Year-end Reporting 2014

Bottom Line
Year-end Reporting 2014
Annual Update on Expense
Reporting and Per Diem Rates
Accountable Plans
An accountable plan allowance is an
arrangement whereby the employer pays
an employee a fixed amount or a formulabased amount of money to be used
for employment-related expenses. The
employee must account for how the money
is used. All or a portion of the allowance
or arrangement is not subject to payroll
withholding rules provided the necessary
substantiation requirements are met. IRS per
diem rates currently available are:
Mileage
We will send the new 2015 rates to you
when they are announced.
(Effective Jan. 1, 2014 - Dec. 31, 2014)
• 56¢ per recorded business mile
• 14¢ charitable use
• 23.5¢ medical or moving
Lodging, Meals and Incidentals
(Effective Oct. 1, 2014)
I. High/Low Method
• High Cost Locality $259 ($65
considered meals and incidentals)
• Other Cost Locality $172 ($52
considered meals and incidentals)
Contact our office for a list of “high cost
localities” or the most recently published
“specific locality” per diems.
II. Transportation Industry Rate for meals
and incidentals
• $59 per day for continental U.S. travel
• $65 per day for non-U.S. travel
III. Federal Per Diem Rate
• $129 standard rate ($46 considered
meals and incidental expenditures)
Non-Accountable Plans
Treasury regulations require non-accountable
plan allowances be treated as taxable wages
subject to Federal income tax and Social
Security tax withholding.
2015 Payroll Wage Bases and Tax
Rates
Social Security
First $118,500 is taxable, with a 6.2% tax
rate for both employee and employer.
Medicare
All wages are taxable, with a 1.45% tax rate
for both employee and employer. Employers
should withhold an additional 0.9% on
wages exceeding $200,000. There is no
employer match on the additional 0.9%.
Federal Unemployment
First $7,000 is taxable, generally at 0.6%.
Minnesota Unemployment
First $30,000 is taxable at rates depending
on employment history and industry.*
Wisconsin Unemployment
First $14,000 is taxable at rates depending
on employment history and industry.*
In This Issue:
pg 1: Expense Reporting, 2015 Payroll, Minimun
Wage
pg 2: Form CRP, Form 1099, Retirement Plan
Strategies
pg 3: W-2 & Health Coverage Reporting
requirements, Health Coverage reporting Issues
pg 4: Affordable Care Act, S Corporation Fringe
Benefits
Year-end
1
Reporting 2014
*Established employers will receive their
2015 experience-modified rate from
respective states.
Tips
Tips are subject to Social Security and
Medicare as well as Federal and state
unemployment taxes.
Sources: www.irs.gov / www.dwd.wisconsin.gov /
www.uimn.org
Minimum Wage Law
The Federal minimum wage to be paid by
covered employers is currently $7.25/hour. In
cases where an employee is subject to both
the state and Federal minimum wage laws,
the employee is entitled to the higher of the
two minimum wages.
Minnesota
Minnesota’s minimum wage for all ages is
$6.50/hour and increases to $7.25/hr on
August 1, 2015 if annual sales are less than
$500,000. If annual sales are $500,000 or
greater, minimum wage is $8.00/hr and will
increase to $9.00/hr on August 1, 2015.
A training wage of $6.50/hr, increasing to
$7.25/hr on August 1, 2015, is available
for new employees under the age of 20
during their first 90 consecutive days of
employment.
Wisconsin
Wisconsin minimum wage is $7.25/hour and
$2.33/hour for tipped employees. These are
reduced to $5.90/hour and $2.13/hour for
opportunity employees.
For more information visit
www.dwd.state.wi.us or
www.doli.state.mn.us.
Form CRP due to renters Jan. 31 Owners of Minnesota residential rental
property are required to file a 2014 Form CRP (Certificate of Rent Paid). The
form must be signed by the landlord and given to tenants by January 31, 2015.
Redpath and Company can assist in preparing these forms. Please contact Teresa
Radermacher, CPA, at [email protected] before Jan. 20, 2015, for
assistance.
Reporting Requirements for Annual
Information Returns – Form 1099
Annual Information Returns (Form 1099 and
1098) are due to recipients by Feb. 2 and to
the federal government by March 2 , 2015.
Penalties for failure to file or for late filing
of Annual Information Returns range from
$30-$100 per information return; penalties
for failure to provide Forms 1099 and
1098 to the recipients are $30-$100 per
recipient; and intentional disregard of filing
requirements incur a penalty of at least $250
per payee statement with no maximum
penalty.
Reportable payments generally include
payments of at least $600 in the aggregate
from a trade or business to an individual,
sole proprietor, partnership, or LLC. Some
typical examples are:
• Form 1099-MISC must be filed for
aggregate payments of at least (a) $10
in royalties, (b) $600 in rents, services
Retirement Plan Tax Strategies
Available for 2014
There is still time to adopt an IRS qualified
retirement plan as a tax planning strategy for
2014. Retirement plans are a great way to
generate needed employer deductions and
tax-deferred savings for the employee.
of $600 in trade or business
• Form 1099-B - Broker or Barter exchanges
• Form 1099-S - Real estate sales
• Form 1099-G - Certain federal, state or
local government unit payments
• Form 1099-PATR - Cooperatives which
have paid at least $10 in patronage
dividends and other distributions.
(including parts and materials), prizes and
awards, fees, commissions, subcontract
labor, other income payments and health
care payments, or (c) any amount in
attorney fees, even if the attorney does
business as a corporation.
• Form 1099-DIV must be filed for
aggregate dividends and other
distributions on stock of $10 or more.
• Form 1099-INT must be filed for
aggregate payments of at least $10 of
interest, or $600 of interest (including
tax-exempt interest) if paid in the trade
or business of lending money or on
registered notes.
• Form 1099-R must be filed for each
distribution of at least $10 from a
pension, annuity, retirement plan, Section
457 Plan, IRA, insurance contract, etc.,
during the year.
Other annual information reporting
requirements:
• Form 1098 - Mortgage interest recipients
For detailed information regarding Form
1099 reporting, visit www.irs.gov.
Retirement plans to consider for 2014 are:
• Profit sharing
• Money purchase pension
• SEP
• 401(k)
• S-corp ESOPs
• C-corp ESOPs
• Cross-tested plans.
We can assist you in the implementation of
these plans. For more information, contact
Christine Bentson, CPA, RPA, CEBS, at
[email protected].
If you have questions regarding Form
1099 reporting requirements or would like
Redpath and Company to prepare your
forms, please contact Teresa Radermacher,
CPA, at [email protected].
For Redpath and Company preparation of
1099s and 1098s, we require the following
information by Jan. 19, 2015:
Recipient’s:
• Name
• Address
• Social Security Number or Federal I.D.
Number
• Total of Payments in 2014
• Reason for Payment (i.e., interest,
subcontract labor, nonemployee
compensation, etc.)
The benefit plan dollar limits for 2014 and
2015 are highlighted below.
IRS Benefit Plan Dollar Limits
(Adjusted for cost-of-living increases)
2015
Deferrals to 401(k)
and 403(b) plans
Under age 50
$18,000
Deferrals to
401(k) and
403(b) plans
Age 50 or
older
$24,000
Deferrals
to SIMPLE
Under age
50
$12,500
Deferrals
to SIMPLE
Age 50 or
older
$15,500
Annual
Limit on
Compensation
$265,000
Individual
Account
Limitation
$53,000
2014
$17,500
$23,000
$12,000
$14,500
$260,000
$52,000
Year-end
2
Reporting 2014
Employee W-2 Form Reporting
Requirements
The IRS requires more information on W-2
Forms each year. Failure to comply with IRS
reporting requirements can result in the
assessment of penalties for non-compliance.
Following is a general list of items that must
be included in various boxes on the 2014
W-2 Forms, in addition to normal wages and
compensation:
• Disability or sick pay paid by thirdparty payers.
• Disability or sick pay not included in
income.
• The value of employer paid group
term life insurance in excess of
$50,000 per year.
• The value of other employer provided
life insurance is generally taxable as
wages.
• The value of employer provided
disability insurance may be taxable.
Talk to your accountant to determine
which rules apply.
• Employee deferrals to salary
reduction retirement plans. (SIMPLE,
401(k), etc.)
• Reimbursed employee business
expenses in excess of amounts
substantiated.
• Amounts paid for qualified
educational assistance.
• Amounts paid for qualified adoption
expenses.
• The value of the personal use of an
employer-provided vehicle.
• Employer contributions for qualified
long-term care services provided
through a flexible spending or similar
arrangement.
• Employee moving expenses paid to a
third party, and services an employer
furnishes in kind, are not reported on
Form W-2. Qualified moving expense
reimbursements paid directly to
an employee by an employer are
reported in box 12. IRS Publication
521 is available to provide detailed
information to the employee.
• Elective deferrals and designated
Roth contributions.
• Dependent care plan benefits.
• Archer Medical Savings Account
contributions.
• Employer contributions to Health
Savings Accounts.
• Distributions from a nonqualified
deferred compensation plan or a nongovernmental Section 457(b) Plan.
• Yearly deferrals under Section 409A
non-qualified deferred compensation
plan.
• Income currently taxable due to a
failure of a nonqualified deferred
compensation plan under Section
409A.
• Current year vesting in non-qualified
deferred compensation plans are
includable in gross income unless
certain requirements are satisfied.
• Cash and non-cash fringe benefits
including benefits provided to 2%
or greater shareholders (or related
employees) of an S-corporation.
• Federal electronic reporting required
when filing 250 or more Federal
W-2s. Visit www.socialsecurity.gov
for information about filing your W-2s
online.
• Minnesota electronic reporting. The
electronic filing threshold decreases
over the next few years. E-filing is
required if you have more W-2s than
the following in the designated years:
»» 2011, and beyond: 10 W-2s
Employer-Provided Health
Coverage Informational Reporting
Requirements
The Patient Protection and Affordable Care
Act of 2010 required employers to report
the cost of coverage under an employersponsored group health plan on 2012
W-2 Forms, but most employers met the
transitional relief rules making reporting
optional and not requiring them to report
the costs. The most common transitional
relief rule making 2012 reporting optional
applies to businesses that filed fewer than
250 W-2 Forms in the prior year. To date, no
further guidance has been provided. The
transitional relief rules applying to 2012 W-2
Forms apply to 2014 W-2 forms employers
provide to employees in January 2015.
Year-end
3
Reporting 2014
Issues Draft Forms and Instructions
for Reporting Employee Health
Coverage
The IRS released draft versions of forms and
instructions for Form 1094-B (Transmittal of
Health Coverage Information Returns), 1094C (Transmittal of Employer-Provided Health
Insurance Offer and Coverage Information
returns), 1095-B (Health Coverage), and
1095-C (Employer Provided Health Insurance
Offer and Coverage).
All reporting for 2014 is optional and not
required. Health insurance issuers or carriers
must file Form 1094/1095-B for most health
insurance coverage, including individual
market coverage and insured coverage
sponsored by employers. Plan sponsors
are responsible for reporting self-insured
employer coverage and will instead report
the information on 1095-C. Employers must
file the Form 1094/1095-C forms.
The reporting requirements will generally
apply to large employers as defined in
the Affordable Care Act (ACA), which
are employers with at least 50 full-time
equivalent employees, on average, in
the preceding calendar year. These new
informational returns will require employers
to coordinate between various groups such
as their payroll department or vendor, HR
department, and health plan insurer.
Employers that may be subject to filing in
years after 2014 should take the time to
determine if they will be required to file,
develop procedures for determining and
documenting each employee’s status (fulltime vs part-time), and the employer’s
offer of health plan coverage and employee
enrollment. Having the appropriate
measures in place before 2015 begins may
relieve some of the burden in trying to get
information ready at year-end next year.
Please visit http://www.irs.gov/uac/Form
W-2-Reporting-of-Employer-SponsoredHealth-Coverage for an IRS chart of the
reporting requirements for various types
of coverage outlining what is reportable,
optional and what not to report.
Other Affordable Care Act
Considerations, Continued
Other Affordable Care Act
Considerations
Health Reimbursement Plans
Due to the nondiscrimination provisions of
the Affordable Care Act, many employers
will no longer be allowed to have Medical
Reimbursement Plans or Health Reimbursement Arrangements (HRA). These
plans or arrangements are used to pay for
or reimburse employee’s out-of-pocket
medical or health insurance expenses
without being subject to income tax to the
employee. Effective as of 2014, violations
may be subject to a $100 per day per employee penalty.
S-Corp Owner Health Insurance
Payment Arrangements
The nondiscriminatory provisions mentioned above also affect the treatment
of company reimbursed or paid health
insurance premiums for greater-than-2%
shareholders.In years prior to 2014 these
reimbursements were to be picked up as
income to the owner on their W-2 in box
1 subject to income tax, but exempt from
being reported in box 3 for social security
wages and box 5 for Medicare wages. This
treatment may change in 2014 so that they
will now be subject to taxation for income
taxes, social security (SS), and Medicare;
and be reported in boxes 1, 3, and 5.
Whether or not the arrangement will be
subject to SS and Medicare may depend
on various factors such as if the company
has more than just the S-Corp owner as an
employee, if the employer offers a group
Fringe benefits provided to 2% or more shareholders (or related
employees) of an S-Corporation
Not subject to Social Security or Medicare:
- Health insurance*
- Disability insurance**
- Non-group life insurance*
- Medical reimbursement plan benefits*
Not subject to Social Security or Medicare
to the extent used for medical or disability
benefits:
- Cafeteria plan benefits*
- Flex plan benefits*
Subject to Social Security or Medicare:
- Section 119, Excluded meals and lodging
- Section 79, Group term life insurance
- Section 120, Group legal services
- Personal use of employer-provided
vehicles
All of the above benefits are subject to
applicable Federal and state withholding
taxes.
*Due to the nondiscrimination provisions
of the Affordable Care Act, many employers
will no longer be allowed to have
Medical Reimbursement Plans or Health
Reimbursement Arrangements (HRA). These
plans or arrangements are used to pay for or
reimburse employee’s out-of-pocket medical
or health insurance expenses without being
subject to income tax to the employee.
Effective as of 2014, violations may be
subject to a $100 per day per employee
penalty.
** Disability insurance premiums subject to
tax for Federal and state income purposes to
avoid taxation of benefits are also subject to
Social Security and Medicare tax.
Year-end
4
Reporting 2014
health plan, or if the greater-than-2%
shareholder has coverage outside of the
group plan. We will send out an update
as we wait for the IRS to address the lack
of clarity on the issue.
The Bottom Line is published by HLB Tautges
The Bottom Line is published by Redpath and
Redpath, Ltd.
Company, Ltd.
4810 White Bear Parkway
Office locaions:
White Bear Lake, MN 55110
phone: 651.426.7000
4810 White Bear Parkway
web: www.hlbtr.com
White Bear Lake, MN 55110
Kristin Sharp, Editor
E-mail: [email protected]
55 East Fifth Street, Suite 1400
St. Paul, MN 55101
In accordance with the Internal Revenue
Service Circular 230, any tax advice included
phone: 651.426.7000
in this written or electronic communication
web: www.redpathcpas.com
(including attachments) was not intended
e-mail: [email protected]
or written to be used, and it cannot be used
by the taxpayer, for the purpose of avoiding
any penalties that may be imposed on
Redpath and Company, Ltd. is a member of
the taxpayer by any governmental taxing
HLB International, a world-wide network of
authority or agency.
independent accounting firms and business
advisors, and of the AICPA Private Companies
HLB Tautges Redpath, Ltd. is an independent
Practice Section.
member of HLB International, a world-wide
organization of accounting firms and of the
AICPA Private companies practice section.
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