Recently, many Michigan employers received a letter like this one (http://www.michigan.gov/documents/uia/ArwoodLetter2012TaxRates_373171_7.pdf) explaining that the computed unemployment rates for Michigan were delayed by some new legislation and would be out soon.  One of the other things in the letter states that “Taxable wage base will now be shown as $9,500.00″.  In 2011 and for a few years before, the wage base was $9,000 so now you’l be paying unemployment tax on an additional $500 in wages per employee that is paid $9,500.00 in 2012.  That extra tax will increase your unemployment tax bill by 5.555%.

That’s unfortunate but as you can see in the list here (http://www.americanpayroll.org/members/stateui/state-ui-2/), Michigan is still on the lower side of the states for taxable wage base.  In fact, the average state or territory would have a taxable wage base of $16,165.00 up $580 from 2010.  According to the state, we’ll keep the higher taxable wage base until we’ve built up a surplus in the unemployment fund.

Friday, November 11 is Veteran’s Day.  One day per year isn’t enough but that’s not the point of this post.  Veteran’s Day also means that the Federal Reserve Bank is closed for the national holiday and so no ACH transactions or wires can be sent or received.  This means no direct deposit on Friday!  Make sure you send it to be effective on Thursday 11/10/11 or communicate with your employees that they won’t get their money until Monday.  I’d lean towards the first arrangement.

Over the years I’ve had the pleasure of speaking to hundreds of trucking companies.  One of the first questions I ask them is “Do you  pay per diem?”  The replies I get on how they pay per diem are all over the board.  Usually they fall into three catagories, Per diem paid by day, by miles , and by percentage of pay. Two of these three can get you in trouble with the IRS! 

The IRS regulations on per diem clearly state that you may pay up to $59 per day for DOT hours of service regulated employees that travel in multiple meals and incidentals (M & I) markets.  They also say that if you pay perdiem another way, it cannot exceed that $59/day number.  Well let’s look at an example.  If a driver is paid nine cents per mile as per diem and the rest as wage, if he runs over 655 miles in any day, you are outside the IRS regulation and exposed to extra government intervention.  A driver who is paid perdiem as a percentage of his wage could have the same issue.  We all know the government needs money and this gives them an opportunity to get it from you!

The other problem with paying per diem as a percentage or per mile is when you do not run 655 miles that day, you are losing out on some of the financial benefit of paying per diem!  The reason you pay per diem in the first place is to save money on your worker’s compensation insurance so why not make the most of it?

If your driver in the above example only drive 400 miles that day due to stops or weather.  At nine cents per mile, the driver gets $36.00 in per diem that day.  You could have avoided paying worker’s compensation insurance on another $23.00 saving you a couple more dollars.  Sure two dollars won’t make a big difference but when you multiply it times the number of drivers times the a few days per week times 52 weeks it can be significant!  100 drivers that are paid $50 per week less in per diem at a 9% worker’s compensation rate = $23,400 in lost profit for your company. 

We want to help you stay in compliance with IRS regulations and maximize your profitability.  To help achieve this, we’ll provide a no-cost assessment of your per diem practices and we’ll show you where you are out of compliance and how much more profit you could be making by paying per diem properly.  Email me or call us at (616) 608-1800 to set up your free assessment.

Mike

On July 1, 2011, the FUTA Tax rate is scheduled to decrease from 6.2% of the first $7000 in wages in a calendar year to 6.0%.  If your state is allowed the full SUTA Credit (Michigan, Indiana, and South Carolina were not in 2010 and there are as many as 22 state that may not for 2011) your effective FUTA rate is cut to 0.6% from 0.8%. 

What does all this mean?  First, the effect in 2011 will be small.  Most employers have paid over $7000.00 in wages to any full time employee that has been employed with them for all of 2011.  The employers have already paid the FUTA tax in full before the rate decreases.  For any new hires, especially those hired after July 1, the employer will save as much as $14.00 per employee. 

For 2012 and beyond, employers are scheduled to save $14.00 per employee that is paid $7000 or more in any calendar year.  This, however, requires President Obama and the Congress to not change their mind.  There have been rumblings about this but I haven’t seen anything come to a vote and time is running short. 

The real fear for employers is that if the government chooses to look at it, they may raise the wage limit instead of the rate.  If they raise the limit from the current $7000 to $10,000 it will cost employers more than the rate decrease saves them.

We’ll keep out eyes on it and report anything that comes from it.

Mike

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Fleet Owner Magazine Online has an articlehttp://fleetowner.com/management/news/workman-comp-costing-fleets-0307/?cid=nl_flo_dn&YM_RID= that suggests that fleet worker’s comp rates will be rising due to cost and economic factors.  Is your company doing everything it can to lower your premiums?  We can help.  Call us at (866) 296-5911 for a free review of your payroll practices.

Here’s some free tax advice for your truck drivers.  If the driver is not paid $59.00 per day in per diem for each day over the road, they can deduct it from their taxes on IRS Form 2106.  Also, if they are paid per diem, but it does not total $59.00 per day on the road, the driver can deduct the difference.  The deduction is subject to a 2% floor so only the amount greater than 2% of the taxpayer’s adjusted gross income is deductable but every bit helps.  See your tax professional for details or email me at mritzema@truckingpayroll.com and we’ll walk you through it.

It’s W-2 time and this year we are offering to print W-2′s and W-3′s for companies that do their payroll in house or pay too much for their payroll provider to generate them.  If you have the data in an exportable format (excel, CSV, etc…) we’ll print six copies of your W-2′s and your W-3 for $5.00 per employee.  There is a $40.00 minimum per order.

If you are already a client of ours, your W-2 fee was included in your regular rate so there will not be an additional charge.

Call us at (866) 296-7911 for more details.

Well, we finally have an idea on how to set up tax rates for payroll for next year. The House and Senate have passed what is essentially the compromise that the President and Republican leaders agreed on last week.  It was decent of them to give you two whole weeks to change your FICA calculations and tax rates.  We’ll get it done though.

Make sure you adjust your employee FICA only, not the employer FICA.  Call us if you have questions or need help!

The IRS has announced that Michigan, Indiana and South Carolina will be credit reduction states for 2010 FUTA Tax Returns.  To companies with employees in these states this means that you’ll owe additional FUTA Tax beyond the 0.8% of the first $7000.00 in wages paid to each employee.  In South Carlina and Indiana, it means that you’ll owe an extra 0.3% and in Michigan would owe an extra 0.6%!  For Michigan employers, that totals $42.00 per employee that earned at least $7000.00 in 2010.

Business owners in these states will want to make sure that Schedule A is attached to their IRS Form 940 in these states.  Failing to comply may cost your company penalties and interest in addition to the extra tax.  Don’t pay any more than you have to!