

– 47,999

12,250

15,000 – 15,999 4,350

48,000

– 49,999

12,750

16,000 – 16,999 4,600

50,000

– 51,999

13,250

17,000 – 17,999 4,850

52,000

– 53,999

13,750

18,000 – 18,999 5,100

54,000

– 25,999

14,250

19,000 – 19,999 5,350

56,000

– 57,999

14,750

20, 000 – 20,999 5,600

58,000

– 59,999

15,250

21,000

– 21,999 5,850

For

Vehicles having a fair market value in excess of $59,999,

the annual

lease

value

= (0.25 x the auto’s fair market value) + $500

https://www.irs.gov/pub/irs-pdf/

p15b.pdfSlide20

Example of Personal Use of Auto CalcSlide21

Group Term Life Insurance

Non-taxable for the first $50,000 of coverageAmount over $50,000 isTaxable for Social Security and MedicareTaxable for Federal Withholding but employer does not have to withholdNon-taxable for FUTA & SUTAGoes on W-2 in Box 12 with the Code CNondiscrimination testing requiredSlide22

Group Term Life Insurance

Follows the 10 employee ruleLife insurance is not group-term unless it is provided to at least 10 full-time employees some time during the yearException: S-Corp shareholders. Two percent shareholder(s) are not considered employees.Slide23

Group Term Life Insurance

Calculating Excess GTLDetermine coverage based on employees’ annual wagesDetermine excess over $50,000Divide excess by $1,000Determine employees’ age as of 12/31Multiply rate found on IRS Table I by amount in Step 3Deduct any after-tax employee contributionsSlide24

Uniform Premium Table 1 – IRC Section 79

Fair Market Value of GTL insurance per $1,000 of excess per monthSlide25

Group Term Life CalculationSlide26

Dependent GTL Insurance

Non-taxable if under $2,000ALL is taxable (including the first $2,000) if over $2,000Calculated based on the age of the dependent(s)Remember to make payroll deposits for additional add-onsSlide27

Gross Up For Payroll Purposes

Below Social Security LimitCurrent Social Security rate is 6.2% and Medicare rate is 1.45%; total FICA rate is 7.65%; Subtract the total rate from 1 yields 92.35%Divide the desired net pay by 92.35%Over Social Security LimitSubtract 1.45% Medicare rate from 1. Medicare is the only tax withheld on a FICA only check where employee is over Social Security limitSlide28

Personal Use of Auto and GTL Insurance

If fringe benefits are added to payroll prior to 12/31/16, set up a Benefit Code or Pay CodeIf fringe benefits are entered with a regular payroll, taxes are calculated so it is not necessary to gross upFederal and State income tax withholding is not requiredIf fringe benefits are entered after the final payroll of the year, it will need to be grossed up for Social Security and MedicareVerify fringe benefits are added to Box 1, 3, 5, and 16 on W-2 and listed in Box 14 – if not, give employee separate sheet to accompany the W-2Slide29

Near Social Security Limit

Joe Smith is to receive a net bonus of $250. The bonus will be grossed up for FICA. Joe’s current wages without the bonus is $118,250. Calculate the Social Security tax. The entire $250 bonus is subject to the tax. The gross up amount is $15.50 ($250 x 0.062 = 15.50). Add Social Security tax to desired net pay ($250+15.50 = $265.50)Gross up for Medicare tax. Subtract the tax rate, in decimal form, from 1 (1 - .0145 = 0.9855). Divide $265.50 from above by 0.9855 to determine gross amount ($265.50 / 0.9855 = $269.41). Slide30

Over Additional Medicare Limit

Employee’s wages exceed $200,000 – no Social Security tax but still subject to 1.45% Medicare and Additional 0.9% Medicare taxesMedicare tax calculation for wages over $200,000 (1 – 0.0145 – 0.009 = 0.9765)Divide the net bonus amount by 0.9765 to determine the gross up amount ($250 / 0.9765 = $256.02)Note – the employer does not match the 0.9% additional Medicare tax Slide31

Moving Expenses

Two tests must be met for moving expenses to be non-taxableDistance Test – must be at least 50 milesTime Test – must work for 39 weeks after move during the twelve month period immediately following moveSlide32

Non-Taxable Moving Expenses

Only two non-taxable moving expenses (fringe benefits)Transportation and in-transit storage of household and personal items Includes packing, moving, in-transit storage, and insuringTraveling from old residence to new residenceIncludes lodging and transportationExcludes mealsMileage reimbursement rate is 0.19 per miles in 2016Slide33

Taxable Moving Expenses

All other moving expenses paid to employee are taxable incomeReported on W-2 in Boxes 1, 3, 5, and State Wages (also taxable for FUTA and SUTA)Taxable moving expenses includeCost of meals while travelingPre-move house hunting Temporary living expenses in new locationReal estate expenses incurred with buying or selling homeSlide34

Reporting of Moving Expenses

Qualified or non-taxable moving expenses paid must be reported in Box 12, Code ‘P’ on employee’s W-2Slide35

Third Party Sick Pay

Fully taxable:Exception: nontaxable if amounts paid by insurer are attributable to premiums paid by taxpayerIf insurer is not preparing a W-2, benefits must be added to wagesRecord a manual checkReported in Boxes 1,3,5 & 16 on W-2 and check Box 13 – Third-Party Sick PayCheck the Third-Party Sick Pay box on the W-3Insurer will need to complete Form 8922Slide36

Education Assistance

Non job-related education up to $5,250 per year is excluded from income under EGTRRANon-taxable assistance must be provided through and EAP (Educational Assistance Program)Any amount over $5,250 per year is considered taxable incomeSlide37

Business Travel Expenses

Only non-taxable if under an accountable planMust be substantiatedProvide proof of amount, time, place, and business purpose within a reasonable period of timeAmounts over $75 (plus all lodging) must have receiptsCredit card receipts not acceptableMust have business connection if overnightSlide38

Business Travel Expenses

Per-Diem allowance for traveling each day is non-taxableAllowance amount is deemed substantiated as long as it does not exceed IRS-established federal per-diem ratesEmployee must also substantiate the time, place, and business purpose of expensesSlide39

Business Travel Expenses

Federal per-diem rate is a combination of the federal lodging expense rate and the meal and incidental expense rate (M&IE) for the locality of travel in the continental US (CONUS)Go to http://www.gsa.gov/portal/content/104877 for more informationSlide40

Business Travel Expenses

M&IE-Only per diem can be provided only if:Employer reimburses employee for actual lodging expensesEmployer pays the provider of the lodging directlyEmployer provides the lodgingEmployer reasonably expects there will be no lodging expensesAllowance is completed on a basis similar to that used for calculating employee’s wagesSlide41

Business Travel Expenses

Mileage reimbursement is non-taxable up to the federal business standard mileage as long as it is substantiatedMileage rate for 2016 is $0.54 per mileAny reimbursement over the federal rate is taxable incomeSlide42

Business Travel Expenses

Non-taxable expenses are not included on employee’s W-2All taxable expenses must be reported on employee’s W-2Slide43

Advances and Overpayments

Salary advances (prepaid wages) and overpayments must be included as income in the payroll period when receivedRepayment of these wages depend on the type of tax involved and when it is repaid to the employerSlide44

Advances and Overpayments

Federal incomes taxes withheldIf paid back in the same year, amount is excluded as income on W-2Employee receives excess income tax withheld as a tax refundIf paid back in a later year, amount cannot be excluded from employee’s income for that year or any yearEmployee may be able to take a deduction from income or tax credit on their personal tax return subject to certain restrictionsSlide45

Prizes and Awards

Awards and prizes are generally included as income with certain exceptions:Length of serviceSafety awardCivic and charitable awardsPrizes of retail salespeopleSlide46

Prizes and Awards

Length of service or safety achievement award is excluded from income if:Awards is tangible personal property and not cash or cash equivalent, stocks, vacations, meals, lodging, or ticketsAward is given in a meaningful presentationAward is not disguised as compensations and given at time of reviewThe requirements for length of service awards must be for five or more years of serviceSlide47

Prizes and Awards

Safety awards:Do not qualify if employer already presented them to 10% of its eligible employees during the taxable yearDo not qualify if presented to non-safety type jobsSlide48

Back Pay Awards

Back-pay under a statute is a payment by an employer pursuant to an awardAwards for punitive and emotional distress damages are also considered wages but should be reported in Box 3 of form 1099-MISC Slide49

Golden Parachute Payments

Payments made to executives when terminated only after change in corporate ownershipAt least three times executive’s average compensation in the last 5 yearsCompletely taxable with ‘excess’ payment (amount over the 5 year average) subject to 20% excise taxExcise tax reported on W-2 Box 12 preceded by Code ‘K’Slide50

Jury Duty Pay

Any pay by Employer above and beyond payment from the courts is taxableIf Employer requires employee to turn over jury pay, only the difference between amount paid and turned over is taxableSlide51

Loans to Employees

Not considered taxable incomeInterest not charged by employer below applicable federal interest rate is taxable on any day that loans are more than $10,000If loan is forgiven or cannot be repaid, then the remaining loan balance is taxableSlide52

Tips

Taxable incomeEarnings of $20 in tips must be reported by Employee to Employer at least once a monthService charges are not tips but are wagesSlide53

Wages Paid After Death

Employee dies before cashing checkEmployer should reissue check to employee’s personal representativeWages are completely taxable and reported on deceased W-2Wages paid in same year as deathWages are only subject to FICA and FUTA and should be reported on deceased W-2Issue 1099-MISC for taxable income in the name of beneficiaryWages paid after year of deathNot subject to tax but should be reported on 1099-MISC in the name of beneficiarySlide54

Wages Paid After Death

Wisconsin Chapter 109.033) Payment upon death of employee.109.03(3)(a)(a) In case of the death of an employee to whom wages are due, the full amount of the wages due shall upon demand be paid by the employer to the spouse, domestic partner under ch. 770, children, or other dependent living with the employee at the time of death. 109.03(3)(b) (b) An employer may, not less than 5 days after the death of an employee and before the filing of a petition or application for administration of the decedent's estate, make payments of the wage due the deceased employee to the spouse, domestic partner under ch. 770, children, parents, or siblings of the decedent, giving preference in the order listed. 109.03(3)(c) (c) If none of the persons listed in par. (b) survives, the employer may apply the payment of the wage or so much of the wage as may be necessary to paying creditors of the decedent in the order of preference prescribed in s. 859.25 for satisfaction of debts by personal representatives. Slide55

W-2’s

January 31, 2017 - new due date for filing 2016 Forms W-2, W-2AS, W-2CM, W-2GU, W-2VI, W-3 and W-3SS with the SSA, via paper forms or electronicallySlide56

Year End ReconciliationSlide57

Year End ReconciliationSlide58

Year End Reconciliation

Effective Jan. 2015, SSA will reject Form W-2 electronic and paper wage reports if:Medicare wages and tips are less than the sum of social security wages and social security tipsSSA will notify submitter via email or postal mail Slide59

Check List Prior To Processing First Payroll In 2017

Enter the 2017 State Unemployment rateReview and enter any changes for the following:Health Insurance PremiumsHealth Savings Account(s)Pension Plan ContributionsIf there are employees who claim exempt from withholding taxes, make sure a new W-4 is completedVerify if there are any new benefits being offered that should be addedVerify the first payroll calculates correctlySlide60

Exempt VS Nonexempt Employees

Type of employee status under FLSAExempt employees Do not have to be paid minimum wage or overtimeEmployer does not have to keep detailed records of their workBona fide executive, administrative, and professional employees (broadened to include computer-related professionals), as well as outside sales employees are exempt ‘white collar’ employees under FLSANonexempt employeesPaid at least min. wage for all hours workedOvertime premium for any hours over 40 in a weekSlide61

FLSA Overtime Rules

FLSA requires overtime pay for hours physically worked over 40 in a work week, unless exemptHours paid but during a week which no actual work is done is excluded in the calculation of number hours workedPaid time off for vacation, holiday, illness, jury dutyExample: Employee Chrissy worked 12 hours a day for 4 days in a work week and also paid 8 hours holiday pay. Since she worked 48 hours, Chrissy is entitled to 8 hours of overtime pay. The holiday pay cannot be used to offset.Slide62

FLSA Overtime Final Rule

Effective Dec. 1st 2016 (now delayed)Minimum salary rule for exempt salary employees must be $913 per week ($47,476 annual salary), previous requirement was $455 per week ($23,660 annual)Up to 10% can be paid in form of non-discretionary quarterly bonuses, commissions or incentive paymentsIncludes managers and professionalsSome exceptions – doctors, lawyers and teachersSlide63

FLSA Overtime Final Rule

Options to comply with new rulePay time and a half for overtime workChange employee status to hourlyRaise salaries for workers to new thresholdLimit employees’ hours to 40 per weekSlide64

Employee With Multiple Pay Rates

If employee has two or more different pay rates for two or more different jobs during a work week, the regular rate must take into account the different ratesGeneral rate formula is used for a ‘weighted average/blended rate’ calculationTotal regular pay from all jobs / total hours worked = regular rate of payExample: George works as a copy editor for 8 hours a day Monday – Friday at $12 an hour. During the same week, he works an extra 12 hours as a proofreader at $9 an hour. His regular rate of pay for the work week is $11.31 [(40 x 12) + (12 x 9)] / 52 = 11.31Slide65

Employees With Multiple Pay Rates

Weighted Average/Blended Rate calculation can be bypassed by using the highest rate paid to determine overtime rateMethod is considered lawful under FLSA since employee would receive higher amount than the law guaranteesSlide66

Flexible Spending Accounts

Use or Lose ProvisionMust use by end of plan year or forfeit unspent amountsEmployer may utilize Carryover or Grace Period option under special ruleCarryover optionEmployee can carry over up to $500 unused funds to the following plan yearGrace Period optionEmployee has 2 ½ months after end of plan year to incur eligible expensesSlide67

Employee Vs Independent Contractor

EmployeeEmployer controlsWhen you workHow you do itEmployer suppliesToolsKnow howBenefitsVacationPersonal Time OffHealth InsuranceRetirement Plan

Independent Contractor

Individual has written contract that states

Length

of

project

What

happens in the event project is not completed

satisfactorilyNo reimbursements for gas or suppliesPays in his/her own FICA SS and Medicare Slide68

Independent Contractor

Have contractor complete a Form W-9Request a copy of certificate of insurance for workers’ compensation and general liabilitySlide69

Form W-9

https://www.irs.gov/pub/irs-pdf/fw9.pdfSlide70

Employee

Forms filled out when hiredW-4I-9Employer remits FICA, Federal and State withholding Employee files Federal and State Individual tax returnsSlide71

Self-Employed Individual

Tracks all revenue/expenses/auto usageFiles Schedule C with Form 1040Pays for own health insurance/workers’ comp insuranceDoes not receive unemployment if business closesSlide72

IRS 20 Factor Test

1-Instructions2-Training3-Integration4-Services rendered personally5-Hiring, supervising and paying assistants6-Continuing relationship7-Set hours of work8-Full-time required

9-Performing work on the employer’s premises

10-Order or sequence set

11-Oral or written reports

12-Payment by hours, week, month

13-Payment of business and/or traveling expenses

14-Furnishing of tools and materials

15-Significant investment

16-Realization of profit or loss17-Working for more than one company at a time18-Making service available to the general public19-Right to discharge20-Right to terminateSlide73

WI Nine Part Test

1-Maintain a separate business2-Obtain a Federal ID# OR have filed business or self-employment income tax returns with the IRS based on the work or service in the previous year.3-Operate under specific contracts4-Be responsible for operating expenses under the contracts.

5-Be responsible for satisfactory performance of the work under the contracts.

6-Be paid per contract, per job, by commission or by competitive bid

7-Be subject to profit or loss in performing the work under the contracts.

8-Have recurring business liabilities and obligations.

9-Be in a position to succeed or fail if business expense exceeds income

.Slide74

WI Worker Classification Test

Part one of two part test – Control or DirectionFive factors to determine whether individual performs free from control or directionFactor One: Whether the individual is required to comply with instructions concerning how to perform the servicesFactor Two: Whether the individual receives training from the employing unit with respect to the services performedFactor Three: Whether the individual is required to personally perform the servicesFactor Four: Whether the services of the individual are required to be performed at times or in a particular order or sequence established by the employing unitFactor Five: Whether the individual is required to make oral or written reports to the employing unit on a regular basisSlide75

WI Worker Classification Test

Part two of two part test – Six of Nine Conditions TestMust meet six of nine conditionsCondition One: The individual advertises or otherwise affirmatively holds himself or herself out as being in business.Condition Two: The individual maintains his or her own office or performs most of the services in a facility or location chosen by the individual and uses his or her own equipment or materials in performing the services.Condition Three: The individual operates under multiple contracts with one or more employing units to perform specific services.Condition Four: The individual incurs the main expenses related to the services he or she provides under contract.Condition Five: The individual is obligated to redo unsatisfactory work for no additional compensation or is subject to a monetary penalty for unsatisfactory work.

Condition Six

: The services performed by the individual do not directly relate to the employing unit retaining the services.

Condition Seven

: The individual may realize a profit or suffer a loss under contracts to perform such services.

Condition Eight

: The individual has recurring business liabilities or obligations.

Condition Nine

: The individual is not economically dependent upon a particular employing unit with respect to the services being performed.Slide76

Retirement Contributions

Employee401k match from employer is possibleReceives Social SecurityIndependent ContractorContributes to own retirement planSocial Security benefits depend on net income of businessSlide77

Recordkeeping

Always keep all documentation for your records in the event of an auditSlide78

Form 1099-MISC

Report payments made in the course of the business or tradeAt least $600 in: rents;services performed by someone who is not your employee;prizes and awards;other income payments;medical and health care payments;crop insurance proceeds;cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish;generally, the cash paid from a notional principal contract to an individual, partnership, or estate;payments to an attorney; orany fishing boat proceedsSlide79

Form 1099-MISC

Form 1099-MISC – filed on or before January 31, 2017, when reporting nonemployee compensation payments in Box 7Otherwise, file by February 28, 2017 via paper, or by March 31, 2017 via electronicallySlide80

Payments to Corps and Partnerships

Generally, payments to corporations are not reportable except the following (Regulations section 1.6049-4(c)(1)(ii)):Medical and health care payments (Form 1099-MISC),Barter exchange transactions (Form 1099-B),Acquisitions or abandonments of secured property (Form 1099-A),Cancellation of debt (Form 1099-C),Payments of attorneys' fees and gross proceeds paid to attorneys (Form 1099-MISC),Merchant card and third-party network payments (Form 1099-K)Reporting generally is required for all payments to partnershipsExample, payments of $600 or more made in the course of your trade or business to an architectural firm that is a partnership are reportable on Form 1099-MISC.Slide81

Affordable Care Act

Future is uncertain with recent elections however, our recommendation is to follow current law until changed.Slide82

New Reporting Requirements for Organizations

Form 1095-A is issued by exchangeForm 1095-B is issued by insurance company and small (less than 50 FTE) organizations that are self insuredForm 1095-C is issued by employerWhy are these forms required?All large employers (over 50 FTE’s) are required to offer affordable health insurance to their employees. These forms help regulate this requirement.Penalties can reach $500 per incorrect or missing required form. Additionally, penalties could include $100 per day per employee for ACA violations.

2Slide83

Form 1095 Filing RequirementsAn organization is required to file Form 1095 – B or C if they meet one of two requirements:

Employ more than 50 FTE’s (Full-Time Equivalent)Health insurance is offered under a self-insured plan5Slide84

Large vs Small EmployerLarge Employer

> 50 Full-Time Equivalent EmployeesSmall Employer < 50 Full-Time Equivalent Employees Not required to provide health insuranceHow to Determine FTE:Calculate your Full-Time Employees (average 30 hrs/week or 130 hours per month)Calculate your (part-time and seasonal) FTEs (add up total hours and divide by 120)

Add the two numbers in steps 1 & 2

Add up the 12 monthly numbers in 3 and divide by 12

If less than 50, not applicable large employer

If more than 50, greater than 120 days?

6Slide85

Timeframe

Extended time to file Form 1095’s:March 2, 2017 deadline for providing the Form 1095-B or 1095-C to your employees.Individuals may not receive Forms 1095-B or 1095-C by the time they are ready to file their 2016 individual income tax return. While information on these forms may assist in preparing a return, the forms are not required in order to file.If you need help please give us a call.10Slide86

Questions?

Greg Kenworthy, CPA608.793.3141