Special Year-End Payroll Considerations for 2015

By Claudia Womack, Small Business Advisor

It is that time of the year to be thinking of processing your Special YE Payrolls for 2015.  Remember these payrolls must be reported as W2 wages for 2015. The Special YE Payrolls are:

·         Personal Auto Wages

·         S-Corporations Health Insurance

·         Year-End Bonuses

·         Gifts ($25.00 and over)

·         Maxing retirement deferrals for officers, owners, etc.

Please review the following information and if any of the Special YE Payrolls pertains to you and your business, please be sure to process a payroll before 12/31/15.

PERSONAL USAGE OF BUSINESS VEHICLES

The personal usage to commute between work and home with a company owned or leased vehicle by an employee (including corporate shareholder/officers) is classified as payroll compensation and must be reported on the employee’s W2.  The personal auto usage compensation is subjected to FUTA, SUTA, LTD, Federal W/H, State W/H, and FICA. This auto payroll should be recorded on the employee’s W2 in box 14.

We are available to help with the personal usage calculation, please send us the following information and we will be happy to do it for you.  Remember, if an employee drove more than one vehicle in 2015, then we need the information below for each vehicle that was driven by the employee.

1.    Vehicle make, type and year

2.    Total 2015 mileage and ending mileage for each vehicle

3.    2015 total personal mileage or percentage of total usage

4.    If an employee’s gross wage exceeds the Social Security limit, we will need the employee’s 2015 Social Security wages to determine Social Security tax for calculating the personal auto wages FICA tax.

S-CORPORATION’S HEALTH INSURANCE

If the S-Corporation’s Health Insurance it is not included as payroll, then the IRS will disallow the health insurance deduction in its entirety on the corporate tax return.

S-Corporation Health Insurance payroll affects the following individuals:

1.    Any S-Corporation shareholder owning more than 2% of the stock on any day during the tax year

Any member of a shareholder’s family identified in number one above regardless if they actually hold stock in the S-Corporation. (Spouse, child, grandchild, or parent)

S-Corporation’s Health Insurance wage is a Federal, State and LTD wage and therefore is subjected to these taxes.  However, when processing the Shareholder’s Health Insurance payroll, please override the federal or state withholding to show zero amount being withheld. It is not a FUTA, SUTA or FICA (Social Security and Medicare) wage and therefore is not subjected to these taxes. This Health Insurance payroll should be recorded on the employee’s W2 in box 14.

Shareholder or related family employees should not have health insurance per-tax deductions coming out of their regular payroll.  These premiums cannot be treated as pre-taxed deductions.

The correct payroll processing of the S-Corporation Health Insurance will have a zero net effect on the individual’s 1040 tax return.  The health insurance premiums will be reported on page one of the employee’s 1040 tax return; W2 wage line (addition) and on the self-employed health insurance deduction line (deduction).  These two line item amounts will offset each other to arrive at the total adjusted gross income amount.

YEAR-END BONUSES & GIFTS

Bonuses (giving during 2015 and at year-end) and 2015 Gifts ($25.00 & over) are required to be reported as W2 wages.

Maxing Retirement Deferrals

Payroll for Maxing Retirement Deferrals are usually processed for owners and officers.

If you have any questions on these Special YE Payroll or need assistance of processing them, please do not hesitate to call our Accounting & Payroll department or email me at claudiaw@jrcpa.com.