In Volume 2 of our 2013 newsletter, we highlight:
- Form I-9 Revised
- Adjust Tax Withholding
- Affordable Care Act Individual Shared Responsibility
- Fraud Prevention
Form I-9 Revised
On March 8, 2013 the U.S. Citizenship and Immigration Services (USCIS) released a new employment eligibility verification (Form I-9), which is required to be used by all employers. There was a 60 day grace period until May 7, 2013 to start using the form; therefore, everyone must now be using the new Form I-9. Failure to use the revised form could result in penalties from the USCIS. Normally, you do not need to replace already-completed forms you have on file.
Some of the changes to the Form I-9 include:
- Expanded instructions with a step-by-step approach to filling out
- Now two pages long
- The maiden name field is now the other names used field
- New optional telephone number and email address fields
- Section 3 is now titled Reverification and Rehires
All newly hired employees must complete the Form I-9 no later than the first day of employment. Form I-9 should never be completed before the employee has accepted a job offer. Employers do not file Form I-9 but must keep the completed Form I-9 on file. The Form I-9 must be retained for either three years after the date of hire or one year after the employee is terminated, whichever is later.
While Form I-9 requires employers to collect information, there was no way for employers to verify that the information and documentation provided was genuine, until the E-Verify System was started. All Federal and Missouri contractors and subcontractors and public employers are required to use the E-Verify System. The E-Verify System allows employers to check the employment eligibility from an employee’s Form I-9 against the Social Security Administration and Department of Homeland Security databases. The E-Verify program is voluntary for all other employers. If the authorization is confirmed, you just print out the results page and attach it to the Form I-9. For more information on Form I-9 or the E-Verify System go to www.uscis.gov.
Nobody can go back and start a new beginning, but anyone can start today and make a new ending.
Adjust Tax Withholding
If you typically receive a large refund from the Internal Revenue Service (IRS) after you file your income tax return, or you owe the IRS a substantial amount at that time, you should consider adjusting your income tax withholding.
Your employer withholds income tax from your paycheck based on the number of withholding allowances you claim on Form W-4, Employee’s Withholding Allowance Certificate. You must give your employer a Form W-4 when you first begin work.
If your tax circumstances change, it is up to you to give your employer a new Form W-4. Many employees neglect to take this step, resulting in withholding that is either too high or too low.
If your withholding is too high, you are in effect giving the government an interest-free loan. Although the overpaid tax will be refunded once you file your return, you would have been better off using the money during the year to generate income or for personal purposes. In this case, you should reduce the amount your employer withholds to increase your regular take-home pay.
Some taxpayers have too little withheld and therefore owe substantial amounts on April 15th. While they enjoy the “extra” amounts received in each paycheck, they must pay back the taxes owed in April, and will likely be tacking on extra in the form of penalties. If this is your situation, you should increase your withholding.
Even if you have had too little tax withheld for most of the year, you still may be able to avoid a penalty by asking your employer to withhold additional amounts for the rest of the year. This is because the increased withholding at year’s end will be treated as paid equally throughout the year.
You should check your withholding whenever significant personal or financial changes occur in your life, including the following:
- Changes in filing status or exemptions: You get married or divorced; you have a new child; a child goes off on his or her own.
- Changes in wage income: You or your spouse start or stop working, or start or stop a second job.
- Changes in income not subject to withholding: You have an increase or decrease in rental income, interest income, dividends, capital gains, or IRA distributions.
- Changes in deductions and credits: You take out or pay off a mortgage; you become entitled to the dependent care credit, child tax credit, or higher education credit; you have changes in medical, alimony, or job expenses.
- Changes in other taxes: You owe self-employment tax or employment taxes for your household workers.
Unfortunately, the procedures for arriving at the proper withholding amounts are among the more complex ones taxpayers confront. A wide array of factors play a role: exemptions, deductions, credits, marital status, your
spouse’s income, and others. The Form W-4 includes three worksheets that you may have to complete to determine the proper withholding. The above rules also apply to pension and IRA distributions. If you think your situation calls for a withholding adjustment (up or down), and you would like some guidance in getting through this maze, please give us a call.
Affordable Care Act Individual Shared Responsibility
Under the Affordable Care Act, the federal government, state governments, insurers, employers, and individuals are given shared responsibility to reform and improve the availability, quality, and affordability of health insurance coverage in the United States. Starting in 2014, the individual shared responsibility provision calls for each individual to have minimum essential health coverage for each month, or qualify for an exemption. If an individual does not have minimum coverage, they will be charged a penalty based upon their household income, which is paid with their federal income tax return. The penalty ranges from $95 to $285 in 2014. This penalty increases over the next two years.
The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption.
The provision goes into effect on January 1, 2014; it applies to each month in the calendar year. The amount of any payment owed takes into account the number of months in a given year an individual is without coverage or an exemption.
Minimum essential coverage includes at a minimum all of the following:
- Employer-sponsored coverage (including COBRA coverage and retiree coverage)
- Coverage purchased in the individual market
- Medicare coverage (including Medicare Advantage)
- Medicaid coverage
- Children’s Health Insurance Program (CHIP) coverage
- Certain types of Veterans health coverage
Minimum essential coverage does not include specialized coverage, such as coverage only for vision care or dental care, workers’ compensation, disability policies, or coverage only for a specific disease or condition. The Department of Health and Human Services (HHS) has authority to designate additional types of coverage as minimum essential coverage.
Some of the statutory exemptions from the requirement to obtain minimum essential coverage include:
- Religious conscience — You are a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits.
- No filing requirement — Your household income is below the minimum threshold for filing a tax return based upon your filing status.
- Short coverage gap — You went without coverage for less than three consecutive months during the year.
- Hardship — A Health Insurance Marketplace, also known as an Affordable Insurance Exchange, has certified that you have suffered a hardship that makes you unable to obtain coverage.
- Unaffordable coverage options — You cannot afford coverage because the minimum amount you must pay for the premiums is more than 8% of your household income.
Most individuals in the United States have health coverage today that will count as minimum essential coverage and will not need to do anything more than continue the coverage that they have. If an employee enrolls in employer-sponsored coverage for himself and his family, the employee and all of the covered family members have minimum essential coverage. However, you, your spouse, and your dependent children do not have to be covered under the same policy or plan. You, your spouse, and each dependent child for whom you may claim a personal exemption on your federal income tax return must have minimum essential coverage or qualify for an exemption, or you will owe a payment when you file.
Because the individual shared responsibility provision goes into effect in 2014, you will not have to account for coverage or exemptions or to make any payments until you file your 2014 federal income tax return in 2015. You should be prepared to obtain coverage if you do not already have it, or consider your eligibility for an exemption before the beginning of 2014.
Fraud can happen to anyone. It is occurring more and more often all the time. No one is exempt from this epidemic. Some people think that just because they have hired friends or relatives they are safe. Do not be lulled into this false sense of security.
The number one method of detecting fraud is from employee tips. Providing employees with training and a means to report suspicious activity is a major element for detecting and preventing fraud. Learning the red flags that indicate fraud can help to spot fraud. Some of the major signs include living beyond their means, having financial difficulties (personally or members of their family), unusually close ties with vendors or customers, and excessive control issues.
Most occupational fraudsters are first-time offenders. One survey stated that 87% had never been charged or convicted of fraud and 84% had never been punished or terminated by the employer due to fraudulent activities.
Small businesses are especially susceptible to fraud because they have less proper controls (such as separation of duties) and fewer resources. The most common area for fraud is in the account-ing department. Small businesses should focus on methods such as developing a code of ethics, employee education, and setting an ethical tone by management.
Many small companies are financially unable to recover from damage caused by fraud. The most cost-effective way to limit fraud losses are to prevent them from ever occurring.
Our Firm has two certified fraud examiners (CFE) — Tammy Alsop, CPA, CFE and Penny Scovill, CPA, CFE. If you have questions concerning fraud and how to prevent it, please do not hesitate to give them a call or anyone else in our Firm to discuss how to better protect your business.
For more information, please contact us.