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Smaller Employers Beware: IRS Doesn’t Want Paper ACA Filings Next Year (or Paper W-2 and Similar Filings)

August 03 - Posted at 1:50 PM Tagged: , , , , , ,

The IRS has proposed two significant changes to electronic filing requirements for various information returns including not just the Forms 1094-C and 1095-C filings required of many employers by the Affordable Care Act (ACA), but common payee statements like Forms W-2 and 1099. If the proposed changes are finalized – we expect that to happen by this autumn – all but the very smallest employers will be required to file these forms electronically for filing due dates falling in 2022 and beyond. Employers wishing to engage an ACA reporting and/or payroll vendor to comply with electronic filings requirements will need to begin making changes to comply.

Background: ACA filings and electronic media

Under current e-filing rules, an employer subject to the ACA’s employer mandate is not required to file its Forms 1094-C and 1095-C electronically unless the employer is submitting at least 250 of the forms to the IRS. When determining whether the employer crosses the 250-return threshold, the employer separately counts the different returns it files, such as its Forms 1094-C and 1095-C, and even payee statements like Forms W-2, 1099, etc.

For example, an employer with 150 ACA full-time employees and 50 part-time employees over the course of the calendar year may be required to file 200 Forms W-2, 150 Forms 1095-C and one Form 1094-C, but because the employer is not filing at least 250 of the same form, the employer is not required to file any of the forms electronically.

The proposed rule: Nearly every employer would be in the e-filing boat

The new IRS proposal would drop the 250-return threshold to 100 for returns due in 2022 (and to 10 for returns due in 2023 or later years), and, most significantly, would require employers to aggregate the number of different returns it files when determining whether the 250-return threshold is reached. In the example above, for returns due in 2022, the employer would aggregate the 200 Forms W-2, 150 Forms 1095-C and the one Form 1094-C, for a total of 351 returns. Because the aggregated total of returns due from the employer is at least 250, all the returns must be filed electronically.

Lining up an ACA (and perhaps payroll) reporting vendor

Many employers that until now have filed their Forms 1094-C/1095-C, W-2, 1099, etc. on paper will be required – assuming the IRS shortly finalizes the newly proposed regulations – to submit those forms to the IRS electronically for filings due in 2022. Almost all employers will be required to e-file by 2023. For employers wishing to engage a vendor to conduct electronic filing – particularly those for whom the e-filing status quo will change next year – the search for an e-filing vendor should begin. 

Paycheck Protection Program Business Application is Out

April 01 - Posted at 11:04 AM Tagged: , , , , , , , , , , , ,
The is a time sensitive program, so you may want to consider applying ASAP.

Starting April 3, 2020- small businesses and sole proprietors can apply
Starting April 10, 2020- independent contractors and self-employed individuals can apply
 
The SBA has issued the application for the Paycheck Protection Program.  This is an SBA-administered loan and loan forgiveness program that allows business to borrow up to 2.5 times your average monthly payroll.
 
To apply, you will need to do the following:
  1. Contact your banker and confirm they can process the loan. 
  2. Fill out the application (SBA form 2483) 
  3. Gather the following documentation:
    • 2019 IRS Quarterly 940, 941 or 944 payroll tax reports.
    • 2019 Summary payroll report by person. 
      • Payroll report must show the following for the time period above:
        1. Gross wages for each employee, including the officer(s) if paid W-2 wages.
        2. Family medical leave pay for each employee.
        3. State and Local taxes assessed on the employee’s compensation for each employee.
    • 2019 W-3 and W-2’s filed. 
    • 1099s for 2019 for independent contractors that would otherwise be an employee of your business.
      • Do NOT include 1099s for services.
    • Documentation showing total of all health insurance premiums paid by the Company Owner under a group health plan.
      • Include all employees and the company owners.
    • Document the sum of all retirement plan funding that was paid by the Company Owner (do not include funding that came from the employee’s out of their paycheck deferrals).
      • Include all employees, including company owners

4. Available is also an excel sheet to help organize and calculate the loan amount. Please let us know if you need a copy of this.

 

Overview of the Program

 
Q: How large can my loan be?
Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee.
 
Q: How much of my loan will be forgiven?
You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. You will also owe money if you do not maintain your staff and payroll.
  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020
 
Q: How can I request loan forgiveness?
You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.
 
Q: What can I use these loans for?
You should use the proceeds from these loans on your:
  • Payroll costs, including benefits
  • Interest on mortgage obligations, incurred before February 15, 2020
  • Rent, under lease agreements in force before February 15, 2020
  • Utilities, for which service began before February 15, 2020

Beware of Form W-2 Phishing Scheme, Authorities Warn

January 23 - Posted at 8:39 PM Tagged: , , , , , , , , ,

As tax season begins, the IRS is urging employers to educate their HR and payroll staff about a Form W-2 phishing scam that victimized hundreds of organizations and thousands of employees last year.

“The Form W-2 scam has emerged as one of the most dangerous phishing e-mails in the tax community,” the IRS said in a January 2018 alert. During the last two tax seasons, “cybercriminals tricked payroll personnel or people with access to payroll information into disclosing sensitive information for entire workforces,” the alert noted.

Reports about this scam jumped to approximately 900 in 2017, compared to slightly over 100 in 2016, the IRS said. As a result, hundreds of thousands of employees had their identities compromised.

The IRS described the scam as follows:

  • Cybercriminals posing as executives send e-mails to payroll personnel requesting copies of Forms W-2 for all employees, using a technique known as business e-mail compromise (BEC) or business e-mail spoofing (BES).
  • The Form W-2 contains the employee’s name, address, Social Security number, income and withholdings. Criminals use that information to file fraudulent tax returns, or they post it for sale on the dark net.
  • The initial e-mail may be a friendly, “hi, are you working today?” exchange before the fraudster asks for all Form W-2 information.

The IRS gave these examples of what appear to be e-mails from top executives at the organization:

  • Kindly reply with all W-2s of our company staff for a quick review. I need them in PDF file type, and you can send it as an attachment.
  • Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary)? Kindly prepare the lists for me asap.

The scam affected all types of employers last year, from small and large businesses to public schools and universities, hospitals, tribal governments and charities, the IRS said.
(more…)

New Scam Targeting HR & Payroll

April 05 - Posted at 3:26 PM Tagged: , , , , , , , ,

A number of employers have recently fallen victim to a phishing scam that tricks them into disclosing highly sensitive employee information to unknown third parties. Make sure to warn your Human Resources and Payroll Departments to be on the alert so that your company doesn’t get added to the ranks of those swindled.


The Latest Scam

In the wake of tax season, multiple businesses have reported receiving spoofing emails, usually sent to Payroll and Human Resources departments / personnel. The emails appear to be requests from in-house high-level company executives, including in some instances the CEO, requesting that employee W-2 tax forms be transmitted to them for various administrative purposes. In reality, these emails are phishing expeditions sent by outside data thieves, who use cloned company email addresses with authentic-looking company logos, colors, and signatures.


If the recipients are deceived into thinking the emails are legitimate company correspondence, they will comply with the request and end up delivering W-2 forms to the scam artists. These forms contain a treasure trove of employee personal data, including Social Security numbers and other personally identifiable information. The successful hackers often use the data obtained from this phishing scam to file fraudulent tax returns on behalf of company employees.


You May Have Been Hacked And Don’t Even Know It

The IRS has reported a 400% increase in phishing and computer malware incidents this tax-filing season, and many companies that have been compromised still don’t realize it. In the coming weeks, as your employees attempt to file tax returns, you may learn that they are unable to file because someone else has already submitted a tax return on their behalf. The source of this data breach may be your company.


What You Should Do

You should immediately warn your employees about the risks associated with this new scam. You should specifically train your Payroll, Human Resources, and any other group of employees with access to personal identifiable information to be on the lookout for these phishing attempts or other red flags, such as requests for information not typically requested, or requests from individuals with whom the employees do not typically directly communicate. You should also take active security steps to ensure that personal data is only transmitted using secure methods.


If you believe your company is a victim of this scam, you may have a legal obligation to follow applicable data breach notification requirements. Besides determining your legal responsibilities, which vary from state to state, you should consider encouraging your employees to monitor their credit reports and take all of the usual measures to prevent identity theft. You should also suggest they file their tax returns as soon as possible in an effort to avoid the filing of fraudulent tax returns on their behalf.

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