Gerald Whittmore, CPP Xerox Business Services Year End Preparation Gerald Whittmore, CPP Xerox Business Services

Year End Preparation Plan/Design Execute Build, Unit Testing Testing Creating Year End Task List Project Plan Plan/Design Requirements – this would include any type of documentation, forms, interfaces Execute Build, Unit Testing For any system changes – benefit, rate changes, 2014 limits and taxes Testing Validation – review testing results with team members Deploy Migration – move all changes to your production systems and any training this would be required Validation Reconciliation of W2’s Reporting Printing of W2’s, mailing to employees Filing with Federal and State

Year End Preparation Creating Year End Task List Project Plan Preparing for year-end is a process that continues throughout the year. Action items completed throughout the year. Wage and Tax Reconciliations Stock Reconciliation HSA Reconciliation Verification of employee data (name, address, work addresses) Worksheets (Annual Reconciliations, W2 filing Due Dates) Action items completed for Year-End Preparation. System enhancements to print W-2’s. Review Magnetic media specifications for Federal and States Enroll SSA’s Business Services Online / reset password www.socialsecurity.gov/employer

Year End Preparation Items that may be on your task list. Establish a year-end committee Identify all processing dates for task list Request an exception report for negative amounts in any applicable field reports on the W-2 form Verification of Employee’s Name and SSN Testing of W-2’s processing Request IRS Publication 509 for compliance calendar, provides federal legal holiday and tax calendar to help you build your tax deposits schedule for 2017

Year End Preparation Estimated tax deposits if required for Federal and States Information from Accounts Payable for any taxable and nontaxable payments made to employees Employees claiming “exempt” for withholding on their W-4 must submit new W-4 by February 15, 2017. Prepare a state and local annual reconciliation chart that indicates when the individual states and local authorities require their reconciliation returns

Year End Preparation Verify your system reflects the changes to dollar limits associated with employee deductions and compensation limits for deferred compensation arrangements Notify the mail room of the scheduled distribution date for your W-2’s

Year End Preparation Social Security Wage Base and Tax Rates Employer portion SS Tax 6.2% Employee portion SS Tax 6.2% Medicare taxes continue to be 1.45% EE Medicare taxes over $200,000 additional 0.9% Compensation Plans 401k Plan Compensation limit $265,000.00 401k Deferral $18,000.00 401k catch up contribution $6,000.00 State Unemployment Insurance Wage Base and your employer tax rates

Year End Preparation Additional Limitations to review Qualified Transportation Fringe Benefits Transit Passes 2016 $255.00 per month Parking 2016 $255.00 per month Bicycle Commuters 2016 $20.00 per month Minimum Wage per State Review any changes in Minimum wages where you have business

Year End Preparation Action Item Completed for the First Payroll of the New Year Set up and test all new tax updates including the employer wage bases and tax percentage rates for social security, Medicare, Federal unemployment, state disability, state unemployment and local taxes Set up and test your company’s benefits package Prepare electronic W-2 file for filling with the SSA

Year End Preparation AccuWage 2016 https://www.socialsecurity.gov/employer/accuwage/ What is AccuWage? AccuWage is a free software from Social Security Administration. AccuWage is for use with Electronic Filing W-2/W-2C - EFW2 or EFW2C The software allows you to check W-2 (Wage and Tax Statement) and W-2c (Corrected Wage and Tax Statement) reports for correctness before you send them to Social Security Administration.

Year End Preparation Action Items Completed After Year-End Process Schedule year-end meeting to review successes and failures Document lessons learned that have occurred during the current year-end process.

Sample Project Plan

Sample Completed Project Plan

Sample Annual Reconciliation and W2 Filing

Sample Annual Reconciliation and W2 Filing

W-2 Reporting Due Dates Employee Copies Paper Forms W-2 to SSA Tuesday, January 31, 2017 Paper Forms W-2 to SSA Electronic Forms W-2 to SSA (New Requirements) *** January 31st is the deadline to file W-2s using Business Services Online or to submit paper Form W-2. If this date falls on a Saturday, Sunday, or legal holiday, the deadline will be the next business day.

Returned W-2 Retention Maintain Electronically 4-year Period = 4/15/2021 Paper storage not required of kept electronically

Verifying Employees Social Security Numbers Registration for Online SSN verification www.socialsecurity.gov/bso/bsowelcome.htm Request Access and Activation Code Activation Code is Mailed to your Employer Login to Use the Service

Verifying Employees Social Security Numbers Verify up to 10 names and SSNs online and receive immediate results Upload batch files of up to 250,000 names and SSNs and usually receive results the next business day Specifications for record layout, go to www.ssa.gov/employer/ssnvs_handbk.htm and click on “Submission File Format”

Year-End Reporting and Taxation of Fringe Benefits Taxable Fringe Benefits When Fringe Benefits Are Considered Paid Withholding on Fringe Benefits Special Accounting Rule Supplemental Tax Rates Federal 25% for supplemental wages Federal 39.6% for supplemental wages over $1 million State Supplemental Tax Rates

Year-End Reporting and Taxation of Fringe Benefits More Fringe Benefits Moving Expenses (taxable and Non-Taxable) Personal Use of Company Cars, Aircrafts Group Term Life Insurance

Year-End Reporting and Taxation of Fringe Benefits Employer-Paid Benefits HSA – recommend a full reconciliation Health Coverage cost - recommend a full reconciliation Awards and prizes Gift cards Educational assistance Loans to employees Adoption assistance Differential military pay

W2 Reporting Cost of Health Coverage Not included in amount for Box 12 Code DD Dental or Vision Plan W2 provided by their-party sick pay provider Plan not subject to Cobra Military plans Excess reimbursements Coverage under EAP, wellness & on-site medical clinic

W2 Reporting Cost of Health Coverage

Year-End Reporting Issues Third-Party Sick Pay Workers’ Compensation benefits are not included in employee’s gross income and are not subject to any employment taxes. Overpayments and Repayments If employees make repayments for amounts received in error, do not offset the repayments against current year payments. Repayments made in the current year, but related to a prior year or years, require special tax treatment by employees and employers

Third-Party Sick Pay

Affordable Care Act 2016 Filing Requirements All applicable large employers are required to file Forms 1094-C and 1095-C for 2016 Forms 1094-C must be filed when an employer files one or more forms 1095-C Generally you must file Forms 1094-C and 1095C by February 28 if filing on paper or March 31 if filling electronically. Employee’s Form 1095-C is due to individuals by January 31, 2017

Federal Tax Levies Publication 1494 Form 668-W Employee has to file a new 668-W to get the benefit of the new standard deductions.

Form W-2 Retirement Plan Checkbox

Wage & Tax Reconciliations Develop a control matrix

Additional Gross-to-net Reconciliations Best Practice: Create an electronic spreadsheet with a separate column for each pay date. Create rows for: 1. Items to add to the total gross payroll (regular, sick, vacation, overtime, bonus, etc.) 2. Total gross payroll – this should be a self-calculating field: a total of the above items 3. Pre-tax deductions (cafeteria plan, 401k plan, etc

Additional Gross-to-net Reconciliations 4. Taxable Gross Wages (federal, social security, Medicare, state – these should be self-calculating fields: the total gross less the appropriate pre-tax deductions 5. Taxes (federal, social security, Medicare, state, local 6. Post-tax deductions 7. Net pay – this should be self-calculating (total gross less pre-tax deductions, taxes, and post-tax deductions 8. Futa and Suta wages and taxes – calculate the taxes and compare to the system generated totals

Additional Gross-to-net Reconciliations With each payroll processing, take the figures from your payroll register total and enter them into the fields for the items 1, 3, 5 and 6 above. Then, see if your spreadsheet calculates for items 2 ,4 and 7 match the calculations on your payroll register Add more columns or worksheets for QTD and YTD figures. The fields in these columns should also be self-calculating, adding the appropriate columns together. As these numbers change every time you enter the items for a new pay period into a new column, see if your spreadsheet calculations for QTD and YTD match those in the payroll journal.

Avoid Reconciliation Errors Each January or February review the prior year's Forms 941, Schedule H or 943 against your payroll records. Compare the amounts to be reported to SSA on Form W-3 to the sum of the amounts you reported to IRS on Forms 941, 943 or Schedule H for the tax year.

Avoid Reconciliation Errors When filing reports electronically, on magnetic tape the total of all employee wage ("RW") records should agree with the amount entered in the "RT" record.

W2 Reconciliations Manually balance W2’s Pay stub or taxable earnings report Copy of W2

Helpful Hints Blank Tax Forms Paycheck City/Symmetry offers all state withholding forms in one location. http://www.statew4.com/w4/blank_withholding_forms.php

Helpful Hints Using your e-mail signature Example Your paycheck stub will not match your W-2. The pay stub is a pay record of total GROSS wages paid to you though out the year. Your W-2 at the end of the year is a summary of TAXABLE wages only. Example: Box 1, 3, 5, 16 and 18 on the W-2 is your total Gross wages on your check stub minus any Sec 125 i.e. insurance deductions Box 1, 16, and 18 on the W-2 represents your total Gross wages minus your 401k deductions.

Questions and Answer

Contact Information Gerald Whittmore, CPP Vice President of Payroll Human Resources Outsourcing and Services Xerox Business Services, LLC 1303 Ridgeview Mailstop: R382-310 Lewisville, TX 75057   Office: 214-841-8484 Gerald.Whittmore@Xerox.com