As the end of the year approaches, it is important to update your payroll systems for new payroll requirements.
- EFTPS Mandate
Virtually all businesses will have to switch to the Electronic Federal Tax Payment System (EFTPS) for all federal tax payments starting in 2011. The familiar paper voucher deposit system is going away for any company with quarterly employment tax liability of $2,500 or more. The IRS penalties for non-compliance are 10 percent for taxes paid by check.
- Expanded 1099 Reporting
- W-2 Reporting of Health Care Coverage Costs
Under a mandate of the Health Care Reform and Small Jobs Act, businesses will be required to report all payments made in 2012 in excess of $600 for services or merchandise to the IRS on Form 1099. Under current law, businesses send Form 1099 for payments in excess of $600 for rent, interest, dividends and non-employee services when these payments are made to entities other than corporations. The reporting expansion now includes corporations and payments for services, including services performed on rental properties owned by an individual. The expanded reporting requirements begin with payments made in 2012.
In order to file the required Form 1099, a business would have a vendor complete Form W-9. Business owners may chose to gather need information and update accounting systems now in preparation of these changes.
The health care reform legislation requires employers to include the aggregate cost of employer sponsored health care coverage on employees’ W-2s for tax years starting on or after January 1, 2012. The original deadline was pushed back a year from 2011 to allow employers to make changes to their payroll systems and procedures to comply with this rule. A penalty will be imposed for non compliance beginning with 2012 W-2s. The amount reported is informational only and will not be includable in employee earnings.
If you have any questions about how your business needs to prepare for this, please feel free to e-mail Deborah Helton, CPA, or call her at (719) 579-9090.