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APA Working to Restore Child Support Funding
By William Dunn, CPP
During the past few weeks child support lobbyists have been roaming the halls of the House and Senate office buildings drumming up support for the Child Support Protection Act of 2007 (HR 1386 and S 803). The bills aim to restore incentive funding for state child support agencies. The funding had been cut by almost two-thirds through the Deficit Reduction Act of 2005, which went into effect October 1, 2007. See the March 2007 Inside Washington to learn more.
APA has joined more than 500 organizations calling for the funding to be restored. With the year coming to a close and the cuts now in effect, it is becoming more urgent that Congress pass the Child Support Protection Act this year. You can help by writing to your congressman (or congresswoman) or senator at www.savechildsupport.org.
APA's concern over the funding cuts is that no entity can withstand losing one-third of its operating budget without laying off employees. Those layoffs will almost certainly mean employers will have a more difficult time getting answers to their questions regarding anything from interstate payments to what to do about upcoming bonus runs. The child support office of Milwaukee County, Wis., reported that it had answered 8,000 questions from employers in the first nine months of this year.
The Government Accountability Office estimates that more than $1 billion in child support will go uncollected each of the next 10 years as a direct result of the cuts. Seventy percent of all child support is collected through wage withholding.
A number of states have made plans to fully fund their child support programs. But not all states can afford the expense. New York Governor Elliot Spitzer recently wrote to Rep. Charles Rangel (D-NY), chair of the House Ways and Means Committee, saying, "Given that New York is facing a $4 billion budget deficit next year, the state and its counties are not in a position to fill this funding gap. Since this funding is typically passed to local districts where it is largely used for staffing, they will likely bear much of the burden for these cuts in the form of significant staff reductions."
Child support collection is consistently one of the highest-rated government functions in terms of efficiency and return on investment. APA is proud of its long history in supporting this important program and we are urging Congress to support it with us.
California DCSS Offers New Website for Employers
By Randy Juster
Employers play a vital role in the well-being of California's children. By reporting new hires, submitting wage withholding payments, and processing medical support orders, employers are helping more than two million California kids become healthy, productive adults.
Do you know the current federal and state requirements for submitting child support wage withholding payments? You'll find the answer to this and many more questions on the California Department of Child Support Services' (DCSS) new, employer-dedicated website.
You'll find the latest information and tips like how to combine multiple payments into a single payment, how to make electronic payments, and more.
The DCSS urges you make our website your destination for child support wage withholding processing and information. When we work together, we can improve the well-being of even more California families.
For more information contact me, Randy Juster, Outreach and Education Coordinator for the California Department of Child Support Services, at (916) 464-5188.
Ensure a Smooth
Year-End and a
Good Start on 2008
More Year-End Reminders to Employees
By Scott Mezistrano, CPP
You may remember the article in the November ePayXpress that discussed your responsibility to remind employees to review their withholding status by December 1. Interestingly, the deadline for that reminder came around before IRS issued the 2008 W-4.
As this edition of ePayXpress was posted to our website, the 2008 W-4 still had not been issued, but it should be available soon, according to the IRS. Keep watching APA's website for the 2008 Form W-4 to be posted.
If you think your employees could use a hand with all the W-4 worksheets and their talk of tax credits, deductions, and exemptions, you can point them to the W-4 Assistant on the National Payroll Week website. This online interview asks a series of simple questions to help anyone complete a Form W-4 for the coming year. It also lets you print the completed form. The sponsor of the W-4 Assistant, PaycheckCity.com, says they will update the Assistant within a few days of IRS issuing the 2008 W-4.
Here are a few more reminders not required by law, but which could come in very handy for your employees:
1. Employees should save their final paystub of 2007 to reconcile to their W-2. Any pre-tax deductions will create a difference between the year-to-date gross pay and the dollar amounts in W-2 boxes 1, 3, and 5 (and probably state and local wages as well).
2. Deductions for an employer-sponsored savings plan, such as a 401(k) retirement plan, will reduce the amount in box 1.
3. Deductions for cafeteria plans, health insurance, health flexible spending accounts (FSAs), dependent-care FSAs, or transportation expense FSAs, will reduce the amounts in boxes 1, 3, and 5.
4. Box 3 should not exceed $97,500—the 2007 social security wage base.
5. Employees should make sure the name on their paystub exactly matches what appears on their social security card. (If the paystub has the employee's middle initial and the social security card has the full middle name, that's OK.) If you can provide them a way to verify their social security number as well, that's even better. Having an exact match of name and SSN is vital for the SSA to post their W-2 wages to their earnings history so each employee can get his or her eventual retirement benefits.
6. Having the employee verify the address on their paystub is also a good idea, especially if you will be mailing the Forms W-2 to employees' homes.
7. Any employee claiming "exempt" from income tax withholding who wants to continue doing so in 2008 must complete a 2008 W-4. IRS does allow a grace period for "exempt" W-4s through February 15 of the following year. So these employees must submit their new W-4s in time for the processing of the first payroll dated on or after February 16, 2008. Otherwise, their withholding must be taken according to a marital status of "single" and zero withholding allowances.
8. Any employee who receives advance payment of the Earned Income Credit and wants to continue receiving these payments must file a 2008 Form W-5, Earned Income Credit Advance Payment Certificate, in time for the processing of the first payroll of 2008. There is no grace period for the 2007 form. You can find the 2008 Form W-5 in the Member's Only section of APA's website.
Discover Critical Links
to a Successful
Year-End
By Scott Mezistrano, CPP
If you've had trouble with the correct presentation of employee names and social security numbers (SSNs) on Forms W-2, you're not alone. According to questions raised by payroll professionals who attend APA's year-end classes, it's one of the biggest challenges for employers.
The overarching rule is that the name and SSN on a W-2 should match whatever is on the social security card. However, there are a couple of exceptions and some tricky situations. To address these, APA worked closely with the Social Security Administration to update SSA's "Critical Links" webpage.
The Critical Links page also includes information on how to use the SSA's Social Security Number Verification Service, which is available for free over the Internet to all employers.
In the meantime, here are a few helpful hints from the SSA. Mentions of "paper filers" below refer to the requirements for Copy A of Forms W-2 submitted on paper to the SSA.
* Don't use nicknames, shortened names, or any changed name on Forms W-2 unless it has also been changed with the SSA.
* If the social security card contains a middle name, you can include it (up to 15 characters) if filing electronically. Paper filers should insert only the middle initial, without a period after it.
* Do not include titles before or after the name, except in the suffix field (see below).
* Box "e", for the employee's name, includes a sub-box for a suffix, such as Jr., Sr., III., etc. Yes, suffixes are allowed on paper W-2s filed with SSA. Employers that submit their W-2s electronically have been allowed to enter the suffix in the optional suffix field in the MMREF record layout and may continue to do so in the new EFW2 format. Including the suffix on the W-2s given to employees can be helpful when the only difference in the names of two employees is the suffix.
* If the employee still does not have an SSN at the time W-2s are being prepared, paper filers should insert "applied for" in W-2 box "d" and electronic filers should insert zeroes in the EFW2 record layout. Inserting zeroes on the W-2 given to the employee is fine.
* If an employer finds out that the SSN provided by the employee is incorrect (such as by using SSA's SSN Verification Service), he or she should ask the employee for corrected information and then document this request. However, if no corrected information is provided by the time W-2s must be filed, the employer should report the SSN as given to them by the employee.
Getting the name and number correct helps avoid inquiries from SSA and IRS, and it is essential in order for earnings to be posted to the SSA database. That database determines an employee's eligibility and benefit amount for SSA's retirement, disability, and survivors programs.
Tax Credit Allows for Up to $1,000 More
in Tax Savings
Encourage employees to take advantage by contributing to retirement savings
By Scott Mezistrano, CPP
Here's a timely tax tip that you may want to pass on to your employees during the enrollment period for your company's retirement plan. By participating in the plan, not only will they reduce their taxable income, but they may also be able to take a credit against their tax liability on their personal income tax return.
This tax credit was set to expire at the end of 2006, but the Pension Protection Act of 2006 made it permanent.
Depending on the individual's filing status and the adjusted gross income on the personal income tax return, a credit as high as 50% of the first $2,000 put into a savings vehicle may be taken (see table below). That's a direct savings of as much as $1,000 off of someone's tax bill. And that's in addition to the fact that the money put into savings usually reduces their income subject to taxes.
This may be of interest to your higher-paid employees, even though they are not eligible for the Saver's Credit. Under anti-discrimination rules that govern many employer plans, more plan participation by lower-paid employees may allow greater participation by the higher-paid employees.
The Finer Points
For the purposes of this credit, the savings plan can be any of the following: 401(k), including designated Roth contributions; 403(b), including designated Roth contributions; 457(b); SIMPLE 401(k) or SIMPLE IRA; salary reduction SEP; traditional or Roth IRA; voluntary employee after-tax contributions to a tax-qualified retirement plan or 403(b); or 501(c)(18)(D).
The credit is taken by filing Form 8880 with the personal income tax return.
The credit is not available to:
* A full-time student (as defined in the instructions for Form 8880),
* Someone who can be claimed as a dependent on someone else's tax return, or
* Someone who is not at least age 18 by the end of the taxable year for which the credit is intended.
The credit is not refundable. That means that you can only take as much of the tax credit as brings your tax liability to $0. You can't get any excess refunded to you, as you can with the Earned Income Credit, for example.
Reduce 2008 Withholding to Take Advantage of This!
Depending on how much your employees will save, they may want to adjust their Forms W-4 for 2008, instead of waiting to get the money back after filing their income tax return in 2009. Direct them to the IRS Withholding Calculator for more assistance.
W-2 Replacements and Corrections
An APA best practice gets coverage in SSA/IRS Reporter
By Scott Mezistrano, CPP
As you read this, you probably have not given your employees their Forms W-2 (due to employees by January 31). But it's not too early to strategize how you'll handle their requests for replacements or corrections.
APA offers U.S. employers lots of tips for managing this process in the winter 2007 edition of the SSA/IRS Reporter. For example, we suggest devising a form for employees to complete that will allow them to request a replacement or correction. This will help you decrease your time on the phone taking down details. Here's another great tip: did you know you can charge a fee for W-2 replacements?
The article also reviews:
* The basics of completing a W-2c, Corrected Wage and Tax Statement
* Whether or not you may correct amounts of taxes that have already been deposited
* The follow-up steps that must be considered after filing a W-2c
* Online preparation and filing resources to make the process less taxing
See our article, "W-2 Replacements and Corrections: Best Practices," on page 4.
Obviously, the IRS and SSA think we have the right approach, since they shared it with the seven million employers who get the Reporter in the mail with their Form 941 and with the thousands of tax professionals who view it online.
APA articles have been a regular feature in the SSA/IRS Reporter since the fall 2003 edition. APA's contributor status helps fulfill the association's mission to educate the payroll community, in addition to providing great exposure for the organization before all employers and thousands of tax professionals. It is also evidence of the ongoing partnership among APA, IRS, and SSA.
Read current and back issues of the Reporter on the IRS website.
