Category Archives: General

Important Deadline Changes for W-2, W-3, and 1099-MISC

The IRS (Internal Revenue Service) has changed the guidelines for the filing of W-2, W-3, and 1099-MISC forms. These changes impact companies of all sizes. It’s important for businesses to be aware of any amendments to remain compliant and to avoid costly penalties.

PATH Act Implications

The PATH (Protecting Against Tax Hikes) Act is a new bill passed in 2015. The bill alters the deadlines of three forms – W-2, W-3, and 1099-MISC – and their variations. Organizations now have less time to make corrections or validate the data they used to complete the forms. The reduced timeframe could lead to more errors which could increase tax penalties at the new higher rates.

The tax information reporting requirements are becoming increasingly difficult for organizations. The reasons include the addition of new forms, changes to existing forms, new deadlines, and the amendments to tax codes, to name just a few. Also, one minor change has a ripple effect and leads to necessary adjustments in other areas. Not only is it more time-consuming to remain compliant, but it is also more expensive. Many companies don’t have staff with the expertise to handle all of these changes efficiently. The reduced timeframe could lead to more errors which could increase tax penalties at the new higher rates

Changes in Filing of W-2 and W-3

The new due date for filing W-2 and W-3 with the SSA (Social Security Administration) is January 31, 2017. The filing due date also pertains to Forms W-2AS, W-2CM, W-2GU, W-2VI, and W-3SS. The filing date is the same whether you file electronically or mail out paper forms.

An extension to file Form W-2 with the SSA is no longer automatic. Companies now have to request a one-time 30-day extension. However, the IRS rarely permits an extension unless there is an extreme situation that prevents compliance by the due date.

There are now higher penalties for tax returns filed after Dec. 31, 2015. The penalty amount is adjusted for inflation.

Changes for Filing Form 1099-MISC

For the filing of Form 1099-MISC, the new due date is Jan. 31. 2017 if companies are reporting nonemployee compensation payments using Box 7. If companies do not report on Box 7, the deadline for filing a paper 1099-MISC forms is Feb. 28, 2017, and March 31, 2017, for filing electronically.

For electronic filing, companies need to use the FIRE (Filing Information Returns Electronically) System provided by the IRS. FIRE is only for the transmittal of forms. It allows fill-ins for only two forms, one of which is Form 8809, Application for Extension of Time to File Information Returns.

If a company needs an extension for filing the 1099-MISC, it must make a request by the deadline. A 30-day extension is granted only in extreme cases. It’s important to file the 1099-MISC by the due date because the penalties continue to increase.

As tax information reporting becomes more complicated, companies struggle to keep up-to-date with the new ever changing requirements. The PATH Act has added a new layer of compliance with the altered deadlines for W-2, W-3, and 1099-MISC forms.

At www.OnlineFileTaxes.com we strive to provide you a timely service at very affordable prices.

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Counting Your Workers Mid-Year for Better ACA Compliance

As part of the ACA (Affordable Care Act), large employers have to provide affordable health care plans to full-time employees or FTEs. The companies also have to report health coverage information on an annual return to the Internal Revenue Service (IRS.) With employee turnovers and changes in staffing, it’s a good idea to count the number of employees you have at the mid-year mark to determine who qualifies as a full-time employee. By doing this, your company is in a better position to remain compliant with the ACA reporting requirements.

Definitions of Employee and Large Employer

An employee performs services for a company, and the employer has the right to control and manage that individual. The employee is told by a supervisor what work is to be performed, and when, where and how that work is to be completed.

An applicable large employer (or ALE) is defined as a company with 50 or more full time employees. A FTE is a person who works 30 or more hours each week on average, or 130 hours or more each month.

Mid-Year Checklist

As part of operations, companies have to plan and budget for the coming year. This includes new hires and staffing costs. The mid-year mark is the perfect time to assess the status of every person who works for your company. This assessment tells you who in your company qualifies to be considered an employee and whether they are a full-time employee.

Keeping track of your workforce helps you to reduce costs by avoiding tax penalties. For companies that don’t offer affordable health coverage to at least 95 percent of its full-time employees, the IRS will impose penalties. The penalties can be huge if a full-time employee gets a premium tax credit from the federal government to buy health insurance coverage from an ACA exchange.

Independent Contractors

If your company uses independent contractors who work long-term and whose work is essential for your business, they may be considered employees. You have to carefully assess these independent contractors, especially if you are close to having 50 full-time employees. You also have to take into consideration the fact that adding them to your workforce might result in your failure to offer health insurance to at least 95% of your full-time employee. Employers also need to look closely at any independent contractor uses a Social Security number as the Taxpayer ID number. By scrutinizing accounts payable records, employers have a better understanding of how to categorize their workers.

Temporary Employees

If you have temporary employees working in your company, you need to review your contract with the staffing agency to determine if you or the staffing firm is the employer. You also need to know if these temps are covered under your health care plan or should be. Alternatively, the temporary, part-time, seasonal and variable-hour employees may be covered under the staffing agency that employs them. In some situations, you can take credit for health coverage if the third-party staffing agency offers these workers minimal essential coverage and also charges you an additional fee any temp that accepts health coverage.

Another important issue is that temporary employees, whether full-time or part-time, are included when calculating full-time equivalents to determine if your company is an applicable large employer. Proper assessment of temporary employees who work full-time will determine if you offer 95% of your full-time employees health coverage.

If you use a temporary staffing agency, the IRS usually deems the workers to be employees of the staffing agency and not your company. However, you need to do your due diligence and review all contracts with a temp staffing agency to ensure that you are not in a PEO arrangement.

Professional Employment Organization

Many large companies hire a Professional Employment Organization (PEO) for the hiring of new employees while also taking care of payroll, employee benefits, and other human resources services. You need to review your contact with the PEO to make certain the organization provides affordable health insurance to each full-time employee the PEO provided for your company. The PEO should charge you a fee for any employee who elects to receive health coverage. This arrangement between a PEO and your company complicates ACA compliance. It’s a good idea to seek legal advice to ensure you and the PEO meet all ACA requirements.

Other Issues with Staffing Companies

Many different staffing arrangement models exist, and this has an impact on how staffing agencies and their clients report health coverage and workforce numbers. The third-party staffing company complicates matters because different approaches are necessary to ensure compliance. For example, some large employers recruit new hires and then refer them to a staffing agency that acts as the worker’s employer. As the employer, the staffing agency is responsible for payroll and benefits. For the IRS, this type of hiring process is a grey area and often results in more scrutiny of your annual returns. You should analyze the pros and cons of such a staffing relationship.

With the ACA laws being so complex, it’s essential that you categorize every worker properly to ensure that your company is in compliance with all the ACA rules and regulations.

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What are the ACA Reporting Requirements?

The Affordable Care Act (ACA) reporting requirements are on the minds of employers, C-level executives and business owners. With hefty penalties for not providing the right information on the annual returns and for not filing before the deadlines, companies realize that they need to understand what health insurance coverage data they have to report and when. The ACA laws are complicated, but companies must follow them to be compliant with the Internal Revenue Service (IRS).

The New Requirements

An applicable large employer (ALE) is required to submit two forms known as the C-Forms. These forms are IRS Form 1094-C and IRS Form 1095-C. Large employers are companies with 50 or more full-time employees. A full-time employee (FTE) is a person who works 30 hours or more per week or 130 hours per month. Under certain conditions, other reporting forms are required known as the B-Forms. These forms are 1094-B and 1095-B.

IRS Form 1094-C

Form 1094-C is titled the Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns. The 1094-C is submitted to the IRS and provides information about a company’s full-time employees. The information includes the type of health insurance the company offers full-time employees and the time period that the health insurance covers. This form is also used for the company to tell the IRS about its workforce, such as the number of full-time employees and the number of part-time employees.

IRS Form 1095-C

IRS Form 1095-C is titled Employer-Provided Health Insurance Offer and Coverage Insurance. The 1095-C uses the same information provided in Form 1094-C, but the employer sends this form to employees. Every FTE has to receive the 1094-C. The employees who are not required to get a C-Form are those in a waiting period to start receiving health coverage. Employers are also not required to give a C-Form to variable-hour employees who are currently in an administrative period.

IRS Forms 1094-B and 1095-B

There are other reporting forms required by the IRS known as the B-Forms. They are IRS Form 1094-B and IRS Form 1095-B. Form 1094-B is titled Transmittal of Health Coverage Information Returns. Form 1095-B is titled Health Coverage. Insurance companies that underwrite an employer-sponsored health care plan and companies that self-fund their health insurance plans are required to supply health insurance coverage information to the IRS and also to the individual who is insured either under the underwritten employer plan or the self-insured plan. Employers send the 1094-B form to the IRS and the 1095-B form to the insured employee.

The IRS permits self-insured employers to report its B-Form information on Part lll of the 1095-C form sent to employees. This combined reporting helps to simplify the reporting process. Employers who have fully-insured health care coverage do not need to send out B-Forms, only the insurance companies underwriting the plans have to submit B-Forms.

Reporting Requirements for Small Employers

There are also some ACA reporting requirements for small employers. A small employer is any company with fewer than 50 full-time employees. If a small employer offers self-insured health insurance to its full-time employees, it has to report this information on the B-Forms.

 

Deadlines for Filing C-Forms and B-Forms

The deadline for companies to send 1095-C and 1095-B to each of its full-time employees is Jan. 31 for the prior year’s coverage. Employers also have to send the 1094-C and the 1094-B forms to the IRS. For companies that need to send out less than 250 forms, the deadline is Feb. 28 for the prior year’s coverage. These employers have the option of submitting the forms to the IRS on paper or submitting them electronically. However, if sent on paper, the deadline is Feb. 28. If sent electronically, the deadline is March 31.

For companies that send out 250 or more C-Forms and B-Forms to the IRS, the deadline is March 31 for the prior year’s coverage. All submissions must be filed electronically through the ACA Information Returns (AIR) system set up by the IRS. The system allows for the e-filing of all ACA forms.

Other Important Information for Employers

The IRS imposes penalties for employers filing forms incorrectly, or filing forms after the deadlines. However, for employers with 50 to 99 full-time employees, there is often no penalty tax.

Large employers have the option of hiring third-party vendors to submit the ACA required forms to the IRS and to the full-time employees. Although this can make the submission process more efficient, every company is still responsible for submitting accurate C-Forms and B-Forms before the deadlines. If a vendor makes errors when filing the forms with the IRS, the employer is liable and can face penalties. The third-party vendors are also subject to the same requirements applicable to third-party tax return preparers.

The Reasons for ACA Reporting Requirements

Congress enacted the reporting requirements for two important reasons. The first is a way for the IRS to know if large employers are offering their full-time employees affordable health insurance. Alternatively, the reporting requirements tell the IRS if companies are paying the penalty tax for not providing health coverage. By requiring the forms, the IRS knows which companies should pay the penalty tax.

Another reason for the reporting is to help the IRS to verify whether or not individual employees are eligible for the premium subsidy. The IRS can determine this once the agency knows the type of health insurance coverage offered by the employer and whether the employees offered the health plan are full-time or part-time.

Because the IRS now imposes a penalty tax for adults who don’t have health insurance, the reporting requirements help the IRS to keep track of people who have health insurance, and people who have to pay the penalty tax because they haven’t obtained health care coverage.

The ACA reporting requirements are important for a number of reasons. The best way for large employers to ensure compliance is by understanding what is expected of them. The IRS website has the ACA Information Center that describes and explains C-Forms and B-Forms and offers other information employers need to know.

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Challenges for E-filing ACA Forms

Large employers are required to report information about their health care plans, but companies are facing challenges in filing the Internal Revenue Service (IRS) forms electronically. The Affordable Care Act (ACA) mandates require employers to report the type and the cost of health insurance offered to full-time employees. However, many companies use an HRIS (human resource information system) to create the necessary forms. Unfortunately, these systems don’t have the ability to file the forms electronically with the IRS. This inability to e-file is causing problems for large employers.

The Issue with Third-Party Vendors

One solution is for large employers to use third-party vendors or outsourced professional to help them submit the IRS Forms 1094 and 1095 electronically. The vendors are usually businesses that transmitted 1099s to the IRS. These companies then entered the ACA e-filing business to offer additional services to customers.

The IRS set up the ACA Information Returns (AIR) system that allows employers to e-file the ACA forms. While this streamlines the process, the main issue is that the E-File vendors submitting the forms for their clients don’t understand the ACA reporting requirements. This means that the vendors can’t help the large employers who need to file these new forms. Employers don’t get assistance in filing the right forms or in avoiding errors. All of these issues could lead to ACA filing penalties for the employers.

Large Employers and Compliance Problems 

Another issue is ACA e-filing compliance. IRS form 1095 is a Protected Health Information (PHI) form. This means that employers need to use HIPAA (Health Insurance Portability and Accountability Act) and HITECH (Health Information Technology for Economic and Clinical Health) compliance policies. To protect information, employers have to submit the ACA forms securely to their vendors, and this includes encryption.

Still, another challenge for large employers is that the “Good Faith Effort” provision is about to expire. Once the expiration date passes, all employers will be responsible for submitting accurate ACA forms to the IRS to avoid penalties.

Although many employers are experiencing a variety of problems with submitting the ACA forms, one option is to find and use the right e-filing vendor. In any event, employers are the ones who face stiff penalties, so it is your responsibility to follow the rules, and to submit accurate ACA forms before the deadline.

If you have questions related to ACA filing please visit www.OnlineFileTaxes.com or www.Outsource1095.com or talk to our ACA experts at 1-866-62 e-file (1-866-62 3-3453). We know the issues employers are having and we would be able to help you at a very reasonable cost.

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IRS Announces Easing of ACA Penalties

Although the Internal Revenue Service (IRS) imposes substantial penalties for late filing, the agency has recently announced that employers, who missed the June 30, 2016 deadlines, still have a chance to file the required Affordable Care Act (ACA) returns without any penalties.

IRS Relaxes Penalties

During this first year of reporting requirements, the IRS is showing its flexibility to employers who chose to electronically submit IRS Form 1094-C, yet missed the June 30 deadline. The IRS is not penalizing employees who made “legitimate efforts” to file on time, as long as they file the ACA reports as soon as they can by registering with the ACA Information Returns (AIR) system. Even though the June 30 electronic filing deadline has passed, the AIR system still accepts form submissions.

The IRS announcement doesn’t define what “legitimate efforts” are and so are open to interpretation. The best way for employers to avoid any problems such as late filing penalties is to document their efforts to be compliant such as detailing issues that resulted in late filing.

Other Filing Issues

Late filing is not the only situation in which the IRS is flexible. If employers submit the IRS forms electronically, but the AIR system rejects a submission for any reason, the employer has 60 days to re-file replacement forms. If an employer submitted the forms, but received a message that the forms were accepted, but had errors, the employer can resubmit the corrected forms as many times as needed, even after the June 30 deadline.

The ACA Reporting Requirements

The Internal Revenue Code Section 6056 requires reports that large employers offered their full-time employees health insurance. A large employer is defined as any company with at least 50 full-time employees. If a company doesn’t provide health coverage, it faces huge penalties.

Every large employer has to submit a variety of IRS forms to detail the health insurance provided to full-time employees in the prior year. By filing Form 1094-C about the total health care coverage offered and Form 1095-C for each individual employee, a company proves that it is in compliance with the ACA mandates. Other required documents are Forms 1094-B and 1095-B.

Will This Leniency Continue?

The IRS leniency policy could extend beyond the initial reporting year. The IRS may decide during the transition period to give employers more leeway as they become accustomed to the new reporting requirements. On the other hand, the IRS may decide that one year is enough and enforce penalties for next year’s filing.

Whether the IRS will be lenient next year with late filers of ACA reports remains to be seen.

For your ACA reporting needs visit www.Outsource1095.com.

 

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Are You Prepared for 2016 ACA Reporting?

The Affordable Care Act (ACA) requires large companies to report its health coverage offerings to the Internal Revenue Service (IRS). This requirement started in January 2015 as part of the Employer Shared Responsibility (ESR) Provisions of the ACA. The reporting of the health coverage is an annual requirement.

Is This Reporting Required for Your Company?

Every Applicable Large Employer (ALE) is required to provide detailed information about the health insurance offered to all of its full-time employees. If the Plan offered is Fully Funded the information to be reported to the IRS includes identification of the ALE, identification of full-time employees to whom an offer of coverage is made, and duration of the offer. If the plan is Self-Insured, then additionally the IRS requires information of the spouses and dependents covered under the full-time employees plan. The definition of full-time is a person working, on average 30 hours each week or working 130 hours per month. An ALE is any company that has 50 or more full-time staff members.

Companies with less than 50 full-time employees are not required under the ESR provision to report this health insurance information. However, under IRS section 6055, small companies that are self-insured are required to report the health insurance coverage of its employees, their spouses and their dependents, even though the employers are not subject to the employer shared responsibility provisions or the information reporting requirements for ALEs. These non-ALEs use Form 1095-B, Health Coverage, and the transmittal Form 1094-B, Transmittal of Health Coverage Information Returns, to meet the information reporting requirements for providers of minimum essential coverage.

ACA Reporting Deadlines

For the tax year 2016, reporting starts in January 2017. IRS Section 6056 requires employers to file forms 1094-C and 1095-C which detail the number of full-time employees you have. These forms also reveal which employees you offered health coverage to during the tax year. These forms have to be filed by February 28, 2017. If your company files the forms electronically, the deadline is March 31, 2017. ALEs that file 250 or more information returns during the calendar year must file the returns electronically.

Every ALE has to give its full-time employees the form 1095-C by February 1, 2017.

Possible Penalties Imposed

Any ALE has to provide minimum essential coverage (MEC) that is affordable to all its full-time employees. If an employer doesn’t meet this requirement, it is subject to penalties. To avoid penalties, the Applicable Large Employer has to offer coverage to at least 95 percent of its full-time employees, their spouses and dependents in 2016.

Other penalties are based on the number of full-time employees that an ALE fails to offer affordable health insurance to. Penalties are also imposed if the health plan fails to meet the minimal actuarial value of at least 60 percent of allowed benefits costs.

Employers also face penalties for failing to file the appropriate forms by the deadline.

It’s important that all large and self-insured employers take steps to meet the IRS reporting requirements for the Affordable Care Act. This is extra work, but it is necessary to ensure that full-time employee get the health coverage they and their families need and is used to report the information the IRS needs to administer the employer shared responsibility penalties. The information is also used to identify individuals who are ineligible for a premium tax credit because they were offered employer-provided insurance that was affordable and provided minimum value.

 

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3 Tips to Avoid a Small Business Audit

small business auditAudit is the watch word during tax season and it often strikes fear into the hearts of small business owners.  Sometimes an audit is inevitable, but there are some tips and tricks to avoid it.

  1. Just in Case, Triple Check: The first step may sound obvious, but check, check, and recheck your figures.  A simple mistake can send up warning signs in the IRS and flag you for an audit.  If it helps, have someone else look over all your forms to ensure you’ve filled in all the required information.
  2. The Truth and Nothing but the Truth: once again, this sounds like common sense but that amount of people that overestimate deductions or expenses.  Too many deductions or unrealistic deductions will turn heads toward your returns and make an audit a possibility.  If your deductions are factual but unusual, provide accurate documentation and/or explanations.
  3. Pay Attention to Directions:  When filing forms, read all directions carefully.  A surprising amount of mistakes are made simply by missing a step in the directions.  Always read through things before starting to fill the forms in.

In any event, it is widely agreed that both e-filing and having a professional prepare your forms is the best trick in avoiding an audit.  Contact us to help with your tax preparations!

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Online File Taxes: As Easy As 1-2-3

Forget complicated processes to file your tax forms, we’ve got the solution.  Our sign up process is as easy as 1-2-3, as we’ve made an effort to keep it as simple as possible.  Why complicate things that don’t need to be complicated?

The first step in our sign up process is just that; sign up!  Fill in your email address, choose a password, and then confirm your password.  We told you this was going to be easy!

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The second step is to fill in some basic information.  We want to know who you are, where you live, and what your business is/does.  This helps simplify both our work and yours.  If you have a coupon code this is your chance to enter it.  After filling in your information, simply click the next button and you will be taken to our third and final step.

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Our third and final step is by far the easiest step of all.  All you have to do to complete your account sign up is to confirm your information.  Here you will be given the option to say yes, and start filing or say no, and revise your information.  Once you select the proper option, you’re free to start entering your forms.

To take part in our services and complete our super easy sign up, check out our website!

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3 Things You May Not Know About the IRS

IRS and small businessThe IRS is one of those government sectors surrounding by mystery and intrigue.  We picture stern looking men in dark suits, always with the looming atmosphere of threat surrounding them.  As taxpayers, we’ve learned to dread audits with the same fear with which we regard natural disasters.  Fortunately, the air of danger and fear surrounding these IRS agents is often exaggerated.

  1. When filing there ARE tricks to avoid an audit:  First of all, don’t round your numbers because the IRS views this as an estimation.  Secondly, failure to sign a form can flag it as suspicious.  Finally, explain large deductions.  Essentially, any form submission that sticks out makes you a potential victim for auditing.
  2. Timing is everything: As a small business, timing when your employees receive bonuses and overtime can affect your bottom line.  With bonus payments, often these payments coincide with payment of payroll taxes and the two must meet up.  This mistake can cause penalty action to be taken.  In the event of overtime, this must be tracked on a weekly basis regardless of your payroll schedule.
  3. Be careful to keep your payroll expenses separate from your operating expenses:  If the IRS thinks you’re dipping into your payroll funds to pay general expenses for your business, you could be looking at quite severe penalties.  Be sure to keep accurate records, and don’t co-mingle finances.

Often the IRS isn’t the unfriendly, frightening figures we fear them to be.  If you’re diligent with record keeping, and are honest in your returns, direct contact with IRS can mostly be avoided.

For fast, secure, and mistake-free filing, be sure to check out our website!

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Challenges Facing CPA’s

 CPAsBeing a CPA presents a unique set of challenges, much like other professions.  During certain times of the year, the duties of a CPA increase exponentially.  Tax time is so often stressful for clients, and more often than not, a great deal of that stress is filtered down to the CPA.

Time is against most of us, there’s no denying it.  There never seems to be enough hours in the day to get everything done that we need to accomplish.  During tax season, if you’re a CPA, chances are you need almost double the amount of hours to get everything finished.  Add in a reliance on technology and staff members, and things can start to get dicey in a hurry.  Think about it this way, if one member of your office were to slow down, miss a day, or a computer were to break down, what effect would that have on your workflow?

On top of dealing with increasing workload, potential technology failures, and unreliable staff CPAs still have clients to deal with.  Some clients expect their CPA to have all the answers, and have those answers immediately.  Clients want more and more, but want to pay less and less.  CPA firms, in turn, have no choice but to lower their prices to compete with other services and then have to hire less staff.  With less staff, workload increases, and a CPA ends up bogged down in their duties.

At Online Files Taxes, we specialize in helping CPAs find enjoyment in their job again.  We have a streamlined system that allows you to easily and painlessly e-file hundreds of forms at a time.  We cut out the tedious steps of filing, mailing, etc. and allow you to get back to focusing on your clients.

Check out our website for more information about easing your workload!

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