December 20, 2007 THERE ARE CHANGES FOR 2008. PLEASE READ THIS LETTER CAREFULLY Dear Client: This letter highlights some of the changes in federal and state payroll tax withholding rates for 2008 and 2007 year-end reporting requirements, and gives you some information about reporting requirements. This letter is not intended to be a comprehensive list of all reporting requirements. NEW FORM I-9: A revised Form I-9 (Employment Eligibility Verification) has been released by the Department of Homeland Security. This revised form (with Rev. date 06/05/07) is available at www.uscis.gov/i-9 and must be used for new hires beginning December 26, 2007. WITHHOLDING TAX RATES: The rates for FICA (Social Security and Medicare) remain the same but the wage base for Social Security has increased. For California State Disability Insurance (SDI) the rate and wage base have both increased. Details are found on the last page of this letter. DEPOSIT REQUIREMENTS: The deposit rules for payroll tax payments remain the same for 2008. See the table in this letter for details. Both the IRS and EDD encourage employers to make payments electronically. For details and requirements, contact each agency. There is a list of contacts on the last page of this letter. W-2’s: REPORTING: Requirements are similar to last year. Change for 2007: the location of the Social Security Number on the form. California employers are NOT required to file State copies of Forms W -2. Prepare legible forms using black ink. Be sure to use correct Social Security Numbers and names. You can verify this information online at www.ssa.gov/bso/bsowelcome.htm MAILING DEADLINES: to employees, January 31, 2008; to Social Security Administration, February 29, 2008 for paper filers, March 31, 2008 for electronic filers. Note: Electronic filing (not magnetic media) is required if you have more than 250 W-2 forms. Get details at www.socialsecurity.gov/employer or call 800-772-6270. Employers with 20 or fewer employees may complete W-2 forms online and submit them electronically to Social Security Administration, using the site above. “1099’s”: REPORTING: Information returns must be filed to report several types of payments made in the course of your trade or business, including payments of more than $600 for services, attorney fees, rents and prizes, royalties or broker payments of $10 or more (all reported on 1099-MISC), interest (1099-INT) and retirement, HSA and MSA plan distributions (1099-R or 1099-SA). You must include your name and telephone number on these forms. REMINDER: payments to corporations are generally exempt from 1099 reporting, but payments to corporations for legal services or medical and health care must be reported. Penalties may be assessed for failure to file or for filing forms with incorrect Taxpayer Identification Numbers. You can order the instructions and forms the IRS at www.irs.gov or by calling 800- 829-3676. MAILING DEADLINES: to recipients, January 31, 2008; to Internal Revenue Service, February 29, 2008. Accurate preparation and timely filing and payment of employment tax returns is essential for all employers. If you have any questions regarding this information, please contact our office at 858-268-3330. Sincerely, Howard Silberman, An Accountancy Corporation Howard Silberman Certified Public Accountant HS/ms Enclosures SUMMARY OF 2008 EMPLOYMENT TAX RATES EMPLOYEE EMPLOYER WAGE MAXIMUM WITHHOLDING TAXES BASE FOR YEAR SOCIAL SECURITY 6.2% 6.2% $102,000 $6324.00 MEDICARE 1.45% 1.45% ALL WAGES UNLIMITED FEDERAL INCOME TAX Use Circular E NONE CALIFORNIA INCOME Use DE 44 Guide NONE TAX CALIFORNIA SDI .8% NONE $86,698 $693.58 FEDERAL UNEMPLOYMENT NONE .06 % $7000 $56.00 (FUTA) CALIFORNIA NONE RATE VARIES $7000 DEPENDS ON UNEMPLOYMENT employers RATE (SUI & ETT) notified in Dec Self-Employment Tax 12.4% of all income 2.9% of all (for individuals) up to $102,00 income Standard rate for eligible 50.5 cents business mileage per mile INTERNET ADDRESSES & TELEPHONE NUMBERS FOR GOVERNMENT AGENCIES AGENCY INTERNET ADDRESS TELEPHONE NUMBER Internal Revenue Service (IRS) www.irs.gov 800-829-3676 Employment Development Department (EDD) www.edd.ca.gov 888-745-3886 Social Security Administration (SSA) www.ssa.gov 800-772-6270 Electronic Federal Tax Payment System (EFTPS) www.eftps.gov 800-555-4477 State Board of Equalization (BOE) www.boe.ca.gov 800-400-7115 Citizenship & Immigration Services (ICE) www.uscis.gov 800-375-5283 Department of Industrial Relations (DIR) www.dir.ca.gov 800-275-9243 (wage info) PAYROLL TAX DEPOSIT REQUIREMENTS Federal deposits are made on a monthly or semi-weekly basis, depending upon the amount of tax deposited in prior years. Employers whose deposit frequency changes for 2008 were notified by IRS during December. Rules are found in Circular E under “Depositing Taxes”. California deposit frequency conforms to Federal, when PIT withholding is $400 or more. Electronic Depositing is required for: Federal: If the total of ALL of your federal deposits in 2006 was $200,000 or more, you MUST make deposits in 2008 using the Electronic Filing System. Contact: www.eftps.gov or 1-800-555-4477 California: If your average EDD deposit during July 2006-June 2007 was $20,000 or more, you MUST make 2008 deposits using EFT system. Contact: www.edd. ca.gov or -1888-745-3886 INDEPENDENT CONTRACTOR REPORTING California employers must file Form DE542 within 20 days of making payments of $600 or more for services to individuals (sole proprietors) who will be receiving a Form 1099-MISC. For further details, refer to EDD’s website www.edd.ca.gov or call 1-916-657-0529.
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