2011 YEAR-END REMINDERS
Ohio Commercial Activity Tax (CAT Tax)
If you did not previously register for tax year 2011, and your Ohio gross receipts have exceeded $150,000 for the year, you need to register for this tax. Annual taxpayers that have Ohio gross receipts between $150,000 and $1,000,000 must file their next report by May 10, 2012. Quarterly taxpayers (Ohio gross receipts over $1,000,000) must file on-line through the Ohio Business Gateway. The quarterly due dates are February 10, May 10 (which is also the annual settlement of the 2011 filing), August 10, and November 10, 2012.
Ohio Sales Tax Reporting – Electronic Filing Now Required
You should check to see if the state has switched you from semi-annual filing to monthly filing. There are three options for filing sales tax: the Ohio Business Gateway, eForms, and Telefile. If you need assistance, please contact our office.
State Unemployment Voluntary Payment
In November or December, you should receive a form from the Ohio Jobs & Family Services that may allow you to make a voluntary payment that would reduce your 2012 unemployment tax rate. The amount of payment required and amount of proposed rate reduction will vary from employer to employer. It is based on each employer’s unemployment experience. The proposed rate reduction should range from 1/10th of 1% to 4/10th of 1%. If you are going to make a voluntary payment, the state must receive the payment by December 31, 2011. If we prepare your payroll taxes, please bring in your form as soon as possible. If you need assistance deciding whether to make the voluntary payment, please contact our office.
An important change to look for on this annual form is the state’s enforcement of a provision they have had available (but not used) for a number of years. If you have been delinquent in filing or payment of your contributions in any of the last several years, the state may have assigned a 2012 rate of 11.4%. If they have assigned this penalty rate, you have an opportunity to clear this problem by December 31, 2011 and obtain a normal experience rate calculation. Do not miss this opportunity to clear this matter if available. Contact us immediately for assistance.
2012 Ohio Unemployment Wage Limit
For 2012, you will be required to pay state unemployment on the first $9,000 of wages per employee. The Ohio rates for 2012 will vary based on each employer’s experience from a low of 7/10ths of 1% to a high of 9.1%.
2012 Federal Unemployment Wage Limit
For 2012, you will be required to pay federal unemployment on the first $7,000 of wages per employee. The rate, net of credit for state premiums paid, was 8/10ths of 1%. On July 1, 2011, this rate changed to 9/10ths of 1% for Ohio employers and 6/10ths for West Virginia employers. Ohio has a penalty rate due to borrowing from the federal fund.
2012 FICA Retirement Wage Limit
For 2012, you will be required to pay the retirement portion (6.2%) of social security on the first $110,100 of wages per employee. This is an increase from the 2011 limit of $106,800.
2012 Social Security Withholding from Employees
For 2011, the withholding rate from employees was 4.2% with a 6.2% employer “match”. The withholding rate for employees is scheduled to return to 6.2% with a 6.2% employer match for wages paid in 2012, unless there is last minute legislation to the contrary.
2012 Federal Tax Deposit Requirements Notice from IRS
In December, you should receive a notice from the Internal Revenue Service that indicates what your 2012 tax deposit requirements will be. Most small business employers are on the monthly schedule. Employers with larger payrolls are on the semi-weekly schedule. Contact us if you are not certain how to interpret your letter.
The IRS sometimes changes very small employers to annual reporting and payment. If you are an annual filer, you will use Form 944 rather than Form 941. We need you to tell us if the IRS has switched you to annual reporting.
2012 Federal Employment Tax Deposits Must Be by EFTPS or Telefile
Since January 1, 2011, you are no longer able to make deposits of federal employment tax (or any federal tax) at your local bank using a tax deposit coupon. You must make this payment using the EFTPS or the Telefile system. Contact us if you need assistance or clarification in this matter.
2012 Ohio Tax Deposit Requirements
Soon you should receive your packet of forms for filing your Ohio withholding tax for 2012. Be certain to check the front of the envelope immediately to see if the state has changed your deposit requirements from quarterly to monthly. If you are switched to monthly, the monthly withholding must be sent to the state by the 15th day after the close of the month. The late payment penalty can be severe, a $50 minimum penalty. If you also have an account for Ohio school district withholding, the rules are the same.
2012 Athens Withholding Payments
Since January 1, 2011, the City of Athens requires all payments for withheld Athens City Income Tax to be made via the Ohio Business Gateway or the Athens City website. This applies to all filers, whether monthly or quarterly.
Federal Withholding Tax Books (Circular E) for 2012
The IRS has not yet announced the date of issue for the 2012 Circular E. There may be a delay in the issuance of this booklet if there is last minute Congressional action pending. When available, you can download this publication from www.irs.gov, along with most other publications and forms.
Information for 2011 Forms W-2
Be certain you have accurate information in your payroll records for each employee to prepare their Form W-2. You need an accurate name, address and social security number, as well as correct wage and withholding information.
Personal Use of Company Vehicles by Employees
If you allow an employee to use a company vehicle for personal use, such as commuting to and from work, you need to include an amount for this value as additional compensation in your employees Form W-2, and the FICA taxes must be included on such compensation. There are different rules that may be applied for owners versus non-owners. Call us if you have questions about how to comply.
Form I-9, Form W-4, and IT-4
Be certain you are having your new employees complete Form I-9 (from the Bureau of Immigration), Form W-4 (from the IRS for withholding), and Form IT-4 (from the Ohio Department of Taxation for withholding) at the time of hire. You can find all these forms, including the Ohio New Hire Reporting form discussed below, at http://newhire-reporting.com/OH-Newhire/PrintForm.aspx.
Ohio New Hire Reporting
The Ohio New Hire Reporting Program is an attempt to better track individuals who owe child support payments. Under this program, all employers must submit information about each new person hired (regardless of their age, marital status, or sex) to the state within 20 days of hire of each employee. The state will be reconciling new hire reports submitted by each employer to the quarterly unemployment reports. If the state discovers someone listed on the quarterly wage listing that was not reported as a new hire, the state may assess a penalty. The state has expanded this new hire reporting rule to include independent contractors (persons you send annual Form 1099-MISC rather than Form W-2). Please be certain to comply with these rules. Call us if you have any questions.
Holiday Bonus Checks
Bonus checks paid to employees are payroll checks subject to payroll taxes, just as any other regular, overtime, or vacation paycheck. You should include these bonus checks in the employee’s total earnings and pay in the social security and federal withholding just as you would any other paycheck.
Group Medical Insurance Paid for an S Corporation Shareholder
If your company is an S Corporation and pays any part of the group medical insurance premium for a shareholder that owns more than 2% of the stock of the corporation, the amount of those premiums must be included on that person’s Form W-2, Box 1, as additional compensation. In prior years, the corporation was required to include this additional compensation in Box 3 (Social Security wages) and Box 5 (Medicare wages). However, the IRS has clarified in their Notice 2008-1 that this additional compensation should be included in Box 1, but not in Box 3 or Box 5, because it is not subject to Social Security and Medicare taxes. Call us if you have questions about how to comply with these provisions.
Federal and State Minimum Wage
We are not attorneys and offer limited informational guidance regarding wage laws for your consideration. We encourage you to seek competent legal advice on any labor law question.
The Federal Minimum Wage increased from $6.55 per hour to $7.25 per hour on July 24, 2009. There are numerous exemptions, overtime rules, and special rules for certain industries.
Beginning January 1, 2012, the Ohio minimum wage increases to $7.70 per hour from $7.40 per hour. Excluded from this requirement are employees under age sixteen and employees of businesses with annual gross receipts of less than $283,000. Tipped employees must be paid at least one-half of the required minimum wage (for 2012, $3.85 would be one half), as long as the tipped employee reports to the employer tips that bring the total hourly earnings to at least $7.70 for 2012. If an employer has less than $283,000 of annual gross receipts, they must pay at the federal minimum wage rate (currently $7.25). Each year these amounts (the $7.70, the $283,000, and the federal minimum wage amount) will be increased for inflation, to restate the minimums at the beginning of each calendar year.
We have enclosed a current federal minimum wage poster and an Ohio minimum wage poster. You can download the poster at http://www.com.ohio.gov/laws/.
The same amendment for the minimum wage law change brought substantial requirements for record keeping for employee time. These record keeping requirements apply to all employers, regardless of size and gross receipts, and to all types of employees, whether hourly, salary, or commission. Beginning January 1, 2007, you must maintain a record of the name, address, occupation, pay rate, hours worked for each day worked and each amount paid an employee for a period of not less than three years following the last date the employee was employed. An example might be an employee that works for you beginning in 2006 and works for you until 2036. You would need to maintain their employee records, including daily time records (whether hourly, salaried, or commission) as well as copies of pay stubs and cancelled payroll checks for the period January 1, 2007 through their last date worked in 2036. You could not destroy these records until three years later (2039).
2011 Forms 1099
If you paid $600 or more for contract services or rent provided to or for your business to any one person during 2011, you should send them a Form 1099-MISC. These forms must be mailed no later than January 31 to the individual and a copy to the IRS no later than February 28.
Ohio Workers’ Compensation Group Rating
If you are not in a workers’ compensation rating group, you should obtain a quotation of proposed savings from a rating group. Membership in a rating group can provide you with reduced workers’ compensation premiums. If you still are not a member of a group, contact us for more information.
Note that the Director of the Bureau of Workers’ Compensation has indicated that the maximum discount for any group will remain at 53% for the fiscal year beginning July 1, 2012.
Retirement Plan Limits for 2012
An employee may have withheld a maximum amount from their payroll under different types of retirement plans. For each plan there is a base limit and an additional amount allowed for employees that will be more than 50 years old by the end of the year.
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Simple IRA Plans – The base limit for 2012 is $11,500 with an additional $2,500 for employees 50 or older.
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401(k) Plans – The base limit for 2012 is $17,000 with an additional $5,500 for employees 50 or older.
Health Savings Account Limits for 2012
The limit for contributions to health savings accounts increased slightly 2012: $3,100 for single plans and $6,250 for family plans. For persons 55 and older the limit can be increased by $1,000. For 2011, the limits were $3,050 for single plans and $6,150 for family plans. The $1,000 extra for persons over 55 also applies for 2011.
Record Retention Requirements
Clients often ask us about record retention requirements. We have enclosed a listing of suggested holding periods for many business related documents. We obtained this listing from sources we consider reliable, but bear in mind the list is not all-inclusive. Be particularly cognizant of the extended requirements for Ohio payroll records previously discussed.
