• Removing penalties in certain pension plans for workers who phase into retirement by receiving a lower salary while working reduced hours.
• Allowing seniors to earn delayed retirement credits for Social Security purposes for an additional two years until age 72, instead of age 70.
• Reducing the amount of Social Security benefits lost to seniors who claim benefits before reaching normal retirement age and while they continue working.
• Forming a National Resource Center on Aging and the Workforce within the Department of Labor to collect, organize and disseminate older worker information;
• Changing how Civil Service Retirement System (CSRS) annuities are calculated by correcting a glitch that results in a disproportionate reduction in benefits for certain employees who phase into retirement by working part-time.
• Requiring states to include older worker representatives on the state and local workforce investment boards and set aside five percent of the Workforce Investment Act (WIA) funds to assist older individuals.
• Expanding eligibility of the Work Opportunity Tax Credit (WOTC) to include older workers.
• Clarifying that certain defined benefit pension plans can define normal retirement age under their plans as the earlier of (1) the attainment of a specified age, or (2) attainment of 30 or more years of service.
  

Labels: Incentives for Older Workers Act, Work Opportunity Tax Credit, WOTC

Labels: WOTC

Labels: WOTC

On May May 25th, 2007 President Bush signed legislation that increases the federal minimum wage to $7.25 an hour. The U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (H.R. 2206), which provides $120 billion primarily for the wars in Iraq and Afghanistan, includes a provision raising the federal minimum wage to $5.85 an hour beginning July 24, 2007, $6.55 an hour starting a year later, and $7.25 an hour, beginning two years later.

The bill also contains a $4.84 billion small business tax relief package and includes an extension of the Work Opportunity Tax Credit (WOTC). Congress approved the war funding bill on May 24.

Labels: WOTC

FUTA surtax

The proposal would extend the 0.2% FUTA surtax through December 31, 2012.

Work Opportunity Tax Credit (WOTC)

The WOTC would be extended to employers for qualified wages paid to eligible target group employees who begin work after September 31, 2007, and before January 1, 2009.

Employment taxes

The exception to the requirement for pre-levy collection due process (CDP) proceedings would be expanded to include levies issued to collect federal employment taxes. As with the current procedures applicable to levies issued to collect a federal tax liability from state tax refunds, the taxpayer would be provided an opportunity for a CDP hearing within a reasonable period of time after the levy. Collection by levy would be allowed to continue during the CDP proceedings. Taxpayers would retain their current right to seek managerial appeal of a proposed levy and to participate in the formal collection appeals process before a levy is issued. The proposal would be effective for levies issued on or after January 1, 2008.

Leasing companies

Standards for holding employee leasing companies jointly and severally liable with their clients for federal employment taxes would be set. In addition, standards would be set for holding employee leasing companies solely liable for such taxes if they meet specified requirements. The provision would be effective for employment tax returns filed with respect to wages paid on or after January 1, 2008.

Employer-based pensions

The proposal would consolidate those types of defined-contribution accounts that permit employee deferrals or employee after-tax contributions, including Code Sec. 401(k), SIMPLE Code Sec. 401(k), Thrift, Code Sec. 403(b), and Governmental Code Sec. 457(b) plans, as well as SIMPLE IRAs and SARSEPs, into Employer Retirement Savings Accounts (ERSAs), which would be available to all employers and have simplified qualification requirements. The proposal would be effective for years beginning after December 31, 2007. ERSAs would follow the existing rules for Code Sec. 401(k) plans, subject to the plan qualification simplifications described below. Thus, employees could defer wages of up to $15,500 annually, with employees aged 50 and older able to defer an additional $5,000 in 2007. The maximum total contribution (including employer contributions) to ERSAs would be the lesser of 100% of compensation or $45,000 in 2007. The taxability of contributions and distributions from an ERSA would be the same as contributions and distributions from the plans that the ERSA would be replacing. Thus, contributions could be pretax deferrals or after-tax employee contributions or Roth contributions, depending on the design of the plan. Distributions of Roth and non-Roth after-tax employee contributions and qualified distributions of earnings on Roth contributions would not be included in income. All other distributions would be included in the participants’ income. Existing Code Sec. 401(k) and Thrift plans would be renamed ERSAs and could continue to operate as before, subject to the simplification described below. Existing SIMPLE Code Sec. 401(k) plans, SIMPLE IRAs, SARSEPs, Code Sec. 403(b) plans, and governmental Code Sec. 457(b) plans could be renamed ERSAs and be subject to ERSA rules, or could continue to be held separately, but if held separately could not accept any new contributions after December 31, 2008, with a special transition for collectively bargained plans and plans sponsored by state and local governments.

Pensions

The proposal would consolidate the three types of current law IRAs into a single account: a Retirement Savings Account (RSA). RSAs would be dedicated solely to retirement savings; other withdrawals would be subject to tax and penalties, effective January 1, 2008.

Unemployment insurance

Incentives for the recovery of state unemployment benefit overpayments and delinquent employer taxes would be increased. In addition, states could redirect up to 5% of overpayment recoveries to additional enforcement activity. The proposal would require states to impose a penalty of at least 15% on recipients of fraudulent overpayments, and penalty revenue would be used exclusively for additional enforcement activity. States would be prohibited from relieving an employer of benefit charges due to a benefit overpayment if the employer had caused the overpayment. In certain circumstances relating to fraudulent overpayment of delinquent employer taxes, states would be allowed to permit private collection agencies to retain a portion (up to 25%) of any amounts collected. At the request of a state, the Secretary of the Treasury would collect benefit overpayments due to a state from any income tax refund owed to a benefit recipient. The proposal would allow states to deposit up to 5% of moneys recovered in the course of a UI tax investigation into a special fund dedicated to implementing the State Unemployment Tax Act (SUTA) Dumping Prevention Act of 2004 or enforcing state laws relating to employer fraud or tax evasion. Employers would be required to report a "start work date" to the National Directory of New Hires for all new hires. Finally, the proposal would authorize the Secretary of Labor to waive certain requirements to allow states to conduct Demonstration Projects geared to reemployment of individuals eligible for unemployment benefits. The provisions would be effective as of the date of enactment.

Standard deduction for health insurance (SDHI)

A standard deduction for health insurance (SDHI) of $15,000 for family coverage ($7,500 for single coverage) would be provided to all families who purchase health insurance that meets minimum requirements, whether directly or through an employer. The new SDHI would replace the existing exclusion for employer-based health insurance, the self-employed premium deduction, and the medical itemized deduction for those not enrolled in Medicare (typically those under 65 years of age). The current exclusion or deduction from income of health care spending, whether for insurance premiums or out-of-pocket expenses, except under a Health Savings Account, also would be repealed. Itemized medical deductions would still be available for taxpayers enrolled in Medicare. Employers would be required to report the value of health insurance coverage to their employees on their annual Form W-2 and such amounts would be subject to withholding and employment taxes. Employers would exclude a pro-rated portion of the SDHI for employment tax purposes for their employees who have qualifying coverage. Withholding and estimated taxes could be adjusted to reflect the SDHI. Businesses would continue to deduct employer-based health insurance as a business expense. In addition, the phase-out rate for the EITC for taxpayers with qualifying children would be reduced to 15%, effective for tax years after December 31, 2008.

Health savings accounts (HSAs)

The existing rule that denies tax-free treatment for HSA funds used to pay medical expenses incurred prior to the establishment of the HSA would be changed so that HSA funds could be used to pay medical expenses incurred on or after the first day of eligibility in a particular year, as long as the HSA is established no later than the date for filing the return for that taxable year. This would provide more time for newly eligible taxpayers to set up their HSAs, effective for tax years beginning after December 31, 2007.

Penalties

An assessable penalty would be established for a failure to comply with a requirement of electronic (or other machine-readable) format for a return that is filed. The amount of the penalty would be $25,000 for a corporation or $5,000 for a tax-exempt organization. For failure to file in any format, the existing penalty would remain, and the proposed penalty would not apply. The proposal would be effective for returns required to be electronically filed on or after January 1, 2008.

Labels: WOTC

• Raises the age ceiling on food stamp recipients through 39
• Combines WtW into the WOTC program
• Eliminates the earnings test for ex-felons
• Increases the paperwork filing deadline from 21 to 28 days
  

• Aid to Families with Dependent Children (AFDC) / Temporary Assistance to Needy Families (TANF)
• Ex-Felons
• Food Stamps Recipient
• High-Risk Youth
• Summer Youth Employee
• Supplemental Security Income (SSI) recipient
• Veterans
• Vocational Rehabilitation Referral
  

• CMS will identify eligible employees.
• CMS understands all the Federal and State guidelines for your company to obtain the eligible tax credits
• CMS handles all the administrative duties necessary to obtain WOTC in your state.
• CMS protects your organization from asking the sensitive questions necessary to obtain the WOTC tax credits.
  

Labels: WOTC

By Kevin Freking
Associated Press

WASHINGTON-- The welfare rolls aren't dropping as fast as they used to, and that could pose a big money problem for states from coast to coast after a new federal law takes effect next month.

The states' task: find jobs for tens of thousands of people on welfare or risk losing millions in federal money. More than two dozen states have work to do inlcuding Pennsylvania, California and Michigan.

The law requires states to place into job training, community service or other work activities 50 percent of their households that get welfare aid -- and 90 percent of their households that receive assistance.

"About half the states are in pretty good shape," said Wade Horn, assistant secretary at the Department of Health and Human Services. "About a quarter of the states are really going to have to work hard."

Pennsylvania will have to add nearly 23,000 recipients to the work rolls, which amounts to a 220 percent increase in work participation, according to federal estimates obtained by the Associated Press.

California has to find work activities for more than 60,000 people - a 100 percent increase in its work participation rate.

Michigan must add nearly 11,500, a 117 percent increase. Several other large states, including Texas, Florida and Georgia, will meet the requirements easily, according to federal estimates.

The requirements are part of broad rules that more strictly defines what constitutes work and require states to verify that adults are doing the activities the states say they are.

This week, five Democrats on the House Ways and Means Committee said the rules had placed new challenges on the states that would make the program more expensive and difficult to administer. They are asking for a congressional hearing.

Some analysts are also concerned that states will penalize beneficiaries as a way to get to 50 percent work participation, rather than help recipients land and keep jobs.

"The people who have the most barriers to employment, the most issues in their life, they tend to be sanctioned more than others," said Evelyn Ganzglass of the Center for Law and Social Policy. "But they often have problems that prevent them from complying. These can be mental health problems, physical disabilities, all kinds of issues that these families face."

Pennsylvania officials say their state has made significant strides since March, the last month included in the federal figures. Work participation is now up to about 32 percent instead of the 15 percent cited by the federal government, they said.

"We're confident we're going to hit the number," said Ted Dallas, executive deputy secretary for the Pennsylvania Department of Public Welfare.

Dallas said the new regulations have forced Pennsylvania to re-evaluate its program. He said there has been more one-on-one counseling and more accountability from contractors. He also said more recipients have been penalized when they did not comply with state requirements.

States can kick recipients out of the program if they have not met certain requirements, such as attending appointments with counselors or going to job interviews. Sanctions in Pennsylvania rose from 1,030 in February to 2,327 in July, state officials said.

Labels: WOTC

Labels: WOTC