Welcome to the Four Point HR Newsletter

• Fair Credit Reporting Act Compliance Changes
• Tax Changes For 2013: A Checklist
• 2013: The Year Of Communication
• Standard Mileage Rates For 2013
• What’s New For The 2012 W-2’s?
• Prevent Winter Slips And Falls
• For Our Clients: Payroll Corner
• BLOG SPOT: Surviving Flu Season

Fair Credit Reporting Act Compliance Changes

The Federal Fair Credit Reporting Act (FCRA) has changed regulations that became effective January 1, 2013. FCRA was enacted to regulate the consumer credit reporting industry. The requirements that have been in place have not changed but the forms have been modified to notify employees and applicants of their rights. Employers are required to use these new forms on or before January 1, 2013.

Any employer requesting a background check from a consumer reporting agency is automatically required to follow all regulations in association with FCRA. The Fair Credit Reporting Act promotes accuracy, fairness and privacy in the files of consumer reporting agencies. This would include all credit bureaus and specialty agencies. Prior to a report request, employers are required to provide the applicants, or employees subject to the screening, with specific information.

If a report is being ordered for employment purposes, the employer must provide the employee with notice that a report may be made and will include information regarding character, general reputation, physical characteristics and mode of living. If an employer is ordering a background check, the notice to the employee is to be in writing and given to the employee, as a single document if used for employment purposes, prior to the background check being initiated. A check cannot be initiated without written authorization from the employee, or applicant, regardless of what type of check is ordered.

Prior to requesting a consumer report, the employer must ensure they have an allowable reason for requesting the report such as it is company policy before any applicant is hired or the business is governed by State requirements to have a check in all employees personnel files. The employer must have provided the employee or applicant with the required disclosures and obtained the required written authorization from the employee or applicant. If any adverse action will be taken based on the check, the employer is required to provide the employee, or applicant, with a copy of the report and the FRCA Summary of Rights.

If an employer seeks to take action based in part, or in whole, on the information contained in the report, the employer must notify the employee, or applicant, prior to the action taken. This is called a “pre-adverse action” notice and should contain a copy of the report, the reporting agencies name, address and telephone number and a copy of the FRCA Summary of rights to the employee or applicant. It is important that employers take the time to re-examine the FRCA compliance policies and procedures to ensure compliance.

---

Tax Changes For 2013: A Checklist

Welcome 2013! As the New Year has begun, it’s always a sure bet that there will be changes to the current tax law and 2013 is no different. From health savings accounts to retirement contributions here’s a checklist of tax changes to help you plan the year ahead.

Individuals

For 2013, the big news is the signing of the American Taxpayer Relief Act of 2012 (ATRA), which modified, made permanent, or extended a number of tax provisions that expired in 2012 and 2011, for both individuals and businesses. Standard mileage, health savings account contribution limits, and foreign earned income exclusion, as well as most retirement contribution limits have been adjusted upward to reflect inflation as well.

Alternative Minimum Tax (AMT): Exemption amounts for the AMT are now permanent and indexed for inflation and allow the use of nonrefundable personal credits against the AMT. For 2013 the exemption amounts are $51,900 for individuals ($50,600 in 2012) and $80,800 for married couples filing jointly ($78,750 in 2012).

“Kiddie Tax”: For taxable years beginning in 2013, the amount that can be used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $1,000 (up from $950 in 2012). The same $1,000 amount is used to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the “kiddie tax”. For example, one of the requirements for the parental election is that a child’s gross income for 2013 must be more than $1,000 but less than $10,000.

For 2013, the net unearned income for a child under the age of 19 (or a full-time student under the age of 24) that is not subject to “kiddie tax” is $2,000.

Health Savings Accounts (HSAs): Contributions to a Health Savings Account (HSA) are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent(s). Medical expenses must not be reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return.

A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care.

For calendar year 2013, a qualifying HDHP must have a deductible of at least $1,250 (up $50 from 2012) for self-only coverage or $2,500 (up $100 from 2012) for family coverage (unchanged from 2011) and must limit annual out-of-pocket expenses of the beneficiary to $6,250 for self-only coverage (up $200 from 2012) and $12,500 for family coverage (up $400 from 2012).

Medical Savings Accounts (MSAs): There are two types of Medical Savings Accounts (MSAs): the Archer MSA created to help self-employed individuals and employees of certain small employers, and the Medicare Advantage MSA, which is also an Archer MSA, and is designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare. Both MSAs require that you be enrolled in a high deductible health plan (HDHP).

Self-Only Coverage: For taxable years beginning in 2013, the term “high deductible health plan” means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,150 (up $50 from 2012) and not more than $3,200 (up $50 from 2012), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,300 (up $100 from 2012).

Family Coverage: For taxable years beginning in 2013, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $4,300 (up $100 from 2012) and not more than $6,450 (up $150 from 2012), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $7,850 (up $200 from 2012).

Increased AGI Limit for Deductible Medical Expenses: Starting in 2013, the deduction threshold increases from 7.5% to 10% of adjusted gross income (AGI). However, if either you or your spouse will be age 65 or older as of December 31, 2013, the new 10% of AGI threshold will not take effect until 2017. In other words, the 7.5% threshold continues to apply for tax years 2013 to 2016 for these individuals. In addition, if you or your spouse turns age 65 in 2014, 2015, or 2016, the 7.5% of AGI threshold applies for that year through 2016 as well. Starting in 2017, the 10% of AGI threshold applies to everyone.

Eligible Long-Term Care Premiums: Premiums for long-term care are treated the same as health care premiums and are deductible on your taxes subject to certain limitations. For individuals age 40 or less at the end of 2013, the limitation is $360. Persons over age 40 but under age 50 can deduct $680. Those over age 50 but not older than age 60 can deduct $1,360, while individuals over age 60 but younger than age 70 can deduct $3,640. The maximum deduction $4,550 and applies to anyone over the age of 70.

Medicare Taxes: Starting in 2013, there will be an additional 0.9% Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly). Also starting in 2013, there is a new Medicare tax of 3.8% on investment (unearned) income for single taxpayers with modified adjusted gross income (MAGI) over $200,000 ($250,000 joint filers). Investment income includes dividends, interest, rents, royalties, gains from the disposition of property, and certain passive activity income. Estates, trusts and self-employed individuals are all liable for the new tax.

Foreign Earned Income Exclusion: For taxable years beginning in 2012, the foreign earned income exclusion amount is $97,600, up from $95,100 in 2012.

Long-Term Capital Gains and Dividends: In 2013, tax rates on capital gains and dividends for taxpayers with income at or below $400,000 ($450,000 married filing jointly) remain at the same 2012 rates. As such, for taxpayers in the lower tax brackets (10% and 15%), the rate remains 0%. For taxpayers in the middle tax brackets, the rate is 15%. An individual taxpayer whose income is at or above $400,000 ($450,000 married filing jointly), the rate for both capital gains and dividends is capped at 20% (up from 15% in 2012).

Pease and PEP (Personal Exemption Phase Out): Pease (limitations on itemized deductions) is permanently extended for taxable years beginning after December 31, 2012 for taxpayers with income at or below $250,000 for single filers) and $300,000 for married filing jointly. The PEP (personal exemption phase-out) limitations was also reinstated, but with higher thresholds of $250,000 for single filers and $300,000 for married taxpayers filing joint tax returns.

Estate and Gift Taxes For an estate of any decedent during calendar year 2013, the basic exclusion amount is $5,250,000 indexed for inflation (up from $5,120,000 2012). The maximum tax rate rises to 40% (up from 35% in 2012). The annual exclusion for gifts increases to $14,000 (up from $13,000 in 2012).

Individuals – Tax Credits

Adoption Credit: In 2013, a non-refundable (only those individuals with tax liability will benefit) credit of up to $10,000 is available for qualified adoption expenses for each eligible child.

Earned Income Tax Credit: For tax year 2013, the maximum earned income tax credit (EITC) for low and moderate-income workers and working family’s rises to $6,044; up from $5,891 in 2012. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.

Child Tax Credit: For tax year 2013, the child tax credit is $1,000 per child.

Child and Dependent Care Credit: The child and dependent care tax credit was permanently extended for taxable years beginning in 2013. If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35% of $3,000 of eligible expenses. For two or more qualifying dependents, you can claim up to 35% of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20%, regardless of the amount of adjusted gross income.

Individuals – Education

American Opportunity Tax Credit and Lifetime Learning Credits: The American Opportunity Tax Credit (formerly Hope Scholarship Credit) is extended to the end of 2017. The maximum credit is $2,500 per student. The Lifetime Learning Credit remains at $2,000.

Interest on Educational Loans: Starting in 2013, the $2,500 maximum deduction for interest paid on student loans is repealed and no longer limited to interest paid during the first 60 months of repayment. The deduction is phased out for higher-income taxpayers.

Tuition and Related Expenses Deduction: In 2013, there is once again an above-the-line deduction of up to $4,000 for qualified tuition expenses. This means that qualified tuition payments can directly reduce the amount of taxable income, and you don’t have to itemize to claim this deduction. However, this option can’t be used with other education tax breaks, such as the American Opportunity Tax Credit, and the amount available is phased out for higher-income taxpayers.

Individuals – Retirement

Contribution Limits The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,000 to $17,500. Contribution limits for SIMPLE plans increase from $11,500 to $12,000. The maximum compensation used to determine contributions increases to $255,000 (up $5,000 from 2012 levels).

Income Phase-Out Ranges the deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by an employer-sponsored retirement plan and have modified adjusted gross income (AGI) between $59,000 and $69,000, up from $58,000 and $68,000 in 2012.

For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by an employer-sponsored retirement plan, the phase-out range is $95,000 to $115,000, up from $92,000 to $112,000. For an IRA contributor who is not covered by an employer-sponsored retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s modified AGI is between $178,000 and $188,000, up from $173,000 and $183,000.

The modified AGI phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012. For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000. For a married individual filing a separate return who is covered by a retirement plan, the phase-out range remains $0 to $10,000.

Saver’s Credit: The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low and moderate income workers is $59,000 for married couples filing jointly, up from $57,500 in 2012; $44,250 for heads of household, up from $43,125; and $29,500 for married individuals filing separately and for singles, up from $28,750.

Businesses

Standard Mileage Rates: The rate for business miles driven is 56.5 cents per mile for 2013, up from 55.5 cents per mile in 2012.

Section 179 Expensing: For 2013 the maximum Section 179 expense deduction for equipment purchases increases to $500,000 of the first $2,000,000 of business property placed in service during 2013. The bonus depreciation of 50% is also extended through 2013.

Work Opportunity Tax Credit (WOTC): The WOTC is extended through 2013 (retroactive to 2012) and includes a one-year extension of the enhanced credit for hiring certain veterans. When a business hires a person from one of several specific economically disadvantaged groups it may claim a Work Opportunity Tax Credit, generally equal to 40 percent of the first $6,000 in wages paid to a new hire.

Transportation Fringe Benefits: If you provide transportation fringe benefits to your employees, for tax years beginning in 2013 (through 2017) the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $245 up from $240 in 2012 (the American Taxpayer Relief Act provided for a retroactive increase from the $125 limit that had been in place for 2012). The monthly limitation for qualified parking is $240.

While this checklist outlines important tax changes for 2013, additional changes in tax law are likely to arise during the year ahead.

SOURCE: Forrestall, Galeano & Li CPA LLC

---

2013: The Year Of Communication

It’s a New Year and time to look at what your Company did well in 2012, and move that success into an even bigger achievement in 2013.

The more difficult question is: What could we have done better? Did Sales increase according to plan? Was there growth in the customer base and in customer relationships? Did you find the time to provide value-added services for your customers? All good questions, but the answers may not be what you wanted to see. The next question should be: Why? If you look hard, many times it comes down to internal communication.

• If the Management team set a strategic plan, did each Management Team Member understand the Plan the same way?
• Did each Team Member share their departmental objectives with their direct reports?
• Were each team member’s goals set based on the department objectives or the business plan?
• Were Management Team Members and their respective employees held accountable?
• Did Management Team Members study the results and boil down the issues as each month passed?
• Were additional goals or directives set up to resolve barriers to progress?
• Were Weekly or Monthly meetings held to communicate results and were those results compared to plan?
• Were action plans modified to ensure that each team member would meet the individual and team goals?

If any of these points gave you pause, it may be time to think about what worked well and what changes you need to make to ensure all objectives are met in 2013.

If the values need to be strengthened, team building needs to be enhanced, clearer department goals need to be set, or communication needs to take place on a more regular basis, go to work now. Be sure that all of these components are updated for 2013. It will send a strong message to your organization and every team member will know where to focus. Setting up a strong internal communication program now will enable each employee, Team, and Manager to know exactly what is expected and what goals they need to reach for each month and quarter of the year.

Over the next 12 months, continue to take the time to step back and see what’s working and what is not. Adjust each plan as necessary to make sure goals are met for each milestone set.

• Be sure employees can focus on the most important aspects of their work and are not sidelined by trivial tasks.
• Be sure team members are working well together — communicating progress and resolving new issues.
• Coach employees on a regular basis and “catch them” doing a great job whenever you can.
• Communicate the successes — giving credit to all who participated in the accomplishment (including those behind the scenes!)
• Communicate clearly with your staff – whether it’s about new customers or refining monthly and quarterly goals to ensure success.
• Create an effective performance appraisal process, and take the time to give both positive and constructive feedback so each employee can enhance his or her performance and better support company objectives.

---

Standard Mileage Rates For 2013

The Standard Mileage Rate is the maximum per-mile rate allowed by the IRS for calculating mileage for operating a vehicle for business, charity, medical, or moving purposes.

• 56.5 cents per mile for business miles driven (a one cent increase over 2012)
• 24 cents per mile for medical or moving purposes (a one cent increase over 2012)
• 14 cents per mile driven in service of charitable organizations (unchanged from 2012)

A taxpayer may not use the business standard rate for a vehicle using any depreciation method or claiming a Section 179 deduction. Taxpayer’s always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

---

What’s New For The 2012 W-2’s?

As the 2012 tax season is in full swing, there are a few items that are new this year to the W-2. The IRS has made the following changes for this years’ W-2’s:

• Employee social security tax withholding. The 4.2% rate of social security tax withholding (for employees only) is extended for wage payments made in 2012. (This has increased for 6.2% for 2013. So, this is one of the reasons there has been a reduction in your take home pay)
• Reporting the cost of group health insurance coverage. You must report the cost of employer-sponsored health coverage in box 12 using code DD.

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on the Form W-2 does not mean that the coverage is taxable. The value of the employer’s contribution for the employer’s health care coverage plan is reported along with the amount that the employee contributed for employer sponsored health care plan. This reporting is for informational purposes only and the hope is that this information will provide employees useful and comparable consumer information on the cost of their health care coverage.

W-2 Report for Group Health Insurance Coverage

The value of the health care coverage will be reported in Box 12 of the W-2, with Code DD to identify the amount. The amount reported should include both the portion paid by the employer and the portion paid by the employee.

An employer is not required to issue a Form W-2 solely to report the value of the health care coverage for retirees or other employees or former employees to whom the employer would not otherwise provide a Form W-2.

The chart below illustrates the types of coverage that employers must report on the Form W-2. Certain items are listed as “optional” based on transition relief provided by Notice 2012-9.

The chart reviews the reporting requirements for Box 12, Code DD.

The chart was created at the suggestion of and in collaboration with the IRS’ Information Reporting Program Advisory Committee (IRPAC). IRPAC’s members are representatives of industries responsible for providing information returns, such as Form W-2, to the IRS. IRPAC works with IRS to improve the information reporting process.

---

Prevent Winter Slips And Falls

As the temperature drops, the number of slips and falls rise. Winter’s wet and icy conditions are dangerous and employers need to take the right precautions to prevent employees from falling. Employers with operations in areas affected by winter weather need to make sure their company safety program includes a section on preventing slips and falls in winter weather.

Your company winter slip and fall policy should include:

• Risk assessment of exposures
• Standard for the conditions of your parking lot, paths and walkways and stairs
• Safety equipment and proper footwear
• Employee training
• Defined roles of Management and Employees
• Communication of Management and Employee roles and the standards
• Confirm standards are met and the program works.
• Adjustments and improvements to your program as need.

Hazards to watch for:

• Slippery surfaces due to water, ice or snow from footwear
• Snowy and ice-covered sidewalks and parking lot
• Melted snow or ice, or grit at the entrance of buildings
• Black ice caused when temperatures rise above freezing and quickly drop below freezing
• Obstructed sidewalks and roadways
• Standing water caused by down spots and blocked drains

Keep your workplace safe by:

• Not getting caught by surprise. Monitor the weather and changing conditions.
• Keeping adequate supplies of snow and ice removal tools in accessible areas.
• Shoveling and applying ice melt as necessary to keep walking areas clean and dry.
• Watching for areas where ice tends to form. Removing ice accumulations promptly and applying additional ice melt to prevent buildup.
• Providing good lighting and clear path markings in parking lots and walkways.
• Clearly identifying steps, ramps and other elevation changes that might not be visible in snowy conditions.
• Placing high quality, beveled edge mats in walking areas subject to water or snow accumulation.
• Changing mats regularly to ensure those in place are dry .
• Placing WET FLOOR signs
• Applying a slip-resistant floor treatment in areas that tend to become wet and slippery. Cleaning and maintaining these floors according to the manufacturer’s specifications.

---

For Our Clients: Payroll Corner

Banks will be closed Monday, February 18th in observance of President’s Day, but Four Point HR will operate with normal business hours. The payroll department will contact any clients whose payroll may be affected by banks closing.

The 2012 W-2’s have been mailed to your employee’s home addresses that Four Point HR has on file for them. Employees, both active and terminated, requesting a re-print will be required to pay a $5.00 W-2 re-print fee. For existing employees, the $5.00 can be payroll deducted with a required completed Authorization for Deduction form. This form can be obtained through payroll, if needed. All other requests will be required to send a money order, payable to Four Point HR, and the re-printed W-2 will be mailed upon receipt of the money order.