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Payroll tax update

As the second calendar quarter of the year winds down, a business owner's thoughts turn to... payroll tax.

Here are three changes to keep in mind as you complete this summer's payroll reports.

  • COBRA credit. The COBRA credit, which began last year, was extended into 2010. If you provided health insurance premium assistance to eligible former employees, you can claim a credit on your payroll tax return for the portion you paid.

    What if you overlooked the credit in the first quarter? Report it on your second quarter payroll return. Alternatively, you can file Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, to correct the previous quarter.

    Be sure to keep back-up to support your claim, including documentation of premiums received from your former employees.
  • Form W-11. Did you recently hire employees who qualify for the two payroll tax breaks signed into law this year? Use this new form as support for claiming both the 6.2% payroll tax deduction and the year-end federal tax credit for workers who stay with you at least 52 weeks.

    Have your new employees sign a Form W-11; then keep them with your tax records.
  • Electronic deposits. Beginning in 2011, the IRS intends to eliminate Form 8109, the paper tax deposit coupons. In most cases you'll be required to deposit payroll taxes electronically.

    Enrolling in the electronic tax payment system is free. Consider setting up an account now to give yourself time to get used to how it works.

For details or assistance, contact our office.

For more information, contact Ross Rizzo at 212-404-5528, rrizzo@sb-cpa.com.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.

The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.

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