HR Morning » FUTA

Alert: Feds delay records audit till February

Jim Giuliano — Fri, 04 Dec 2009 11:00:41 +0000

An audit of 6,000 businesses that was scheduled for November has been pushed back, giving you a little more time to make sure your company’s records are in order.

As previously reported, the Internal Revenue Service was gearing up for the audits to uncover unpaid business and payroll taxes. IRS is still planning the nationwide audit, but is pushing it back to February.

Here’s what auditors will be looking at:

Three federal taxes collected, paid and/or remitted by employers — employee income taxes deducted by the employer, FICA and FUTA.
Employment taxes related to four areas — worker classification, fringe benefits, reimbursed expenses and compensation of owner employees.

The audits have been triggered by an IRS study that shows a “tax gap” in the billions of dollars for unpaid business and payroll taxes.

Changes coming for unemployment insurance

Jim Giuliano — Tue, 20 Jan 2009 11:00:31 +0000

Between the new administration and the soaring jobless rate, this figures to be a big year for proposals dramatically changing the unemployment-insurance system. Under the new Obama administration, you’re likely to see proposals on new family leave coverage, new “wage insurance” programs, paid health benefits for the unemployed and extension of the present system to administer new health care mandates. Doug Holmes, president of UWC, Inc., outlined these likely policy goals at the recent National Association of State Workforce Agencies conference:
• increased FUTA taxes. Many policy- and lawmakers agree that the $7,000 FUTA wage base, which hasn’t changed in decades, should be increased and possibly indexed to address trust fund solvency.

• dramatically higher state UI taxes. Trust funds are depleting rapidly, which means states will soon be borrowing to pay claims in unprecedented amounts. Employers should expect sharply higher state employer taxes in 2010 and beyond, and possibly higher federal FUTA taxes to repay loans.

• more pressure on reducing federal administrative funding for UI. That means employers may be paying higher state administrative assessments to make up for it.

• potential new taxes and reporting burdens, as many view the UI system as the natural vehicle for collection of health coverage information and possible new taxes. Both are likely in any national health insurance reform.

• possible new programs such as dramatically expanded Trade Adjustment Assistance, implementation a new “Wage Insurance” program, and a new employer tax credit to pay for COBRA health benefits for the unemployed.

Even if all of these proposals don’t pass, employers can count on continuing to fund the system through state and federal unemployment insurance taxes.

The changes Obama proposes for Payroll regs

Kerry Isberg — Thu, 20 Nov 2008 11:00:04 +0000

Many of the changes President-elect Obama wants will make a direct hit on your company’s operations. Here’s what he’s proposed during the campaign — and what’s likely and unlikely.

1. Repeal of some Bush tax cuts. Obama favors:

reinstating the pre-2001 top individual tax rates of 39.6% and 36% for families making more than $250,000 ($200,000 for singles)
making permanent the 10%, 15%, 25% and 28% individual tax rates, and
restoring the personal exemption phaseout and itemized deduction limitation phaseouts at an increased threshold of $250,000 for joint filers ($200,000 for singles).

2. Higher FUTA wage base. Employers would have to contribute more into the federal unemployment tax system – especially those located in states that still have a $7,000 wage base.

3. Changes in healthcare financing. Although you probably won’t see a universal healthcare push, employers that don’t offer or make a “meaningful contribution” to the cost of employee health care will probably have to contribute a percentage of payroll toward the costs of a national plan. That could affect employee payroll deductions.

4. Increased payroll taxes. Maybe you’ve been hearing reports of additional Social Security taxes, but they likely wouldn’t take effect for years and they’d be phased in over a long period. Any such tax would be at a rate of between 2% and 4% (split between employer and employee). It would apply to income above $250,000 and:

eliminate the $102,000 ceiling for the Social Security tax, and
create a “donut hole” exemption for earnings between $102,000 and $250,000.