Tax Researcher
December 2008
NEW TREATEMENT OF DIFFERENTIAL WAGE PAYMENTS UNDER MILITARY TAX BILL BECOMES EFFECTIVE 1/1/09
On June 17, 2008, President Bush signed into law the “Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008”. Effective for remuneration paid on or after January 1, 2009, differential pay would be subject to withholding. Beginning with tax year 2009 employers will report differential wage payments to military personnel as wages on Form W-2.
Differential pay is defined as payments made voluntarily by an employer to represent all or part of the difference between the regular salary of an employee called to military active duty for more than 30 days and the amount being paid by the military, if the regular salary was higher
Under current law, the IRS doesn’t treat differential pay as taxable wages for federal income tax withholding purposes because it considered the employment relationship terminated once the employee was called to active duty. These amounts are reported on Form 1099-MISC through tax year 2008.
Also effective January 1, 2009, differential wage payments are deemed to be employee compensation for retirement plan purposes. A retirement plan won’t be treated as failing the minimum participation and nondiscrimination requirements by reason of any contribution or benefit attributable to differential wage payments.
FUTA SURTAX EXTENDED AGAIN
On October 3, 2008, President Bush signed the “Economic Stabilization Act of 2008”. It included a provision to again extend the temporary 0.2% FUTA (Federal Unemployment Tax Act) surtax, this time through December 31, 2009.
NEW JERSEY PAID FAMILY LEAVE INSURANCE EFFECTIVE 1/1/09
New Jersey enacted Family Leave Insurance (FLI) which becomes effective in 2009. Below are some of the major provisions. Those that are payroll-related are bolded.
- Up to six weeks of FLI benefits for the care of a family member suffering from a serious heath condition, a newly born child or a newly adopted child.
- Applies to all private and governmental employers subject to the "Unemployment Compensation Law". It includes local governmental employees who choose to opt out of the regular TDI program.
- Governmental employers that have chosen not to elect coverage for benefits during their employee's own disability under NJ TDI do not have the option to be exempt from FLI.
-
Employee assessments begin on January 1, 2009 to fund the FLI program.
-
There is no employer contribution to the program.
- The payment of FLI benefits begins on July 1, 2009.
-
Employers will report FLI wages and deductions and submit payment with Form NJ-927, Employer's Quarterly Report.
- A weekly FLI benefit that is the same as the weekly amount for Temporary Disability Insurance (TDI) benefits during a worker's own disability and is subject to the same waiting period.
- Small businesses, those with 50 or fewer employees, have the option to replace employees receiving FLI benefits. They are not required to hold those jobs open and provisions in the law allow small businesses to fill a worker's position with a permanent replacement without the risk of being sued.
-
Revenue to pay for the FLI benefits will be raised through a worker FLI rate of 0.09% on the FLI taxable wages of $28,900 during 2009. For 2009, the maximum employee contribution will be $26.01. In 2010 and subsequent years, the worker FLI rate will be 0.12% of the applicable FLI taxable wages in effect for those years.
- Requires the employee to give at least 30 days notice, except when unforeseen circumstances prevent prior notice, for care of a child after birth or adoption.
- If FLI is for the care of a family member, the employee is required to schedule the leave in a manner to minimize disruption of employer operations when possible. Also, if the leave is to be intermittent care, they should give their employer 15 days notice if possible.
- Provides that employers would have the option of using the State-operated plan or a private plan, so long as the employees are not charged more, the benefits are not lower and eligibility is not more restrictive than under the State plan.
- A private plan may be self-coverage or coverage by a private insurance carrier. Either alternative requires prior approval by the NJ Division of Temporary Disability Insurance.
- Provides that private plans may cover TDI benefits, FLI benefits, both or neither.
- No changes are required to existing private plans.
2009 STATE MINIMUM WAGE CHANGES ANNOUNCED BY AZ, CO, FL, MO, MT, OH, OR, VT AND WA
A number of states have announced minimum wage changes with effective dates beginning January 1, 2009:
|
Effective Date |
Minimum Wage From To |
Minimum Cash Wage |
Maximum Hourly Tip Credit |
AZ |
1/1/09 |
$6.90 |
$7.25 |
$4.25 |
$3.00 |
CO |
1/1/09 |
$7.02 |
$7.28 |
$4.26 |
$3.02 |
FL |
1/1/09 |
$6.79 |
$7.21 |
$4.19 |
$3.02 |
|
7/24/09 |
$7.21 |
$7.25 |
$4.23 |
$3.02 |
MO |
1/1/09 |
$6.65 |
$7.05 |
$3.525 |
$3.525 |
MT |
1/1/09 |
$6.55* |
$6.90* |
$6.90* |
None |
|
7/24/09 |
$6.90* |
$7.25* |
$7.25* |
None |
OH |
1/1/09 |
$7.00 |
$7.30 |
$3.65 |
$3.65 |
|
1/1/09** |
$5.85 |
$6.55 |
$2.13 |
$4.42 |
|
7/24/09** |
$6.55 |
$7.25 |
$2.13 |
$5.12 |
OR |
1/1/09 |
$7.95 |
$8.40 |
$8.40 |
None |
VT |
1/1/09 |
$7.68 |
$8.06 |
$3.91 |
$4.15 |
WA |
1/1/09 |
$8.07 |
$8.55 |
$8.55 |
None |
* MT—If annual sales exceed $110,000. If annual sales are
$110,000 or less, the minimum wage remains at $4.00
**OH—If annual sales are under $267,000
* * * * *
TAX RESEARCHER is distributed with the understanding that the publisher is not rendering legal, accounting or other professional services. If such advice or assistance is required, an attorney or accountant should be consulted. This newsletter is published monthly by Statutory Research, a department of the Employer Services Division. Comments should be addressed to ADP, Inc., Statutory Research Department, One ADP Boulevard (M/S 364), Roseland, New Jersey 07068. Copyright 2008 ADP, Inc.