Be informed of the latest tax and accounting issues:
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Calendar Highlights
| By December 31 |
Schedule an appointment for year end tax planning. |
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2009 Payroll Newsletter
At the close of every year, we send a comprehensive payroll letter to all of our clients. This letter explains changes for 2010, completing 2009 payroll tax returns, making payroll tax deposits, and new hire reporting. If you have any questions about any portion of the letter, call either of our offices and someone can assist you.
PHB Payroll Newsletter
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Mileage Rates
The IRS announced the standard mileage rates for 2010. Business rates are 50 cents per mile. Mileage rates relating to medical or moving expenses are 16.5 cents per mile. Read the related IRS bulletin. See our FAQ page for a full table of the rates.
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Payroll Alerts for S Corporations
We mailed an update letter to all S Corporation clients alerting them of payroll items concerning 2-percent shareholders. A copy of the letter is available here. The letter made reference to the following documents:
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Minnesota Section 125 Law
Beginning July 1, 2009, Minnesota employers with more than 10 full-time equivalent employees who do not offer group health insurance to employees must establish a premium only Section 125 "cafeteria" plan to allow their employees to purchase individual market or employer-based health coverage with pretax dollars. The goal of the law is to make it possible for employees at affected companies to purchase their own health insurance coverage with pre-tax dollars. The law does not require employers to offer or contribute to health insurance benefits. In companies without a Section 125 plan, employees buy their own health insurance with after-tax dollars. The Section 125 plan could save an employee several thousands of dollars per year in taxes.
There are financial benefits for employers who establish a Section 125 Flexible Benefit plan. For example, employers do not pay Medicare, Social Security or unemployment insurance taxes on the amounts that employees choose to have withheld from their paychecks on a pre-tax basis. Read a Q & A document from the Minnesota Department of Commerce for an introduction to Section 125 plans.
The state has set aside $200,000 in grant money to help small employers (2 to 50 employees) cover the cost of establishing a Section 125 plan. The grant amount awarded through this program is $350 per employer. To apply for the grant, contact the Department of Employment and Economic Development at 651-259-7435.
Although in most cases the employer will save more than the cost of the Section 125 Plan, the law does allow employers to "opt out" of this requirement to establish a Section 125 plan. Click here to view the state's Opt Out Form.
The website MNHI.net has additional resources about health insurance options.
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Minimum Wage Increase
Effective July 24, 2009, the federal minimum wage changed to $7.25 an hour. This was the third of three annual 70 cent increases in the minimum wage. Until July 23, 2009, the federal minimum wage is $6.55 an hour. Please click the link below for more information.
Federal Minimum Wage Update
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MN Sales Tax Increase
Beginning July 1, 2009, the Minnesota state general sales and use tax rate increased from 6.5% to 6.875%. This increase of 3/8ths of one percent came as a result of the Clean Water, Land, and Legacy Amendment approved by voters on November 4, 2008. The appropriate sales tax rate charts will be updated by MN Revenue.
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Health Insurance Rules for COBRA Continuation Coverage
The American Recovery and Reinvestment Act of 2009 (ARRA) was signed on February 17, 2009 and provides for premium reductions and additional election opportunities for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit on the employer's Form 941. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months for those eligible for COBRA during the period beginning September 1, 2008 and ending December 31, 2009 due to an involuntary termination of employment other than gross misconduct that occurred during that period. The TAA Health Coverage Improvement Act of 2009, enacted as part of ARRA, also made changes with regard to COBRA continuation coverage. Individuals whose employment was involuntarily terminated on or after September 1, 2008 but prior to the date of enactment and who did not elect COBRA will need to be allowed a special election period - an opportunity to elect COBRA on a prospective basis.
Please reference the Federal Department of Labor website at www.dol.gov/COBRA which also has a link to the IRS website.
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Minnesota News for Contractors
Per Minnesota Revenue, effective January 1, 2009, a construction contractor who makes payments to an individual construction contractor carrying on a trade or business as a sole proprietorship must deduct and withhold 2 percent of the payment as Minnesota income tax withholding.
Per the Minnesota Department of Labor and Industry, effective January 1, 2009, individuals who work as independent contractors in the building construction industry are required to obtain an Independent Contractor Exemption Certificate (ICEC) from MN DOL.
Key details are summarized in the files below:
Minnesota 2% Tax Withholding
Independent Contractor Exemption Certificate
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