Accountants, the new year is upon us, and if you’re like us at Nuage Digital, you’re likely to rush to make sure your clients are where they need to start the new year on the right foot. To make things easier for you, we have compiled a list of last-minute reminders to help you through the year-end process with your clients.
2% Health Insurance – S-Corp
As you probably know, in most situations, employee health insurance is a non-taxable fringe benefit. Nevertheless, if your client’s corporation is an S-Corporation and they own more than 2% of the company’s stock, the health insurance plan works a bit differently. The S-Corp may provide health insurance to non-owner employees as a tax-free margin benefit. However if the company provides health insurance to staff, investors or shareholders who own more than 2% of the stock in the S-Corp, the expense of their health insurance is subject to income tax.
The company must therefore include the cost of the S-Corp shareholder health insurance premium in the gross wages of those workers. If they have not yet done so, it is important that this information is recorded in their payroll account by the end of the year. That number will then be shown in box 14 ofW-2 employees. More year-end S-Corp 2% health insurance information can be found on the IRS website.
W-2/1099 Changes
Before the end of the year, it is crucial that you and your clients review the information of their employees and 1099 contractors and make any necessary changes or adjustments prior to the last payroll of the year. While most items are unlikely to change in the course of the year, something as simple as changing the employee’s address could potentially throw a wrench into things.
Some of the data you can review includes:
- Missing or inaccurate details of the employer: this includes the name and address of the client, the federal identification number and the state identification number.
- Missing or incorrect employee information: including employee name, social security number, marital status change, and email address.
- Employee pay and tax information: including wages, deductions and taxes for employees.
Collect and send up-to-date SUI prices
As you know, State Unemployment Insurance (SUI) is an employer-funded tax that offers short-term benefits to those who have lost or left their jobs for a variety of reasons. The amount of SUI paid by a company is proportional to the SUI rates eligible for it. The rate varies depending on the amount of money the employer pays to its employees and the number of employees laid off. As these rates vary from year to year, it is important to collect a new rate from your company so that it can be added to the client’s payroll account before the new year. States usually send letters notifying employees of their new rate by the end of November.
Beware of Federal Reserve Closures
Nothing is destroying a holiday like a late paycheck. If your client’s regular day of processing falls on a bank holiday, it could mean that their workers might not be paid on time. Reminding your clients to process payrolls a day or two earlier might make a difference between a smooth sail for everyone and an angry Christmas morning call. It is also important to remind your clients that their final payroll of the year should be processed well in advance. The last day of the year for the payment of payrolls is 27 December. That date will also apply to any additional payrolls, such as bonuses or holiday pay.
Conclusion:
Year-end can get quick and hectic, which is why having a number of to – do lists and checklists can be helpful. With these tips you can work with clients to make sure they’re ready to start the new year.
