1. For 2008, the effective rate for Federal Unemployment will continue to be .8% of the first $7,000 in wages paid per employee.
2. The State Minimum Wage continues at $7.15 per hour until the summer of 2009. On July 24, 2007, the federal minimum wage increased to $5.85. On July 24, 2008, the federal minimum wage will increase to $6.55 and in the summer of 2009, it will increase to $7.25. NYS employers are still required to pay the state minimum of $7.15 for 2008.
3. Social Security Old Age Survivors and Disability Insurance (OASDI) and Medicare Health Insurance withholding remain at a total withholding of 7.65%. OASDI withholding is 6.2% on the first $102,000 wages paid for 2008 and medicare withholding is 1.45% on all wages paid in 2008.
4. IRS will notify employers who qualify for annual payroll tax filing for 2008 in February 2008. All other employers have been notified in October, 2007, of their payment frequency for 2008.
5. We recommend your employees complete a new W-4 each year. A new W-5 for earned income credit must be completed each year. For W-2 and W-4 purposes, the employee name should be the same as their social security card. You have 20 days to notify NYS of newly hired employees. NYS now has online reporting for new hire reporting. To utilize this feature, employers must register with NYS at https://www.nynewhire.com/NYNewHireServlet.
6. IRS continues to send out notices when 1099’s do not match their records. We recommend that you use Form W-9 to obtain numbers for all contractors and other non-employee businesses that provide you with a service. When obtaining a number from a sole proprietor, the number used should be the federal identification (EIN) number if one has been issued; or it should be the individual’s social security number of not the EIN number. In the event that no EIN number has been issued, we recommend that you obtain a copy of that individual’s social security card. When completing Form 1099, you should use the individual’s name as shown on their social security card on Line 1, and the business name on Line 2. If you do not have a number, you must withhold 28% from any payment made to that individual or business and follow backup withholding procedures as outlined in IRS PUB #1281. This withholding should be paid to IRS as 945 tax and an annual Form 945 should be filed to reconcile such payments of backup withholding. DO NOT REPORT BACKUP WITHHOLDING on FORM 941.
7. The New York State Unemployment wage base for 2007 is expected to continue at $8,500. The federal wage base remains the same at $7,000.
8. Remember to use the new Form I-9 for Employment Eligibility Verification. The new form can now be signed electronically and computer stored. To obtain copies of the new form, go to http://www.uscis.gov and download.

Quarterly Reporting Requirements
(Due the last day of January, April, July and October)

FEDERAL WITHHOLDING TAXES - FORM 941

Form 941, "Employer's Quarterly Federal Tax Return", must be filed showing the breakdown of tax liabilities for the quarter. If the total undeposited tax exceeds $2,500, a deposit must be made with an authorized depository by the 15th. If the total undeposited tax is less than $2,500, it may be paid with the form or deposited with an authorized depository.

FEDERAL UNEMPLOYMENT INSURANCE TAX – FORM 940

Deposit Federal Unemployment Insurance (FUTA Tax) computed on a quarterly basis at the net rate of 0.8% of the first $7,000 in gross wages paid per employee per calendar year in New York State. No deposit is required for any quarter in which the liability plus the accumulated liability for the previous quarters is less than $500 (except for fourth quarter). If you are enrolled in the electronic filing system, you must make your deposit using EFTPS.

NYS COMBINED WITHHOLDING & UNEMPLOYMENT - FORM NYS-45 AND NYS-45-ATT

New York State continues to use Form NYS-45, "Quarterly Combined Withholding Wage Reporting and Unemployment Insurance Report" to report quarterly liability for unemployment insurance along with reconciling NYS withholding for the quarter. Contractors no longer have to file NYS-45CC.

Payment of Withholding Taxes

Federal Payment Requirements:

IRS has notified you during the fourth quarter of 2007 of your depository status for 2008. This status is determined by your history of total withholding liability for the period 7/1/06 through 6/30/07. If that total is more than $50,000, you are required to make semi-weekly deposits. If your accumulated liability is over $2,500, you must make monthly deposits. The computation of liability remains the same:

Liability = (OASDI W/H X 2) + (Medicare W/H X 2) + Federal W/H

Payment of payroll tax liability is determined by the following:

* Some semi-weekly depositors are required to enroll in the EFTPS program if total liability exceeds $200,000 annually. REMINDER - for enrolled employers, all types of federal tax must be paid using electronic filing.

New York State Payment Requirements:

Liability is computed based on actual total withholding of New York State tax and is summarized as follows:

If at the end of a quarter, the withholding liability is under $700 and a payment has been made during the quarter, a payment of the balance should be made prior to the last day of the month following the end of the quarter --OR-- it may be paid with the quarterly report.

Annual Reporting Requirements

FORM 944 – This is the new annual form that will enable small businesses that have less than $1,000 in payroll taxes due for the entire year. Payment of tax is made with the form on an annual basis due January 31st of the year after the payroll liability is incurred.

FORM 940 – This is the ANNUAL Federal Unemployment Insurance Tax form for employers, which reconciles all payments made for the year to quarterly liabilities. The balance, if under $500, may be paid with the form.

FORM W-2 – Wage statements must be completed and distributed to employees on or before January 31, 2008. Form W-2 for 2007 has remained exactly the same as 2006. Please review the instructions before completion. USE forms W-2C and W-3C to correct previously filed W-2’s and W-3.

FORM W-3 – This is a transmittal and reconciliation schedule to accompany the Forms W-2. Form W-3, together with W-2's are to be mailed by February 29, 2008 to Social Security Administration, Data Operations Center, Wilkes-Barre, PA 18769-0001.

FORM NYS-45-ATT – For fourth quarter only, this form may be filed separately on or before February 29, 2008 showing only annual gross wages and withholdings. This form is the “NYS W-2.”

FORM 1099 – "Federal Information Return for the Calendar Year 2007". On or before February 29, 2008, Form 1099 must be filed with IRS for each individual or partnership to whom you made payment in 2007, to the extent not reported on Form W-2. You must provide the recipient with a copy of Form 1099 on or before January 31, 2008. You must file a 1099-Misc when you pay $600 or more for services and you must report all payments to attorneys over $600 regardless of type of entity in Box 14 of the 1099-Misc Form.

FORM 1096 – A separate transmittal Form 1096 must be filed with each type of Form 1099. By February 29, 2008, mail Form 1096 with original copies of Form 1099 to Internal Revenue Service Center, Austin, TX 73301.

We recommend that all forms be mailed Certified Mail Return Receipt.

This payroll and 1099 requirement letter has been prepared as a guide and does not attempt to take the place of any of the publications provided to you by the various taxing authorities.

If you do not receive the forms from the taxing agencies, you should contact those agencies and request the missing forms be mailed to you as soon as possible. Telephone numbers of the various agencies are:

Internal Revenue Service - Information 1-800-TAX-1040 (829-1040)

Internal Revenue Service - Small Business 1-800-829-4933

Internal Revenue Service - Forms and Publications 1-800-TAX-FORM (829-3676)

IRS - Information on Electronic Filing 1-800-555-4477

 

Federal Fair Labor Standards 1-315-448-0630

Social Security Administration 1-800-772-1213

NYS Dept of Tax & Fin – Taxpayer Assistance Call Center 1-800-972-1233

NYS Dept of Tax & Fin – T/P Assist Call Ctr - Forms Only 1-800-462-8100

NYS Fair Labor Standards – Binghamton 1-607-721-8009

NYS Fair Labor Standards – Syracuse 1-315-735-6198

NYS Labor Dept.- Unemployment Insurance-Information 1-888-899-8810

NYS Tax Fax Hotline - Forms Only Faxed Directly 1-800-748-3676

NYS Disability Benefits Bureau 1-800-353-3092

NYS Workmen’s Compensation Board 1-866-750-5157

NYS New Hire Notification - FAX # - 1-518-869-3318

 

Most forms and publications can be downloaded off the internet by going to the websites as shown below.

Internal Revenue Service www.irs.gov

IRS: Forms and Publications www.irs.gov/formspubs/index.html

IRS: Business Tax Information www.irs.gov/businesses/index.html

IRS: Efile www.irs.gov/efile/index.html

Federal Dept of Labor www.dol.gov

Social Security Administration www.ssa.gov

US Citizenship and Immigration Services www.uscis.gov

New York State www.tax.state.ny.us

NYS: Forms www.tax.state.ny.us/forms/

NYS Dept of State www.dos.state.ny.us

NYS Dept of Labor www.labor.state.ny.us

NYS New Hire Online www.nynewhire.com/NYNewHireServlet

NOTE: If any questions arise, do not hesitate to call our offices for assistance (607) 432-8700 or (315) 797-7781 or go to our website at www.gzscpa.com.