2020 Year End Newsletter
The end of 2020 is fast approaching. This time of the year is busy and can be stressful for everyone. We hope this year-end guide will be a useful tool in preparing you for the remainder of the 2020 year and overall readiness for the 2020 Forms W-2 filing season.
Thank you for your cooperation. If you have any questions, please contact us. We are always here to assist you.
IRS Q & A www.irs.gov/Affordable-Care-Act
Treasury Dept. ACA Fact Sheet www.treasury.gov/press-center/press-releases/Pages/jl2290.aspx
U.S. Small Business Assoc. Webinars www.sba.gov/healthcare
- Colorado’s hourly minimum wage would rise to $12.32 from $12 on Jan. 1 under a proposal issued Sept. 14 by the state Department of Labor and Employment.
- The tipped-worker hourly minimum wage would rise to $9.30 from $8.98, based on a $3.02 tip credit.
The Consolidated Appropriations Act of 2016 includes provisions requiring the accelerated Form W-2 and Form 1099 filing due dates. Due to increased incidents of tax fraud and identity theft, the IRS has moved forward with a provision to require employers to report Form W-2 and Form 1099 data to the Social Security Administration and IRS by January 31st.
With this deadline, it is essential for businesses to be prepared as soon as possible in the months leading up to the due date. This means organizations will have to participate in advanced planning to ensure all documentation is submitted accurately and on time. We encourage human resources and payroll teams to begin planning now and submit changes and year-end adjustments early. Please pay close attention to timelines and important cut-off dates in this year-end guide as well as correspondence via email from your Autopaychecks Team throughout the remainder of 2020.
Payrolls must be submitted at least three banking days in advance of the check date to allow sufficient time for payroll funding and employee direct deposits to be received and posted by the check date. Due to strict banking rules, we will not make exceptions to the three-banking day rule. If you need to process with fewer than three banking days prior to your check date, you will be required to wire funds and you must notify Autopaychecks of your need to wire funds PRIOR to processing payroll. Any payrolls with $100,000 or more in federal tax liability or total ACH debit of $250,000 or more will require a wire.
The iSolved system offers the ability to deliver electronic year-end tax forms to your employees through the Employee Self Service portal. If you would like to have your tax forms delivered to your employees electronically, please contact our office.
If your payroll is sent via UPS/FedEx, it is impossible for us to guarantee timely arrival of your payroll, especially during the busy holiday season and inclement weather conditions. If you prefer to pick up your payroll or switch to paperless payroll, please let your payroll specialist know.
Bonuses and Extra Payrolls – If you are paying bonuses or have any extra payrolls that need to be included on your 2020 Forms W-2, you must let us know. Things to keep in mind when running bonus payrolls:
- Blocking direct deposit
- Blocking deductions
- Supplemental Tax Rates
- Gross up or Net checks
- Separate payroll runs
Payroll Adjustments – Make sure payroll adjustments (e.g., voided checks, third party sick, etc) are completed before your last payroll with a 2020 check date is processed. If any manual checks are written after your final payroll of 2020 has been processed, an additional payroll will have to be processed to commit this data for 2020 tax reporting. Applicable processing fees will apply.
Fringe Benefit Adjustments – Identify and schedule special payroll adjustments such as group-term life, auto allowances and other fringe benefits. Because some of these fringe benefits require tax withholdings, they must be entered at the same time as a normal payroll run before the end of the year. Please contact our team as soon as possible with any adjustments that need to be included in 2020 tax year reporting.
Third-Party Sick Pay – Determine if you have third-party sick pay information that must be reported for 2020.
2% Shareholder Health Insurance – Health insurance premiums paid by an S-Corporation for employees who are more than 2% shareholders must be treated as compensation and must be included on the employee Form W-2. Premiums are taxable and subject to withholding taxes but are excluded from the definition of wages for Social Security and Medicare tax purposes. Please contact us as soon as possible with the total premium amount(s) paid for health insurance for more than 2% shareholders of an S-Corporation for the 2020 tax year. This must be processed with a payroll dated in 2020 to be included on the 2020 Forms W-2.
Employer Portion of Health Insurance – The Affordable Care Act provides that employers must report the cost of the employer-provided health care coverage on Form W-2. Reporting is mandatory for employers who filed 250 or more Forms W-2 in the preceding reporting year. The amount reported should include both the portion paid by the employer and the portion paid by the employee. Please contact us to discuss the setup of your health insurance deductions and the entry of the employer portion of the health insurance premium. It is your responsibility to preview your Forms W-2 and verify the amounts in Box 12 Code DD prior to processing your final payroll of 2020. Please contact us for changes that you may need. Amended Forms W-2 and Quarterly returns will be required if you fail to report changes prior to December 30, 2020.
Employer’s Responsibilities for Forms W-4 – IRS regulations say that employers should remind their employees by December 1st to submit revised Forms W-4 if their marital status should their Form W-4 need to be updated. When an employee provides their employer with a Form W-4 claiming an exemption from withholding, the form is valid for the remainder of that year and until February 15th of the next year. If the employee does not provide a new Form W-4 before it expires on February 15, the employer will withhold tax as if he or she is single with no other adjustments. However, if you have an earlier Form W-4 (not claiming exempt status) for this employee that is valid, withhold as you did before.
Year-End Adjustment Cut-off Date – Payroll adjustments must be processed by 12:00 p.m. MST on December 31, 2020. Any adjustments made after December 31, 2020 will result in Forms W-2C for employees and amended Quarterly return fees will apply. Adjustments requiring Forms W-2C and Amended Quarterly returns processed after December 31, 2020 will begin to be processed by Autopaychecks in February 2021. We encourage you to process adjustments well in advance of December 31, 2020.
Reminder: Process year-end adjustments early. Do not wait until January. There will be additional fees for adjustments processed after December 31, 2020.
Important: Payrolls processed in 2020 which have a pay date in 2021 will show as wages on the 2021 Form W-2. These wages will not be part of your 2020 YTD totals. Please check your schedule and verify all dates PRIOR to submitting payroll. If you need to adjust your check date back to 2020 you MUST notify us in advance and prior to processing the payroll.
For clients using our Direct Deposit, Pay Card, or Autopaychecks Positive Pay service, the earliest day that funds (including Christmas bonuses) can be available to your employees is the third business day (48 Banking Hours) after your payroll is submitted.
Friday, December 25th, 2020 and Friday, January 1st, 2021 are Federal Bank holidays and cannot be check dates. If your policy is to pay the prior day when a check date is on a holiday, then you will need to process a day earlier. Meaning, if you normally process payroll on Tuesday with a Friday check date you will need to process payroll on Monday for a Thursday check date. Payroll must be submitted to us no later than the preceding Monday by 11:00 a.m. MST. Please review your current schedule and call our office immediately if any changes need to be made.
If you need to change your payroll check dates, please let us know BEFORE you process your payroll.
In November, the IRS will mail a deposit frequency notice to employers stating what their deposit frequency will be for the upcoming year. If you receive a notice, it is your responsibility and it is important that you send us a copy for our records. We do not automatically receive this information from the IRS. Please fax to 970-257-1872 or email to email@example.com.
State Deposit Frequency Notice or State Notification of EFT Requirements. If you receive a notice, it is your responsibility to send us a copy for our records. We do not automatically receive this information from the State. Please fax to 970-257-1872 or email to firstname.lastname@example.org.
You will receive notification of your state unemployment insurance (SUI) tax rate for the upcoming year. We need this rate to calculate your state unemployment insurance tax and SUI expense correctly. If you receive a notice, it is your responsibility to send us a copy for our records. If we do not receive a copy of your rate change notice by December 11th, you will be charged a $25 fee per state for us to request the information from your State Department of Labor.
It is important that you provide us with updated information. Autopaychecks HCM is not responsible for incorrect tax filing frequency and/or incorrect rates. You may be subject to tax filing penalties and interest.
Autopaychecks HCM will electronically file your employer Federal Forms W-2 information with the Social Security Administration and State and Local Governments, regardless of the number of Forms W-2. Autopaychecks HCM will also electronically file the required transmittal form. We archive your 2020 payroll information, including employee Form W-2 copies, for you to access on the iSolved platform. If you would like an archive CD for $85, please call our office. You can access your Year End Reports in iSolved by logging in and navigating to Reporting à Year End Reports on Demand.
Note: The Social Security Administration accepts electronic media information from more than one source. Mailed out by 1/20/2021
The Social Security Administration (SSA) has cautioned payroll service providers to be more mindful of duplicate Form W-2 reporting. SSA research found this occasionally occurs when clients transfer from one payroll service provider to another mid-year. To assist in this situation, Autopaychecks HCM would like to remind our clients that we will be preparing and filing your Form W-2 reporting for the tax year 2020, unless we receive a request stating otherwise. The Social Security Administration and State agencies do not allow punctuation in employee names (e.g. periods and dashes, etc.).
Important: An employee’s name should match exactly what is shown on the employee’s Social Security card (first name, middle initial, last name). It is especially important to report the exact last name of the employee. Please remove any punctuation in active and terminated employees prior to year-end.
Reminder: The IRS charges a penalty of $50, and most states charge $25 for each return of Form W-2 that has a missing or incorrect Social Security number or federal identification number. We cannot file your federal Forms W-2 electronically if Social Security numbers are invalid or missing. If you are missing Social Security numbers when we process your file electronically, we will bill you $25 per missing address and/or Social Security number. Please review your Employee W-2 Verification report located in Reporting à Client Reports. Please have this completed by Friday, December 18th, 2020.
Forms 1099-MISC & Forms 1099-NEC
Please call our office if you would like Autopaychecks to file Forms 1099 on your behalf. You will need to submit amounts paid to subcontractors for 2020 before December 31st, 2020.
We will file Forms 1099 electronically with the IRS.
Note: Please review how you use this type of payment; we commonly process non-employee compensation (payments to independent contractors) which must be reported on Form 1099-NEC in box 1. If you need Forms 1099 for other payment types (e.g., rents, royalties), please let us know. Please do not report other types of non-taxed payments as Form 1099 amounts.
Companies which employ 50 or more full-time and full-time equivalent employees in the preceding year are defined as an Applicable Large Employer (ALE). The employer mandate requires that all ALEs offer Minimum Essential Coverage or face a penalty called the Assessable Payment.
The IRS requires Forms 1095 to be filed. Form 1095-C is filed and furnished to any employee of an Applicable Large Employers (ALE) member who is a full-time employee for one or more months of the calendar year. Form 1095-B is used to report certain information to the IRS and to taxpayers about individuals who are covered by minimum essential coverage and therefore are not liable for the individual shared responsibility payment. This form lets the IRS know that you had self-funded health care coverage during the year.
In some cases, employees’ names and/or Social Security numbers (SSNs) may not match what the IRS has in its taxpayer database. The IRS cannot tell us which individual(s) have a name or SSN that is incorrect; you are required by the IRS to ensure you have the correct information.
The IRS may impose penalties to individuals who have not provided their proper name or SSN for reporting purposes.
What we need you to do:
- Review your information in the system. This includes the latest name and date of birth information we have for your employees and their dependents.
- Make any necessary corrections to the name or date of birth.
- Add the Social Security number for each employee and dependent.
- Ensure the name and SSN match exactly what is listed on the Social Security card.
Important Deadlines for Reporting
Employers: You must approve Forms 1095 for 2020 in iSolved no later than December 18, 2020 at 5:00pm MST.
Employee Forms 1095: We will send all Forms 1095 to the primary address of your company. You will be responsible for handing out or postmarking the forms for mailing no later than January 31, 2021, for the 2020 tax year.
There are many payroll reporting requirements to consider if you change your business entity (i.e., sole proprietorship to a corporation, partnership, etc.) during the calendar year; including, but not limited to, accurate payment of your federal and state taxes and filing of your tax returns.
Our experience has shown that a change made effective at the beginning of the calendar year is best for a clean transition and has shown to be the least confusing for tax agencies.
If you intend to change your business entity in consultation with your CPA, make the change effective at the beginning of the calendar year; if that is not possible, the break at a payroll quarter will make the transition the easiest. Be sure to note that you will need to have us complete the quarterly and year-end process for the terminating company.
It is important to notify your payroll specialist of your intent to change business entity before you need to process a payroll under a new entity. We must have sufficient time to ensure that we can make the transition a smooth one and to handle the transfer of any associated services. We can handle the transition for a nominal fee and assist with the special agency requirements. Please contact your payroll specialist immediately if you intend to change your business entity at the beginning of January.
Please review your 2021 payroll processing schedule and notify us of any changes that need to be made. You will find your payroll processing schedule on the Client Landing Page under the “Next Scheduled Payroll” section. Click the “View” hyperlink under “Processing Schedule”.
Please review the information that we have and notify us of any changes that need to be made. You will find the report under Reporting à Client Reports à Tax ID & Rate Verification Report.
You will find an Employee W-2 Verification Report under Reporting à Client Reports à Employee W-2 Verification. Please confirm that all Social Security numbers and addresses are correct. It is important that we have complete and correct information in the system by December 31, 2020. Employee names must match the name on individual’s[AH1] Social Security card. We will assess $25 per missing Social Security number and/or address that is corrected after January 3rd, 2021.
Families First Coronavirus Relief Act
Employers are required to report the amount of qualified sick and family leave wages paid to employees under the Families First Coronavirus Response Act (FFCRA) on Form W-2, according to guidance from the IRS and the U.S. Treasury Department.
Colorado Required Sick Pay
The Healthy Families and Workplace Act (HFWA) was signed into Colorado law by Governor Polis requiring up to six paid sick days per year be provided to Colorado workers and takes effect on January 1, 2021 for all Colorado employers with 16 or more employees.
All Colorado employees will earn one hour of paid sick leave for every 30 hours worked, up to a total of 48 hours (or six eight-hour workdays) of paid sick leave in a year. The leave can be used for the following purposes:
- The employee has a mental or physical illness, injury or health condition; needs to obtain a medical diagnosis, care or treatment of such illness, injury or condition; or needs to obtain preventive medical care.
- The employee needs to care for a family member who has a mental or physical illness, injury or health condition; needs to obtain a medical diagnosis, care or treatment of such illness, injury or condition; or needs to obtain preventive medical care.
- The employee or family member has been the victim of domestic abuse, sexual assault or harassment and needs to be absent from work for purposes related to such crime.
- A public official has ordered the closure of the school or place of care of the employee's child or of the employee's place of business due to a public health emergency, necessitating the employee's absence from work.
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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