Dear Clients and Friends:
With one year ending and another one beginning, payroll data and files need to be updated. The notices for the 2014 NC unemployment tax rates for businesses are in the process of being mailed. Please remember to update your payroll tax tables for this change after processing the last payroll for 2013.
In 2013, NC made significant changes to the individual income tax rates, exemptions, and deductions. As a result, all employers are required to obtain a new NC-4 or NC-4EZ from each employee by 01/01/2014. You may have already received a mailing from the state in regards to this. Here is a link to the NC Department of Revenue site with additional information and forms – http://www.dor.state.nc.us/press/2013/nc4requirement.html .
Remember that there may be year-end adjustments needed for filing your W-2s. These include, but are not limited to, the following – please contact us if you need assistance in calculating these amounts:
• If you provide a company vehicle to any employee (including company owners), the value of the personal use of the vehicle must be included in the W-2. This is income for federal withholding, FICA, Medicare, and FUTA purposes.
• If you provide group-term life insurance in excess of $50,000 to employees, the value of the life insurance in excess of the $50,000 must be included in the W-2.
• For this and similar non-cash compensation, you obviously cannot withhold tax when there is no cash payment. Therefore, you need to calculate this additional W-2 income before the last payroll of the year, so that you can withhold additional tax from the last payroll, if needed.
• For “S” corporations, the amount the company paid for accident and health insurance (including dental, cancer, long-term care, and other policies) must be included in the W-2 of certain shareholders (those owning more-than-2% of the company, and their spouses, children, and other related parties). The amount paid is taxable for federal withholding purposes, but is not taxable for FICA, FUTA, or Medicare purposes as long as coverage is offered to your employees.
• Note – the Internal Revenue Service has stated its intention to disallow the deduction for health insurance for more-than-2% “S” corporation shareholders if the company fails to include this health insurance in the W-2 of the shareholder.
• Note – 2013 Forms W-2 will include a box to disclose the amount of health insurance paid on behalf of employees. Other than the above adjustment for more-than-2% “S” corporation shareholders, this amount is not taxable income to the employee. This is only an information disclosure. Employers who send 250 or more forms W-2s are required to comply with this disclosure. Other employers, while not required to complete it, should consider doing so in order to show their employees the cost of the coverage paid on their behalf. The amount to report is the total value of group health and major medical plans (use COBRA amounts), self-funded plans, and employer contributions to health FSAs (flexible savings accounts) or HSAs (health savings accounts).
Please contact us if you have any questions.