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Simplify Your Year End Payroll

Let’s be honest, December is crazy and the last thing most business owners want to think about is payroll tax filing.  Before the holidays and the January deadline, get organized now.  Here are some things you should consider:

Calculate automobile use for W-2 reporting early

If you provide company vehicles to your employees that they can take home and use for personal travel, you are required to add this taxable fringe benefit to their W-2 wages.  To compute the taxable benefit amount, gather the vehicle’s value, model year, mileage, and a breakdown of mileage for business vs. personal.  NOTE: the IRS requires substantiation for business and personal use, so make sure your employees are keeping a log or good records. The value of driving an employer owned vehicle is based on the IRS annual lease value and the computation must be prorated for the number of months it was used.  The IRS gives companies the option of setting an October 31st or November 30th cutoff date, instead of the calendar year end.  Advice: use an optional cutoff date and compute this reportable benefit now.

Know which insurance benefits are reportable

Life insurance Premiums- reportable and taxable if the beneficiary of the policy is a shareholder, officer, or a member of their family.

Health and Disability- reportable for 2% shareholders of S Corporations, partners in a partnership, and members of an LLC.

Group Term Insurance- reportable for coverage over $2,000 on any owner or employee’s dependent. Also taxable income is added to an employee’s W-2 wages for any coverage over $50,000 based on the employer’s age and IRS premium tables.

 Many 3rd party payroll services have specific deadlines for this information, make sure to check their requirements and send them the necessary information s so they can issue correct W-2’s to your employees.

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