1. 888-736-7638 www.pensoft.com 1 Preparing for Year End 2015 and Year Beginning 2016

2. 888-736-7638 www.pensoft.com 2 Agenda IRS Update State Update SSA Update Other Regulatory Updates Best Practices

3. 888-736-7638 www.pensoft.com 3 Agenda Special types of payments Reconciling 2015 Payroll Data Balancing and reconciling Form 941 Balancing and reconciling Form 940 Form 944 Forms W-2/W-3 Paper and Electronic

4. 888-736-7638 www.pensoft.com 4 Develop Year End Checklist  Record Taxable Fringe Benefits  Record Third-party Sick Payments  Reconcile the quarterly 941 reports with the payroll summary report  Reconcile the 941’s for the year with the W-3, 940 and State reports

5. 888-736-7638 www.pensoft.com 5 IRS Update Pension plan limits Federal per diem allowance Standard mileage rate Tax Rate changes Adoption Benefits Taxation of Fringe Benefits Qualified transportation fringe benefit

6. 888-736-7638 www.pensoft.com 6 IRS –Pension Plans for 2016 Elective Deferral limit 2016:$18,000.00 Catch up contributions limit 2016:$6,000.00 Defined Contribution Plans limitation 2016:$53,000.00 Annual compensation limit 2016:$265,000.00 Example of employee reach $265,000 wages and their deferral limit

7. 888-736-7638 www.pensoft.com 7 IRS –Per Diems Mileage rates-2016 has not been announced yet 2015- is 57.5 cents per mile for business miles driven FY 2015 Per Diems for Standard CONUS Lodging-89 Meals and Incidental expenses-$65

8. 888-736-7638 www.pensoft.com 8 IRS Transportation Fringe Benefits-2016 pending Qualified transportation fringe benefits-2015 Transit passes $130 Parking $250

9. 888-736-7638 www.pensoft.com 9 IRS Earned Income Credit Earned income credit Must still notify employee of Earned Income Credit on back of Form W-2 copy B State may still require notification

10. 888-736-7638 www.pensoft.com 10 IRS Adoption Benefits-2016 pending Adoption Benefits-2015 $13,400 was $13,190 in 2014

11. 888-736-7638 www.pensoft.com 11 FSA “Use or Lose” rule for health flexible spending arrangements Permits plan participants to carry over $500 of unused balances remaining at end of plan year Also allows a grace period at the end of the plan year But cannot do both Type of FSA Medical Dependent Care

12. 888-736-7638 www.pensoft.com 12 Supplemental Tax Rates-2016 No changes expected Withholding up to $1 million up 25% Withholding on wages in excess of $1 million 39.6% Back up withholding-28%

13. 888-736-7638 www.pensoft.com 13 Taxable Fringe Benefits Taxation of fringe benefits at year end including: Awards and prizes Moving expenses Personal use of company cars Gift certificates Cell phones Educational Assistance

14. 888-736-7638 www.pensoft.com 14 Special Payment Types Life Insurance Over $50,000.00 http://www.irs.gov/pub/irs-pdf/p15b.pdf Third Party Sick Pay http://www.irs.gov/publications/p15a/index.html

15. 888-736-7638 www.pensoft.com 15 Record Taxable Fringe Benefits Determine taxability Examples: dependent care assistance, life insurance, personal use of auto, cafeteria plan IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits..

16. 888-736-7638 www.pensoft.com 16 Life Insurance over $50,000 Cost of coverage included on employee’s W-2. IRS premium rates: cost per $1000 per month, by employee's age. IRS Publication 15-B, Employers Tax Guide to Fringe Benefits.

17. 888-736-7638 www.pensoft.com 17 Third-Party Sick Pay Payment from insurance company to employee unable to work Effect on State/Fed forms Entered in payroll record only to record employer tax liability

18. 888-736-7638 www.pensoft.com 18 Reconciling 2015 Data Summary Reconciliation Report

19. 888-736-7638 www.pensoft.com 19 Finding Discrepancies Outstanding Payroll Checks Manual checks written but not recorded in payroll; service fees Adjustment to payroll records after checks have cleared

20. 888-736-7638 www.pensoft.com 20 Identify ‘ghost’ employees Identify during year-end processing Checks and balances system and segregation of duties reduces the chances of occurrence Payroll disbursements being reviewed by upper management creates strong internal control

21. 888-736-7638 www.pensoft.com 21 Solid Reconciliation Process Before making any adjustments to payroll data, create backup Detailed discrepancy report also documents error resolution process Report signed by management and kept on file with year end documents

22. 888-736-7638 www.pensoft.com 22 Reporting for Health Care Act Affordable Care Act required all employers to report the cost of of coverage under employer-sponsored group health plan-Box 12 code DD Requirement optional for small employers at least for 2015 (filed less than 205 W=2s in 2014 This reporting is for informational purposes only Show employees the value of their health care benefits so they can be more informed consumers The amount reported does not affect tax liability-still not taxable wages

23. 888-736-7638 www.pensoft.com 23 SSA/IRS Reconciling 941 with W-3/W-2s Federal income tax withheld Social security wages Social security tips Medicare wages

24. 888-736-7638 www.pensoft.com 24 Form 941 for 2016 Draft Form for 2016 No later than 3-1-16 No changes pending

25. 888-736-7638 www.pensoft.com 25 Schedule B for Use in 2016 Current form issued 1/2014 No form currently in draft for 2016

26. 888-736-7638 www.pensoft.com 26 Form 944 for Use in 2015 IRS released Form 944 for 2015 Small employers or small payrolls within a larger company Only if IRS notifies you to do so IRS has created a page on IRS.gov for information about the form https://www.irs.gov/pub/irs-pdf/f944.pd

27. 888-736-7638 www.pensoft.com 27 Form 940 Use in 2015 Final version is pending No expected changes for this year

28. 888-736-7638 www.pensoft.com 28 FUTA Credit Reduction for 2015 Pending FUTA is employer-paid, covers some state UI administrative costs There were 7 states and one territory for 2014 Many states working on getting off the list this year Final list due out by November 10 th

29. 888-736-7638 www.pensoft.com 29 Forms W-2/W-3 Paper and Electronic

30. 888-736-7638 www.pensoft.com 30 Common Mistakes Preparing W-2/W-3 Incorrect: EIN, employee name & SSN Verify the employer and employee information in boxes b - f Understand where numbers in each box originated

31. 888-736-7638 www.pensoft.com 31 a.Employee’s Social Security Number b.Employer Identification Number c.Employer’s Name, Address and Zip Code d.Control number e.Employee’s First Name, Init, Last Name, Suffix f.Employee’s Address and Zip code W-2 Box-by-Box Detail

32. 888-736-7638 www.pensoft.com 32 1.Wages, tips and other compensation 2.Federal Income Tax withheld 3.Social Security Wages 4.Social Security Tax withheld 5.Medicare Wages and Tips 6.Medicare Tax withheld Box-by-Box Detail

33. 888-736-7638 www.pensoft.com 33 7.Social Security Tips 8.Allocated Tips 9.Blank in 2015 10.Dependent Care Benefits 11.Nonqualified Plans 12.See instructions for Box 12 Box-by-Box Detail

34. 888-736-7638 www.pensoft.com 34 13.Statutory employee, Retirement plan, Third- party sick pay 14.Other 15.State & Employer’s State ID 16.State Wages, Tips 17.State Income Tax Box-by-Box Detail

35. 888-736-7638 www.pensoft.com 35 18.Local Wages, Tips 19.Local Income Tax 20.Locality Name Box-by-Box Detail

36. 888-736-7638 www.pensoft.com 36 W-2 Copy A and W-3 due to SSA by February 29, 2015; e-filing due by February 29, 2016 W-2s to each employee by February 1, 2016 Paper Forms W-2/W-3

37. 888-736-7638 www.pensoft.com 37 If prior to processing Then correct the original If prior to disbursement to the employee Then correct the original If after given to employee but not yet submitted to SSA Then replace the original and correct the “employer submission version” Correcting the Form W-2

38. 888-736-7638 www.pensoft.com 38 Procedures providing duplicate Form W-2 to employee Create Form Duplicate Form W-2 Fee Does your company have a request for duplicate form W-2 to give to employees to fill out? Duplicate Form W-2

39. 888-736-7638 www.pensoft.com Paper Form W-3 39

40. 888-736-7638 www.pensoft.com 40 Address For Private Delivery Service (FedEx, UPS) Social Security Administration Data Operations Center ATTN: W-2 Process 1150 E. Mountain Dr. Wilkes-Barre, PA 18702-7997 Paper Form Submission

41. 888-736-7638 www.pensoft.com 41 To employee: February 1, 2016 Paper Filers to SSA: February 29, 2016 Electronic Filers to SSA: March 31, 2016 If employment ends before December 31, 2015 and employee asked for Form W-2 they must receive the completed copies within 30 days of the request or within 30 days of final wage payment, whichever is later Review of Filling Deadlines for 2015

42. 888-736-7638 www.pensoft.com 42 Information can be sent in an electronic file format. Required if more than 250 employees Submitting W-2 electronically eliminates need for Form W-3 2015 Electronic Filing W2 (EFW2)

43. 888-736-7638 www.pensoft.com 43 Software or website specs will vary Employee must consent- electronic consent even if consenting on paper Big stumble block is disclosure requirements Statement can be furnished on the web if employee given access info 2015 Employee Electronic Forms W-2

44. 888-736-7638 www.pensoft.com 44 May get paper if they want it How long will the consent last Procedure for paper copy after giving consent How to withdraw consent and how it is confirmed Conditions on when electronic Form W-2 is not available Procedures for updating contact info for employee Employer must notify if changes in contact info for employer Disclosure Requirement

45. 888-736-7638 www.pensoft.com Paper Form W-2c 45 Revised in 2015 If the Form W-2 has been given to employee and submitted to SSA then issue Form W-2c If given to employee but the file is not correctable

46. 888-736-7638 www.pensoft.com Paper Form W-3c 46 Used to transmit Forms W-2c No changes from last version

47. 888-736-7638 www.pensoft.com Paper Form W-4 for 2016 47 No expected changes to add new year 2016 and applicable calculations

48. 888-736-7638 www.pensoft.com 941X Form Series 48 Use for errors discovered after Dec. 31, 2009 Is a stand alone form Has series to match 941 series Next update is schedule for April 2016-No draft as of yet

49. 888-736-7638 www.pensoft.com Third Party Sick Pay Form 8922 49 Replaces the Form W-2 Recap or Dummy w-2 done in previous years Send to IRS not SSA For more information, see Sick Pay Reporting in Pub. 15-A

50. 888-736-7638 www.pensoft.com 50 Affordable Care Act reporting forms 1094 and 1095 State Updates Check for changes state wage hour laws Check for all new SUI rates and wage bases. Check for EFT Changes Check for minimum wage increases Withholding Tables and Calculations New in 2016

51. 888-736-7638 www.pensoft.com 51 OASDI Taxable wage base for 2016- $185,000 Social Security

52. 888-736-7638 www.pensoft.com 52 Additional Medicare Tax began in 2013 appear to be no changes for 2016 Rate is 0.9% Requires employer to withhold additional amount on wages in excess of $200,000 in calendar year No employer matching All wages currently subject to Medicare subject to this additional tax Medicare

53. 888-736-7638 www.pensoft.com 53 Best time to take a good look around Taxation practices Wage and hour laws Independent contractors Watch out for state as well as federal Self audit is better than the alternative Best Practices

54. 888-736-7638 www.pensoft.com 54 The Social Security Number Verification Service (SSNVS) is one of the services offered by Social Security’s Business Services Online (BSO). Verify up 10 names and SSNs Can Key multiple screens Cannot be used to verify for I-9 No match codes Deceased person No match letter to employee Social Security Number Verification Service (SSNVS)

55. 888-736-7638 www.pensoft.com 55 Setup Calendars Before the first payroll… After the first payroll run… Order forms and pubs Setup Files and spreadsheets Updates New Year 2016

56. 888-736-7638 www.pensoft.com 56 Links and Websites Electronic W-2 to employees :https://www.law.cornell.edu/cfr/text/26/31.6051-1 Filling electronically: https://www.ssa.gov/employer/ Info for verifying social security numbers on line: https://www.ssa.gov/employer/verifySSN.htm Social Security Administration Business Services https://www.ssa.gov/bso/bsowelcome.htm/

57. 888-736-7638 www.pensoft.com 57 Contact Melinee’ D. Cody, CPP Email: mcody@pensoft.com Phone: 757-873-1199

58. 888-736-7638 www.pensoft.com 58 Thank You!