Quarterly Payroll Tax Reminder

Don't forget to mail in your quarterly and annual payroll tax reports today. This includes your IRS 941 and 940 forms and Georgia state withholding and state unemployment quarterly reports. There are two state withholding reports this quarter - your quarterly report, G-7 and the annual report, G-1003. If your taxes were prepared by a CPA, then they will probably electronically file your W-3 with the IRS, but check the instructions from your CPA, as your individual CPA may handle things differently.

You also need to distribute to your employees their W-2s and to your contractors their 1099s today. The 1096 with the IRS copies of the 1099s needs to be filed by the end of February.

Employment Forms for 2008

For 2008, the Georgia employment forms remain the same. However, the IRS W-4 and the Immigration I-9 have changed. All four forms are available through the DeCarrera Law, LLC website in the forms section.

Important Numbers for 2008

The highest estate tax rate remains at 45% and the exemption amount (the tax free part) also remains at $2 million. Meanwhile, in an effort to reduce your estate, you may give $12,000 under the annual exclusion.

For retirement plans, you can defer up to $15,500 through a 401(k) and $10,500 through a SIMPLE plan. Meanwhile, the IRA contribution limits increase to $5,000. All three retirement plans have higher limits if you above 50 ($20,500 for 401(k), $13,000 for SIMPLE, and $6,000 for IRA). Remember that you must have earned income to be eligible for those plans.

Speaking of earned income, the Social Security taxable wage limit has increased to $102,000. It'll be a little later in the year, if ever, before you see those taxes disappear from your check. If you are under the age of 65 and retired (lucky you!), you can earn up to $13,560 without losing your benefits.

Meanwhile, the kiddie tax is coming after your little ones that don't actually work for their income. The threshold increases to $1,800 for children up to the age of 19 unless they are full-time students, in which case the age limit is 24 years old.

But if you have a nanny or household help, you have to withhold taxes on wages over $1,600.

Self-Employed Want Insurance Deduction

The Atlanta Business Chronicle has a story today about the health-care costs for the self-employed.

Other types of businesses can deduct health insurance costs as a normal business expense. Sole proprietors can deduct these costs when they calculate their income taxes, but not when they calculate the 15.3 percent self-employment tax, which covers Social Security and Medicare... The average self-employed individual pays $12,106 a year for family health coverage, according to the Kaiser Family Foundation. He or she could save $1,852 in payroll taxes if these costs were deductible.

Rep. Ron Kind, D-Wis introduced H.R. 3660 that would provide the tax deduction for the self-employed. It was referred to the Committee on Ways and Means.

Immigration Policies and Work-Site Enforcement

Today must be focus on illegal immigration day as both the "local newspaper" and the Savannah Morning News both have articles relating to immigration enforcement. The Savannah Morning News reports that immigration policies are hurting law enforcement investigations. The AJC says that immigration work-site enforcement has changed, resulting in nearly zero noncriminal fines to businesses employing illegal immigrants. Instead, Immigration and Customs Enforcement have been focusing on criminal cases where employers are "knowingly break the law by encouraging or participating in immigrant smuggling, abusing workers, not paying taxes or document fraud."

Taxes Leading Concern for Small Businesses

A study conducted by International Profit Associates Small Business Research Board shows that taxes are the leading concern for small businesses for the second quarter of 2007. Taxes replace health care costs for the top spot. Other top concerns for small businesses include economic conditions and energy costs.

Remember that payroll tax deposits are due on July 16; sales and occupancy taxes are due on July 20; and quarterly payroll tax reports are due July 31.

Federal and State Withholding

How much should a business withhold from an employee's paycheck?

The new employee should fill out the employment forms found on the DeCarrera Law, LLC website. The W-4 and the G-4 are the federal and state forms that you will pay particular attention to when determining how much money to withhold from the employee's paycheck. On each form, the employee will indicate whether he or she is married and the number of allowances he or she has. (Side note: If the employee is having a difficult time figuring out the number of allowances, direct the employee to the IRS Withholding Calculator.)You will use this information from the tax guides to figure out the amount of withholding.

The company should automatically withhold 6.2% of taxable wages until the employee earns $97,500 for the calendar year for Social Security taxes. The company will withhold an additional 1.45% of taxable wages for Medicare. There is no limit on the earnings of the employee for the Medicare taxes.

To determine the Federal Withholding, the company will use the W-4. If the company did not receive a W-4 from the employee, then the company will withhold as if the form said "Single, no allowances." At the end of this IRS Employer's Tax Guide are the withholding tables. The company will use the table that corresponds with the marital status and the payroll period (weekly, bi-weekly, monthly, annual, daily) the company uses. Once on the correct table, find the gross wages in the left column. Go across until you reach the column with the correct number of employee allowances. The amount in that block is the amount of withholding.

The company will use the same method for determing state withholding. The state withholding tables can be found on the Georgia Department of Revenue website.

All amounts withheld shall be submitted to the IRS on behalf of the employee.

If you have any questions, please contact me or your CPA.