Your tax professionals at Paycor continue to monitor these and other potential changes that affect your payroll. You have our assurance that our systems will be updated anytime new payroll and tax changes are introduced. Inside this newsletter is information about what Paycor is doing to help with the Federal HIRE Act, as well as other legislative changes.

- Molly Giesken CPA Care Advocate

Important Dates

April 15 - Individuals. File a 2009 income tax return (Form 1040, 1040A, or 1040EZ).

April 15 - Individuals. File Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.

April 15 - Individuals. First payment due for those paying 2010 estimated tax in installments (Use Form 1040-ES).

April 15 - Household Employers. If you paid cash wages of $1,600 or more in 2009 to a household employee, you must file Schedule H.

April 15 - Corporations. Deposit the first installment of estimated income tax for 2010.

April 15 - Partnerships. File a 2009 calendar year return (Form 1065).

April 15 - Partnerships. Electing large partnerships: File a 2009 calendar year return (Form 1065-B).

For more information contact:

CPA Care Advocate513.719.1300866.729.2671cpacare@paycor.com

Did you know? Paycor is making the implementation of the HIRE Act painless. We have a simple worksheet to notify us of eligible employees and reports that make tracking effortless.

How can CPA Care Help?

Your CPA Care Advocate can provide the following reports for assistance with tracking the Social Security Tax Exemption: Payroll Journal, Cash Requirement, GL and a new zzSOCER Exemption Credit report.

Federal HIRE Act: Eliminates Employer Share of Social Security Tax for New Hires in 2010On March 18, President Obama signed The Hiring Incentives to Restore Employment (HIRE) Act into law. The HIRE Act is a $17.5 billion dollar plan that is intended to accelerate the hiring of unemployed workers and further stimulate the uncertain economy. This bill will create a limited tax exemption for the employer’s share of the social security tax on wages paid to previously unemployed new hires and a business tax credit if those employees are employed for at least a year.

Social Security Tax ExemptionThe law provides relief from the employer share of social security tax (up to $6,621.60, 6.2 percent of $106,800, the FICA wage cap) for wages paid to qualified employees, beginning March 19, 2010.

• Employment must begin after February 3, 2010 and before January 1, 2011.

• New hires must sign an affidavit stating they have not been employed more than a total of 40 hours during the 60-day period ending on the day the individual begins work for the qualified employer.

• New hires may not be hired to replace another employee, unless the employee left employment voluntarily or was terminated for cause.

• The employee share of the social security tax still must be withheld and deposited by the employer.

• Employer may not receive the Work Opportunity Tax Credit on any wages paid to a qualified employee during the one-year period beginning when the individual was hired, unless the employer elects not to receive the social security tax relief.

Business Tax CreditAn additional provision of the bill will give employers a $1,000 credit for each qualified employee, to be taken on their 2011 income tax return.

• The employee must be hired after February 3, 2010, and must be employed for at least 52 consecutive weeks.

• Wages paid to the employee for the last 26 weeks must be at least 80 percent of the wages paid for the first 26 weeks.

For more details about the Federal HIRE Act, search HIRE Act at www.irs.gov.

Automatic IRA Plan to Use Payroll System for SavingsThe Obama administration is proposing that employers in business for at least two years with more than 10 employees be required to offer an automatic IRA to employees, with regular contributions being made through payroll deductions.

Employees would be given the option to opt in or out of the program, as well as the ability to set their contribution amount. A default contribution of 3 percent of the employees’ compensation would be implemented for any employee failing to provide a written participation election.

Employers would not have to provide a funding match and would not have a fiduciary responsibility for selecting investments.

A small tax credit would be available for employers participating in the program. The amount of the credit would be $25 per enrolled employee, up to $250 per year, and the credit would be available for two years.

The proposal suggests the program become effective January 1, 2012.

April 2010

How can CPA Care Help?

Paycor will rely on client notification of Social Security Tax Exemption eligible employees. Contact your CPA Care Advocate to request a zzSOCER Credit Worksheet if you need to assist our mutual clients with this communication.

April 2010

Paycor is Helping your Clients with HIRE Act CompliancePaycor will calculate the Social Security Tax Exemption credit effective April 1, 2010 on each eligible new hire along with the payroll.

When can my clients begin applying for the Social Security Tax Exemption credit?Paycor has already updated its global tax table with the zzSOCER tax code effective April 1, 2010. Paycor will contact clients with information on how to set up eligible employees in their payroll application.

Payrolls with April 1, 2010 check dates will be calculated with this new code and the credit will be applied immediately along with the payroll. Check dates of March 19, 2010-March 31, 2010 will be handled as adjustments and coordinated separately.

How will new hires in February and March be handled? Assuming the employee received wages with a check date on or after March 19, 2010, these credits will be applied in April as an adjustment (check date April 1, 2010 or later).

How can my clients claim a credit for 1st quarter?First quarter credits will be included in second quarter 941s. Paycor will provide reports to help track these credits. Reports include Payroll Journal, Cash Requirement, GL and a new zzSOCER Exemption Credit report.

What about the Business Tax Credit also created by the HIRE Act?Since it is related to corporate income tax, Paycor does not apply this credit.

For more information on Paycor’s HIRE Act implementation, search HIRE Act at www.paycor.com.

Employers to Pay FICA Taxes for Employee-Reported Tips on Form 4137A new compliance program to assess an employer’s share of Federal Insurance Contributions Act taxes on tips reported by employees on Form 4137 has been started by the Internal Revenue Service.

Employers are only liable for their portion of payroll taxes on tips when the employees report the tips to them on Form 4137, Social Security and Medicare Tax on Unreported Tip Income, said John Tuzynski, IRS Chief of Employment Tax Operations, Small Business/Self-Employed Division

“We have never made those employer assessments in the history of the IRS, so we’re going to be making history this year,” he said.

IRS can conduct these assessments because Form 4137 was revised about three years ago to require employees to list the employer identification number on the form so it can aggregate all forms, Tuzynski said. IRS did not have the capacity to do so before the form was modified, he said.

The service will notify employers of the amount owed and ask that the taxes be included on their next Form 941, Employer’s Quarterly Federal Tax Return, Tuzynski said, adding that employers will not be subject to interest or penalties if they are compliant.

Obama Proposes COBRA Premium Subsidy Assistance through the End of 2010President Obama’s fiscal year 2011 budget, released February 1, 2010, proposes to extend the COBRA premium subsidy eligibility period to allow individuals involuntarily terminated prior to January 1, 2011 to qualify for premium assistance. Currently the subsidy is set to expire on March 31, 2010; however action is being taken by Congress to extend the subsidy. The Senate has passed a bill extending the subsidy through December 31, 2010, and the House has passed a separate bill that extends the subsidy through April 30, 2010. Despite the series of short extensions, many lawmakers are confident the subsidy will ultimately be extended through the end of 2010.

For the latest information regarding COBRA premium subsidy legislation, visit www.paycor.com.

Employers who have paid a significant amount of severance to involuntarily terminated employees may want to estimate the FICA tax paid and consider filing a protective refund claim.

How can CPA Care Help?

Your CPA Care Adovcate can provide an Expanded Year-to-Date Report that breaks out severance pay to aid in estimating 2006 FICA tax payments.

FICA Tax on Severance Payments QuestionedAccording to a district court ruling on February 23, 2010, certain severance benefits may not be subject to FICA taxation because they do not constitute “wages.” In United States v. Quality Stores, Inc. the U.S. District Court for the Western District of Michigan reasoned that the severance payments at issue were “supplemental unemployment compensation benefits”, and therefore not subject to FICA taxation. In doing so, the court disagreed with IRS Rev. Rul. 90-72 and the reasoning of the US Court of Appeals for the Federal Circuit in CSX Corp. v. United States which held that benefits such as those in question in Quality Stores were subject to FICA taxation.

FICA Refund Claims Due April 15, 2010Due to the controversy surrouding this issue, Paycor recommends that employers who have paid a significant amount of severance to involuntarily terminated employees should estimate the FICA tax paid and consider filing a protective refund claim for 2006, the oldest calendar year for which the statute of limitations is set to expire on April 15, 2010.

However, please note that the IRS will be denying any claims filed at this time because their position stands that severance payments are subject to FICA taxation, and therefore FICA withholding is required.