SPECIAL NOTE! 3 Mandatory Employee Notices Due in January

Most small business owners know that they need to distribute their business’s 2014 W-2 forms to their employees before the end of January. But did you know that you also need to supply other year-end employee notices, too?

Annually, you should review all requirements concerning Federal and state employee notification reports, especially those containing supplemental tax information for your employees. You should prepare and distribute any mandatory reports to your employees to help them fulfill their personal tax filing obligations. Some mandatory notices that you’re required to provide to your employees include:

• The special accounting rule/no federal income tax withholding on personal-use auto notice. If you provide employees with a company vehicle that they can drive for personal use, in most cases, this personal use is considered a taxable fringe benefit. As an employer, you’re responsible for withholding taxes on the fair market value (FMV) of this benefit, which is determined at least once a year. If you determine the FMV based on monthly valuations, you can simplify your tax reporting by using a special accounting rule that allows you to use the value of the fringe benefit for November and December of the calendar year, and combine that valuation with the value of the first ten months (January through October) of the following year. If you used this special accounting rule in 2014 to determine FMV, or you plan to not withhold federal income tax from the value of your employee’s personal use of company vehicles in 2015, you must provide employees with a notice by February 2, 2015. For more information, refer to the IRS Employer’s Tax Guide to Fringe Benefits.
• Charitable contributions report. If your employees make charitable contributions to national or local non-profit organizations through payroll deductions, you’re required to report to each employee the annual total of charitable contributions the individual made. Consider using box 14 of the Form W-2 to report this annual total.
• Earned Income Tax Credit (EITC) notice. The EITC is a tax credit for low-income working families. For federal purposes, the back of Copy B of the Form W-2 includes eligibility information about the EITC for your employees that meets notification requirements. However, some states may require a separate notification (other than the Form W-2, Copy B) and have a different annual deadline for notifying your employees about the EITC. To get the word out about this tax credit, January 30, 2015 is EITC Awareness Day.

Besides mandatory employee notifications, you also should consider processing and distributing other reports that may be helpful to your employees in completing their taxes as well.

If you need help identifying all of the mandatory and optional employee notifications your small business should make, contact The Payroll Department at 317-852-2568. By engaging the services of a professional payroll services provider, we’re your experts in all things concerning your payroll.

– Ariane of The Payroll Department Blog Team