Are You Ready for Year End?
Items often missed
Important Changes that Affect California Employers
Stay current with 2012 employment laws
2012 Wage and Tax Information
Updated Federal and State Tax Information.
What you need to know before processing payroll
HSAs and End of Year
Our offices will be closed December 26th and January 2nd
Legislative Updates: Important Changes that Affect California Employers.
Below is a synopsis of five new laws that take effect January 2012
- Credit checks on employees:
AB 22 prohibits employers and prospective employers from obtaining consumer credit reports on applicants or employees. This bill excludes those businesses which are financial institutions subject to specified federal statutes or if the position falls under any one of the following eight areas: (1) Managerial job that qualifies for the executive overtime exemption. See Wage Order 4 (2) State Department of Justice (3) Law Enforcement
(4) Information in a credit report is required by law to be disclosed
(5) Employee has regular access to bank account information, social security number and date of birth for any one person (6) Employee is a named signature on a bank or credit card account, or is authorized to transfer money and enter contracts on behalf of the employer (7) A position that has access to confidential or proprietary information that has economic value (8) A position that involves regular access to cash totaling ten thousand (10,000) dollars or more of the employer or customer during the workday.
See Assembly Bill No. 22
- Pregnancy Disability Leave:
SB 299 requires all employers with five or more employees to continue to maintain and pay for health coverage under a group health plan for an eligible female employee who takes Pregnancy Disability Leave (PDL) up to a maximum of four months in a 12-month period. The benefits are at the same level and under the same conditions as if the employee had continued working during the leave period. See Senate Bill 299
- Willful Misclassification of Independent Contractors:
SB 459 provides new penalties of between $5,000 to $25,000 for the “willful misclassification” of independent contractors. Willful misclassification is defined as: “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.” See Senate Bill 459
- Wage Theft Protection Act of 2011
AB 469 enacts the Wage Theft Protection Act of 2011 which criminalizes willful violations for non-payment of wages after a court judgment or final administrative order. It also requires employers to provide nonexempt employees, at the time of hire, a notice that specifies:
Rate of pay, whether hourly, salary, piece, commission, and overtime rate.
Allowances claimed as part of the minimum wage, including meal and lodging allowances
Employer’s name, including any “doing business as” names
Physical and mailing address of the employer’s main office
Workers' Compensation carrier name, address and phone number
AB 469 also allows employees to recover attorney’s fees and costs incurred to enforce a judgment for unpaid wages and requires detailed pay information to be provided with each pay check.
See Assembly Bill 469
- Insurance Non-discrimination Act
SB 757 closes an existing loophole and prevents employers that operate in multiple states from discriminating against same-sex couples by not providing the same insurance coverage for domestic partners as they do for spouses.
Under the new law, even if the employer’s principal place of business and majority of employees are located outside of California, no health insurance policy issued or delivered to a California resident shall discriminate between spouses and domestic partners of a different or same sex. See Senate Bill 757
back to top
Year End Checklist.
Important items not to miss
The year-end cutoff date for reporting 2011 payroll changes is December 30, 2011 at 1:00 p.m. To ensure accurate and on-time filing of Federal and State returns all adjustments should be submitted by the cutoff date. We can accommodate adjustments after December 30th if necessary, however, there will be additional fees and/or a delay of your W-2’s and tax returns. Also, depending on the changes, tax payments may be made late and incur penalties and interest.
IRS and State Notices.
The IRS and states mail deposit frequency/change notices to all employers who have a change in their deposit frequency for 2012. The State Unemployment office also mails the rate changes for 2012. If you receive one of these notices, please send us a copy to ensure we have the most accurate information for your tax accounts. We do not automatically receive this information from the IRS and State agencies.
W-2 Audit Reports were included with November payroll packages for review of addresses and social security numbers. If you didn’t receive the report or have questions please contact your payroll specialist.
Packages containing 4th Quarter tax returns and 2011 W-2s will be sent priority mail on January 17, 2012. For clients utilizing Employee Self Service, the W-2s are available on the employee portal the last week of January.
Non-profits and the New W-3
Box b, Kind of Employer, has been added to select the type of non-profit: 501(c) non-government, or State/Local non-501(c), or State/Local 501(c). We will be contacting all our non-profits to verify status before filing the W-3s.
See IRS W-2 and W-3 Instructions
Employees EXEMPT from Tax Withholdings.
To maintain “EXEMPT” status, the employee must file a new Form W-4 each year on or before February 15th.
Flexible Spending Accounts.
Remind employees they only have until December 31st to obtain services and incur costs against their 2011 FSA account balances (for those employers that have a calendar year plan). See FSA eligible expenses
back to top
2012 Wage and Tax Facts:
The New Year always brings new wage and tax rates. Download our summary of tax rates, minimum wage, 401k maximums, etc. for a quick reference. 2012 Wage & Tax Information.
back to top
There is much to consider when processing bonus checks. Here's our list:
- Will bonuses be included with regular pay or as an additional check?
If you would like the bonus checks to be issued for a date other than the normal payroll date, these checks will require processing separate from the regular payroll.
- Are the bonus amounts before or after taxes?
We can help you calculate the gross pay if you are paying a net amount.
- Will pension plan deductions be taken? Keep in mind any special deductions, and resulting employer matches.
- How should the bonuses be taxed?
All wages paid separate from regularly scheduled payrolls should be taxed using the supplementatl rates per the IRS and EDD guideliines.
Supplemental tax rates (25% Federal, 10.23% CA) or
Regular withholding status on record or
Fixed tax amount or fixed tax percentages or
No federal or state withholding
- Are bonus checks intended to be a surprise?
For employers using Employee Self Service (ESS) bonus amounts will be available for viewing the same day the bonus payroll is processed. Keep this in mind if you would like the bonus amounts to be a surprise on pay day.
All payrolls with direct deposit and/or tax service must be submitted by 1pm two banking days prior to the check date. Keep this list in mind when doing the bonus payroll and as always your payroll specialists can assist you.
back to top
H.S.A.s and Taxability
Contrary to Federal HSA tax law both employer and employee HSA contributions are subject to the following California taxes:
HSA contributions must be reported through payroll to be taxed and recorded correctly on an employee’s W-2. The best practice is to report contributions with each payroll. To avoid additional costs and amendments, please report all employer HSA contributions prior to processing your last payroll of the year. Specifics are outlined on the EDD website,
Taxability of Employee Benefits.
- Unemployment Insurance (UI)
- Employment Training Tax (ETT)
- State Disability Insurance (SDI)
- CA Personal Income Tax Withholding (PIT)
back to top
Payroll Systems Holiday Hours
We wish all our clients a warm and wonderful holiday season!
Please keep our holiday schedule in mind when submitting payroll information:
December 23rd: 8:30am-12:00pm
Direct deposits do not post on weekends or bank holidays. If your company's regularly scheduled check date requires a change to accommodate the holidays, payroll data must be submitted two business days (and by 1pm) prior to the intended check date to provide tax or direct deposit services.
December 26th: Closed, Bank Holiday
January 2nd: Closed, Bank Holiday
back to top