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What is the NJ Notice of Employer Contribution Rates?

employer contribution

Every year at the end of July every employer subject to NJ unemployment taxes receives a “Notice of Employer Contribution Rates”. The form is light blue and mailed from The State of New Jersey Department of Labor and Workforce Development Employment Security Agency.

The Purpose of This Important Form

The purpose of the form is to advise the employer what their unemployment and disability tax rates are for the next year. Here is what you need to know.

Your payroll service uses the tax rates to calculate your unemployment and disability payroll taxes. What you do with the notice depends on the instruction you receive from your payroll service. There are three options.

1) If your payroll service downloads the rates directly from NJ you do not need to do anything.
2) If your service does not download the rates they will ask you to send them the notice.
3) Some internet only payroll services will require you to log on and enter the rates yourself.

Pieper Payroll falls in the first category. We download your rates. It is not necessary to send us your rate notice. We download your tax rate directly from NJ and automatically update your account.

Unemployment and Disability Rates in NJ

Unemployment/Disability Rates in New Jersey are assigned on a fiscal year basis (i.e. July 1st to June 30). All new employers (except successors) are assigned new employer rates for the first three calendar years after which a calculated rate is assigned based on employment experience.

Rates Are Retroactive

Please note, even though NJ does not issue the rates until the last week of July, they are retroactive to July 1st. If your rate does change, your payroll service needs to recalculate your tax liability back to July 1st and then credit/debit your account for any differences at the same time your third quarter tax report is completed.

Thank you for reading our blog! How can we help you? Contact us today.

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What is the New Jersey Combined Assessment Bill?

assessment bill

Every year at the beginning of July every employer subject to NJ unemployment taxes receives a “Combined Assessment Bill”. The form is salmon colored and is mailed from the New Jersey Department of Labor and Workforce Development (NJ LWD) Division of Employer Accounts.

Because NJ LWD is also responsible for administering New Jersey’s unemployment and disability benefits programs as well as collecting related payroll taxes, clients are typically confused and often contact their accountant or payroll service for direction. Here is what you need to know.

Who Pays the Bill?

The employer is responsible for paying the bill. The assessments listed on the bill are not related to payroll taxes and are not paid by your payroll service. The assessments are not penalties, nor are they the result of any error.

The bill should be paid right away as interest is assessed if payment is late. The amount due can be just a few dollars if the employer has only 1-2 employees, growing to several hundred dollars for businesses with 20-50 employees. Payment can be made by check or online following the instructions on the form. The due date is usually on, or around August 1st.

Detailed Description of Each Assessment

For the curious, here is a detailed description of each assessment from the New Jersey Department of Labor and Workforce Development website.

State Plan 4F Deficit Assessment

The (State) Plan 4F Deficit Assessment is levied to cover Unemployment/Disability Benefits paid to unemployed persons who have become disabled and thus have been rendered ineligible for unemployment benefits. This is not the same as regular unemployment or regular disability benefits.

Private Plan 4F Deficit Assessment

The Private Plan 4F Deficit Assessment is the same as the State Plan 4F Deficit Assessment but only applies to employers which have been approved to be self-insured for Disability. If an employer has an approved Private Disability Plan with an Insurance Company, the Insurance Company will be billed for this assessment.

State Plan Experience Rating Costs Assessment

The State Plan (Experience Rating) Costs Assessment funds the costs of compiling the data which allows employers in the State Plan Disability program to pay contributions to the fund relative to their experience rating (contributions paid, less benefits charged).

Private Plan Administrative Cost Assessment

The Private Plan Administrative Cost Assessment reimburses the Department of Labor and Workforce Development for costs incurred to oversee and approve Private Disability Plans. This assessment only applies to employers which are self-insured. If an employer has an approved Private Disability Plan with an Insurance Company, the Insurance Company will be billed for this assessment.

Combination of State and Private

Employers with combination (both State & Private) disability plans may receive all of the disability assessments outlined above.

Catastrophic Illness Fund Assessment

The Catastrophic Illness Fund Assessment (CIF) was created in 1987 by the NJ State Legislature to provide funds to families who have incurred extraordinary medical expenses due to a child’s illness. It is funded, by law, through assessments to all New Jersey employers. There are no exemptions to this assessment.

Right to Know Assessment

The Right to Know Assessment (RTK) started in 1986. This fund supports the costs of collecting information about the hazardous substances used, manufactured, stored and released from businesses in New Jersey. This information is collected, summarized and made available to the public and to emergency responders by the NJ Department of Environmental Protection. Only employers in certain industries are subject to this assessment. The NAICS Industrial Codes of subject employers were determined when the law was written.

Pollution Prevention Fund Assessment

The Pollution Prevention Fund Assessment (PPC) covers the same employers as the Right to Know Fund. This assessment began in 1993. Subject companies must develop and submit to the DEP formal plans to voluntarily reduce their use and generation of hazardous substances that are not products. The assessment funds the administration of this program at DEP.

Medical Malpractice Liability Insurance Premium Assistance Fund

The Medical Malpractice Liability Insurance Premium Assistance Fund was established by the Legislature in order to keep physicians from leaving the State of New Jersey. The assessment for this fund was based on the number of employees in 2003, 2004, and 2005. This assessment is currently inactive.

Questions regarding the combined assessment can be directed to the NJ Assessment Office at 609-292-7397 or email assessments@dol.state.nj.us

Thank you for reading our blog! How can we help you? Contact us today.

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The Top 14 Questions About the New IRS Withholding Tables

irs withholding tables

Following the recent tax law changes, it’s especially important for certain employees to use the Withholding Calculator on IRS.gov to check if they are having the right amount of withholding.

Q: What is a withholding table?

A: A withholding table shows the employer and payroll service how much tax to withhold from employee paychecks, given the information shown on Form W-4.

Q: Why should employees check their tax withholding?

A: There are changes in the tax law every year that could affect the amount of tax they owe.

Q: Will employees need to fill out a new Form W-4?

A: It depends. Every year the IRS revises the Form W-4 worksheets and the Withholding Calculator. Employees should use the Withholding Calculator to check if they need to adjust their withholding. If they need to fill out a new Form W-4, they should do so and give it to their employers.

Q: What is a Form W-4?

A: Form W-4 is an IRS form that employees give to their employers that provides information used to determine the amount of federal income tax to withhold from each employee’s paycheck. The Form W-4 relates to an employee’s federal tax withholding. State withholding is separate.

Q: Do all employees need to check their tax withholding?

A: No. Employees with simpler tax situations do not need to make any changes. Simple situations include singles and married couples with only one job, who have no dependents, and who do not claim itemized deductions or other adjustments to income or tax credits.

Q: Which employees check to see if they should change their withholding allowances?

A: If an employee falls into any of the following groups they should check to see if they are having the right amount of withholding.
– Belong to a two-income family.
– Work two or more jobs or only work for part of the year.
– Have children and claim credits such as the Child Tax Credit.
– Have older dependents, including children age 17 or older.
– Itemized deductions on their last tax return.
– Earn a high income and/or have more complex tax returns.
– Received a large tax refund or had large tax bills.

Q: Should employees that live and work in New Jersey change their withholding allowances?

A: In addition to the situations described above, New Jersey employees that have state and local tax deductions greater than $10,000 are advised review their withholding allowances.

Q: How do Employees change the amount of tax withheld from their paychecks?

A: Employees who need to change the amount of tax withheld from their paychecks need to complete Form W-4 and give it to their employer. The IRS encourages employees to use the Withholding Calculator to check their personal situation and help see if they are having the right amount of tax withheld.

Q: What is the Withholding Calculator?

A: The Withholding Calculator is a tool on IRS.gov designed to help employees determine the right amount of tax to have their employer withhold from their paychecks. It is a more accurate alternative to the worksheets that accompany the Form W-4s.

Q: Where can I find the IRS Withholding Calculator?

A: IRS.gov then search withholding calculator

Q: Does the IRS prefer that people get refunds?

A: Getting a refund is a personal choice for taxpayers.

Q: How does someone determine how many allowances they should claim on their Form W-4?

A: The Withholding Calculator will help employees determine that. Remember, the fewer allowances someone enters on the Form W-4, the more tax will be withheld from their paycheck. So, entering “0” or “1” on Form W-4 will mean more tax is withheld from their paycheck. Entering a larger number of allowances means less tax withholding—which means a smaller tax refund or potentially a tax bill when the employee files their tax return. Employees with more complicated tax situations should review their situation carefully. The Withholding Calculator can help.

Q: Can a payroll office or human resources department help someone understand these tax law changes or use the Withholding Calculator?

A: It is an employee’s responsibility to check their withholding and determine if it’s accurate for their personal situation. Payroll offices and human resource departments are responsible only for processing the Form W-4. The people working in these offices do not know the rest of someone’s personal financial situation, and they are not responsible for giving you tax advice.

Q: Does it make any difference when an employee checks on their withholding?

A: Sooner is better. Withholding takes place throughout the year. If an employee needs to adjust their withholding, doing so as quickly as possible means there’s more time for tax withholding to take place evenly during the rest of the year.

Our team of professionals is available to help small businesses in NJ figure out withholding tables and other payroll-related issues. We help businesses remain in compliance with the latest updates.

Thank you for reading our blog! How can we help you? Contact us today.

Disclaimer
This FAQ is based on material sourced from irs.gov and may not be relied upon as legal authority. This means that the information cannot be used to support a legal argument in a court case.

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Six Common Payroll Errors Made By New Jersey Employers

payroll errors

Making payroll mistakes can become costly for everyone. Unfortunately, they happen at all types of small businesses. Discover six common payroll errors made by New Jersey employers to see if you are making any of them.

1) Classifying W2 Employees as 1099 Contractors

Employers sometimes choose to set-up what should be W2 employees as 1099 contractors. Since employers do not have to pay payroll taxes for independent contractors, they believe they can save money by doing this. If an employer is discovered to be misclassifying workers, the employer is subject to paying not only their share of the taxes but also the employee’s taxes. Also, there are usually penalty and interest charges. New Jersey is particularly strict about enforcing proper classification of workers.

2) Miscalculating State Unemployment Tax

Incorrectly calculating your state unemployment tax can lead to penalties and interest charges. Every state is different, but New Jersey has seven different unemployment taxes. The amount due is based on the amount of wages and the tax rate for each tax. The wage threshold and five of the taxes change every year on January first. The remaining two other tax rates change every year on July first. Accurate calculation of your tax liability depends on knowing your current tax rate and the taxable wages of each employee.

3) Not Depositing Payroll Taxes on Time

Employers are usually required to deposit withholding and FICA taxes on either a semi-monthly or monthly schedule. A 941 report is then prepared and sent to the IRS every quarter describing how much, and when, those deposits were made. Unemployment taxes are usually deposited on a quarterly and annual basis. In New Jersey, an NJ-927 and WR-30 are due every quarter. An annual form is sent to the IRS once a year. Not reporting based on these schedules results in late penalties and interest charges.

4) Failure to Keep Payroll Records

According to the Fair Labor Standards Act (FLSA) you need to keep all records at least three years and those records that show how you determined wages for two years (e.g., time cards that comply with FLSA timekeeping requirements). According to the IRS, you must keep records of payroll taxes for at least four years after filing the fourth quarter for the year.

5) Not Reporting New Hires

New Jersey requires the reporting of all new hires. The reporting of new hires is used by the state to send garnishment and family support orders to employers who are then required to garnish employee wages as directed.

6) Failure to Obtain Worker Compensation Insurance

New Jersey law requires that all New Jersey employers, not covered by Federal programs, have workers’ compensation coverage or be approved for self-insurance.  Even out-of-state employers may need workers’ compensation coverage if a contract of employment is entered into in New Jersey or if work is performed in New Jersey.

One of the smartest ways to avoid potentially costly payroll errors is to work with a full-service payroll company for small businesses in NJ.

Thank you for reading our blog! How can we help you? Contact us today.

 

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Client Resources Articles

Client Resources Articles

Client Resources Article Index

Full Articles

If you receive a IRS Notice titled “Your 2015 Federal Tax Deposit Requirements for Form 941”

Starting in November the IRS has mailed notice describing 2015 Federal Tax Deposit Requirements to businesses that will have a change in their deposit frequency next year.

  • Every year the IRS re-evaluates the deposit frequency for payroll tax deposits against a threshold amount. Your deposit frequency may change as a result.
  • Usually only a small number of our clients are affected since liabilities are usually fairly consistent year over year. If you have no change in your deposit frequency you will not receive a notice.

While the IRS may provide a courtesy copy of the notice to us, there have been exceptions. If you receive a notice please fax it to our office or just send an email indicating whether your deposit frequency changed to either semi-weekly or monthly.

Similar letters from New Jersey will follow in the near future. Changes in tax frequency are effective Jan 1 for the IRS and April 1 for NJ.

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New Jersey Announces an Increase in Minimum Wage to $8.38 an Hour

On September 30th New Jersey LWD announced the minimum wage will increase by 13 cents an hour to $8.38 an hour starting in January 1, 2015. The 1.59 percent increase, from $8.25 an hour to $8.38, is required under a constitutional amendment approved by 61 percent of voters last November that raised the minimum wage by $1 for 2014 and provided for automatic yearly increases to keep pace with inflation.

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3Q14 Quarterly Reports Have Been Filed

Your Federal 941 and New Jersey NJ-927 and WR-30 quarterly reports have been filed. Courtesy copies have been posted to your web portal. Hard copies have also been distributed to print clients.

Directions to access your reports on your web portal are provided in the guide “How to Access Quarter & Year End Reports”.

If you notice a small tax credit or debit from your account at the end of October it is part of our quarter balancing process…

  • Federal and State unemployment rates can change during the course of a quarter but be effective retroactively to the beginning of the quarter.
  • As NJ updates unemployment and disability rates in August retro-actively to July 1st you can expect to see a balancing adjustment if your rates changed.
  • Our software keeps track of any tax rate changes and automatically recalculates liabilities to their effective date.
  • We then credit or debit your payroll account for any balance or refund due. This keeps your deposits and liabilities in balance and assures that no tax penalties will be incurred.
  • A debit or credit will display the same description in your bank statement as regular tax debits.

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Pieper Payroll Completes Quarter Balancing for Clients with Updated UI/DI Contribution Rates

Pieper Payroll reconciles all client unemployment tax returns prior to filing them with New Jersey. Basically we recalculate your taxes for the period during which your new rates were not available. This process assures that your unemployment tax liabilities and deposits are balanced. This approach greatly reduces the chance for any penalties.

With the completion of our quarter balancing process may notice a credit or debit to your payroll account on or around October 31st.

  • If your rates went down you will receive a credit to your account
  • If your rates went up there will be a debit to your account

Pieper Payroll completes the quarter balancing process at the end of every quarter. New Jersey employers usually only see adjustments at the end of 3Q when UI rates change. Employers in other states usually see adjustments at the end of the 1st quarter since most states change rates on a calendar basis.

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Pieper Payroll Completes Download of Client Unemployment and Disability Rates

The updating of unemployment and disability rates by New Jersey is probably the single biggest source of filing errors that can result in fines and penalties. Most small businesses are unfamiliar with the notification process for new rates and fail to update their payroll service. If your rates are not properly updated then taxes will be calculated incorrectly and the quarter end return will be incorrect.

Pieper Payroll has completed its download of your unemployment and disability experience rates and has updated the tax rates we use to calculate your payroll. The file we received contains the same information that is in the blue form you receive from NJ.

We are now using your new rates to calculate your payroll. Just as a reminder, even though New Jersey communicates new rates in late July and early August they are retroactive to July 1st.

If your rates changed we will balance your tax deposits and liabilities at the end of the 3rd Quarter.

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NJ LWD Releases Experience Based Unemployment, and Disability, Tax Rates for 2H14 and 1H15

NJ LWD mailed a “Notice of Employer Contribution Rates,” for the fiscal year 2H14/1H15, during the fourth week of July 2014. All employers receive this notice. It is a blue form that is easily recognizable but very confusing to most small business owners.

If you are a new business then your rates will be the new business rates announced earlier in the month. If your rates are “experience based” (generally employers with three or more years of unemployment experience) they are specific to your business.

Your rates are retro-active to July 1, 2014 even though they are distributed late July and early August.

Unlike other payroll services no action is required for Pieper Payroll clients. Pieper Payroll has fully automated the loading of your new contribution rates. Our data rate interchange process allows us to download your new experience rates directly from the State of New Jersey and then directly into our software. This simplifies the process for you, and eliminates manual rate entry for us making errors less likely.

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How New Jersey Calculates Your Unemployment and Disability Experience Rates

New Jersey maintains a reserve for every business that is used to fund unemployment and disability benefits.

  • If you have had unemployment claims it is likely that your state defined reserve ratio has fallen below a NJ defined ratio. In that case your rates will increase until the target reserve ratio is reached.
  • If you have not had unemployment claims then your reserve ration it is likely to be higher than the state target and your rates will decrease over time.

If you are a new, or recently formed business, you may be assigned new business rates for the first three calendar years. After three years your experience rate is assigned based on your unemployment and disability claims experience.

In our experience unemployment rates can vary from under 1% to over 6%. If you are interested understanding how your experience based contribution call NJ LWD at 609-633-6400 and choose prompt 1.

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NJ LWD Announces Contribution Rates for New Businesses and Employees

NJ LWD announced new employee and employer contribution rates for 2H14 and 2015. These rates encompass unemployment, disability, workforce development, and family leave insurance. A summary of rate changes follows.

  • New business employer rates are unchanged through 1H15. Rates for 2H15 have not been released. New businesses generally have less than 3 years of unemployment history. They are provided default rates until NJ LWD has enough history to have experience rates calculated.
  • Employer Workforce Development rates are unchanged through 1H15. Rates for 2H15 have not been released.
  • Employee unemployment rates are unchanged for 2015
  • Employee disability rates will 0.38% in 2014 to 0.25% for 2015.
  • Employee rates for Family Leave Insurance decrease from 0.1% in 2014 to 0.9% in 2015.

Employers that have calculated experience based rates (generally those employers with 3 or more years of history) are scheduled to have their Unemployment and Disability rates mailed to them late July or early August.

No action is required for Pieper Payroll clients. We will automatically update rates as they are received.

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New Jersey Announces increased Employee Disability Tax Rates for 2014

The New Jersey Department of Labor and Workforce Development released the calendar year 2014 employee Temporary Disability Insurance (TDI) and Family Leave Insurance (FLI) withholding rates. The Disability Insurance rate will increase to 0.38%for calendar year 2014, up from 0.36% for calendar year 2013. The 2014 Family Leave Insurance rate will remain unchanged at 0.10%. The combined Employee Unemployment Insurance and Work Force Training tax rate will also remain unchanged at .0.425%.

The taxable wage base will increase from $30,900 to $31,500. Based on the 2014 taxable wage base of $31,500, a worker’s maximum TDI contribution for 2014 will be $119.70, the maximum FLI contribution for 2014 will be $31.50, and the maximum Combined UI/WF will be $133.99. New Jersey Labor and Workforce Development revises employee UI/DI/WF tax rates effective January 1 each year. Employer tax rates are revised effective July 1 each year.

For more detail on NJ LWD employee and employer tax rates visit: http://lwd.dol.state.nj.us/labor/ea/rates/rateindex.html

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Social Security Wage Base increases in 2014

Social Security and Medicare taxes are employee and employer paid payroll taxes. The Social Security wage base used to calculate employee and employer Social Security Taxes will increase from $113,700 in 2013 to $117,000 in 2014. As a result New Jersey employees and employers with earned income over $113,700 in 2014 will have an increase in their payroll taxes.

Tax rates will remain unchanged in 2014 at 7.65% each for employees and employers. The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion is 6.20% on earnings up to the applicable taxable maximum amount. The Medicare portion is 1.45% on all earnings. Continuing in 2014 for individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly), is an additional 0.9 percent Medicare tax.

For the complete Social Security Administration Fact Sheet go to: http://www.ssa.gov/pressoffice/factsheets/colafacts2014.html.

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Lower FUTA Tax Rates for New Jersey in 2013

Federal Unemployment Taxes are an employer paid payroll tax. The normal tax rate is 0.6% on an employee’s first $7000 in earned income. New Jersey had borrowed funds from the Federal Government to maintain the solvency of NJ unemployment fund in 2010, 2011 and 2012. As New Jersey had not repaid the loans the FUTA payroll tax rate for New Jersey employers was increased to 0.9% in 2011 and 1.2% in 2012.

On October 24th, 2013 New Jersey Governor Chris Christie announced that New Jersey will repay its federal unemployment insurance (FUTA) loan balance by the end of October. As a result the FUTA tax rate will return to 0.6% for 2013 from the current 1.2% withholding rate. If the loan was not been repaid the tax would have increased to 1.5% in 2013. Once the Federal Government confirms the reduction of New Jersey’s FUTA payroll tax rates in early November employer payroll tax rates will be adjusted. Payroll services will then recalculate payroll taxes retro-actively to January 1st, 2013 and return any excess taxes to employers.

More information can be obtained at http://lwd.dol.state.nj.us/labor/lwdhome/press/2013/20131024_unemploymentrustfundbecomessolvent.html

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NJ Work force Development Notice of
Employer Contribution Rates

New Jersey has recently distributed their notification of employer unemployment and disability experience rates for the period July 1, 2013 through June 30, 2014. Notices are distributed the fourth week of July and the new rates are effective retro-actively to July 1st. It is a blue notice that looks like the attached sample.

No action is required for Pieper Payroll clients.

  • Traditionally a New Jersey employer was required to forward their new experience rates to their payroll service to manually update the tax rate. Pieper Payroll has fully automated this process which will allow us to download your new experience rates directly from the State of New Jersey and then directly into our software. This simplifies the process for you, and eliminates manual rate entry for us making errors less likely.
  • New Jersey releases their data file at the end of August. Once we receive your updated rates they will be used for all subsequent payrolls.
  • Even though New Jersey releases updated rates after the July 1st effective date we will automatically recalculate your taxes at the end of the 3rd quarter back to July 1st to assure liabilities and deposits are in balance. If your rates had gone up and additional taxes are owed we will debit your account at the end of October. If your rates have been lowered and less tax is owed we credit your account for any over payments.

If you are interested understanding how your rates are calculated see the attached explanation or call NJ LWD at 609-633-6400 and choose prompt 1. Basically New Jersey calculates your experience rates as follows:

  • If claims have depleted your state defined reserve balance your rates are higher. If your reserve ratio is higher than the state target then your rates are lower.
  • If you are a new, or recently formed business, you may be assigned new employer rates for the first three calendar years. After three years your experience rate is assigned based on your unemployment and disability claims experience.

Pieper Payroll maintains the following New Jersey LWD tax rates and applicable wage bases for you.

  • Unemployment (employer and employee)
  • Work Force Development (employer and employee)
  • Disability (employer and employee)
  • Family Leave Insurance (employee)

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NJ Annual Assessment

Several Clients have inquired about the new Jersey annual assessment forms currently arriving in the mail….

Seven different annual assessments are levied on New Jersey employers according to various NJ statutes. These assessments, which are required by law, fund programs that are not covered by the quarterly contributions as reported by the NJ-927 report and submitted by Pieper Payroll. The assessments are not penalties and are not the result of an error. The same assessment rates apply to all employers that had employees in the previous year. The assessments are not a payroll tax and should be paid by the employer. A sample copy of the assessment notice can be found at this link. The second page of the notice describes the assessments in detail.

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Notice of the NJ Federal Loan interest (FLINT) Assessment

The NJ Department of Labor and Workforce Development announced via its website that the department plans to mail the 2012 federal loan interest assessment to employers on June 8th, 2012 with payment due on July 8th, 2012. This is one month early than the same assessment in 2011. This assessment, since it relates to the funding of New Jersey’s Unemployment Insurance fund is frequently assumed to be a payroll tax by NJ employers. It is important to understand that the assessment is a separate interest assessment and NJ employers who receive an assessment notice will be responsible for paying your assessment directly to New Jersey.

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Background: The New Jersey Department of Labor and Workforce Development (Department) was required to borrow funds from the United States Treasury in order to pay Unemployment Insurance benefits. Payment of the interest on the outstanding loan is due September 30, 2012. As required by N.J.S.A. 43:21-14.3, The Department must assess all employers for the interest due. Each employer’s assessment will be determined by multiplying the amount of the employer’s calendar year 2011 unemployment contributions by 2.1486%, a ratio calculated in accordance with state law above. The calculation of the employer’s assessment will be shown on the notice to be mailed to employers. As long as your business was active during some portion of 2011 there will be an assessment. The minimum assessment is $5.00. Payment instructions will be provided in the notice.

Complete details can be found at the following NJ Department of Labor and Workforce Development link:

http://lwd.dol.state.nj.us/labor/employer/ea/empinfo/FLINT.html

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Payroll Tax Cut Extended

Legislation to extend a two percentage point cut on the employee side of the payroll tax through the end of 2012 was signed by President Obama on February 22nd. Employees will continue to be taxed on a lower Social Security tax withholding rate of 4.2 percent, which is two percentage points less than the 6.2 percent rate scheduled to go into effect March 1, 2012. This reduced rate, originally in effect for all of 2011, was previously extended through February 2012.

A comparable rate reduction in the Social Security portion of the self-employment tax, from 12.4 percent to 10.4 percent, applies for self-employed individuals. For 2012, the Social Security tax applies to the first $110,100 of wages and net self-employment income received by an individual.

The new law also repeals the recapture provision included in the previous extension that effectively capped the amount of wages eligible for the payroll tax cut at $18,350.

On February 23rd, the Internal Revenue Service released a revised Form 941, Employer’s Quarterly Federal Tax Return, enabling employers to properly report the newly-extended payroll tax cut. If you are currently an active Pieper Payroll client there is no action required as we handle the payment of your quarterly payroll taxes, complete and submit this form for you.

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Payroll Tax Break Extended for 2012 (12-11)

President Obama signed into law a 2-month extension of the 2% reduction in employee Social Security tax on Friday 12-23-11. The employee Social Security rate remains at 4.2% through at least February 29, 2012.

Pieper Payroll has updated our tax software to reflect the extension of this payroll tax reduction.

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NJ Annual Reconciliation of Gross Income Tax
Withheld (Form NJ-W-3)

Clients are starting to receive a form notice from NJ with instructions for filing the NJ-W-3 form. This is a reminder than filing of this form is included as part of your tax service with Pieper payroll and that no action is required on your part. A copy of the filings will be provided early 1Q12 with copies of your other year end forms.

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NJ Division of Employer Accounts 2012
Worker Rates Released (12/11)

This notice is informational. Your taxes rate have been updated by Pieper Payroll

Unemployment Insurance: 0.3825%
Disability Insurance: 0.2%
Workforce Development/Supplemental Workforce Funds: 0.0425%
Family Leave Insurance: 0.08%

Please note the new worker FLI and DI rates for the 1st and 2nd quarters of 2012. The 2012 Taxable Wage Base under UI, TDI and FLI: $30,300

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2012 New Jersey Gross Income
Tax Instruction Booklet (12/11)

This notice is informational. Your tax rates have been updated by Pieper Payroll
The New Jersey Division of Taxation has released the 2012 New Jersey Gross Income Tax Instruction Booklet. The percentage method
withholding tables are unchanged.
http://www.state.nj.us/treasury/taxation/pdf/current/njwt.pdf

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2012 W4 Form Released (12/11)

Employers should use the updated forms
The 2012 W4 Form has been released. Employers should request that employees complete form W-4 every year or whenever their tax status changes. This form should be retained by the employer.
http://www.irs.gov/pub/irs-pdf/fw4.pdf?portlet=103

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Notification to ach Credit payers of change
in banking information (10/11)

This notice is informational. Your tax deposit process has been
updated by Pieper Payroll

The State of New Jersey recently notified ACH credit payers of a contractual banking change that affects tax, Unemployment Insurance and energy tax payments. Taxpayers who remit payments using the ACH credit method were instructed to change banking information.

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FEDERAL LOAN INTEREST (FLINT) ASSESSMENT (7/11)

Several clients have asked me about a recent bill they have received from NJ Department of Labor and whether it was payroll related. This is not payroll related. This is a NJ assessment bill that has been assessed on NJ employers as a result of interest costs NJ incurred borrowing money from the
Federal Government. Details at this web site:
http://lwd.dol.state.nj.us/labor/employer/ea/empinfo/FLINT.html and below

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2011/2012 Business Specific Unemployment
and Disability Rates Released (7/11)

Employer action is required to provide Pieper Payroll with your
new experience rates

NJ Department of Labor and Workforce has released their annual notification of business experience tax rates for 2H11/1H12. They were mailed by NJ DOL on 7-29-11 and were effective 7-1-11. If you have not received your rate yet please call NJ DOL @ 609-633-6400 option 1 then option 5 for rates.
This form should be faxed to our office @ 908-926-2348 so we can update your tax rates. These tax rates vary by business based on your unemployment and disability tax claims.

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2011 New Jersey’s Unemployment & Disability Insurance Programs Handbook is available (1/11)

This notice is informational;
The 2011 New Jersey’s Unemployment & Disability Insurance Programs Handbook is available
http://lwd.dol.state.nj.us/labor/forms_pdfs/employer/B-426EmployerHndbk.pdf

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What are the benefits of payroll outsourcing?

Because it is inexpensive relative to the benefits provided, payroll services are frequently one of the first business functions that a small business will outsource to a payroll outsourcing services provider.

Here are the key benefits of payroll outsourcing:

Save Time and Money

A good payroll outsourcing service will have invested in specialized software and trained staff to do the job more accurately and quickly than a business can do it on their own. In addition a payroll outsourcer will keep up with changes to state and federal payroll tax laws that may impact employee pay.

Avoidance of Tax Penalties

Reputable payroll outsourcing companies will take responsibility for accurate and prompt filing of your payroll taxes at federal, state, and municipal levels. Your payroll outsourcer should be willing to act as your agent and respond to any tax inquiry on your behalf. Your payroll service should guarantee their work by accepting responsibility for any fees or penalties due to their error.

Business Continuity

Outsourcing your payroll will provide your business an important safety net. Many businesses have relied on a key employee, or book-keeper, for their payroll and had to scramble when that resource unexpectedly left the business. If you have outsourced your payroll you can rest assured that your payroll process, records, and tax history are retained and continually available.

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New Jersey Payroll: What payroll options are available?

It’s no surprise that NJ Small Business Owners are looking for payroll options that will minimize the risk of payroll compliance issues. If you are a small business operating in New Jersey you already know that New Jersey Payroll Taxes are among the most complicated in the nation. While most states only have an employee withholding tax and an employer unemployment tax, New Jersey also adds employer disability and workforce taxes as well as employee unemployment, disability, workforce, and family leave taxes. The taxable wage base changes every January and business specific contribution rates change July 1st although the business owner may not learn of their new rate until August or September. In addition New Jersey businesses are now required to file electronically.

So what payroll options are available for New Jersey Small Business Owners? Well, here are three popular options:

  1. Accounting software (e.g. Quickbooks) frequently appeals to “do it yourselfers”. While on the surface it is the least expensive option, there are several hidden costs
    1. They take more of your time.
    2. You must subscribe to additional payroll and tax databases.
    3. You must purchase preprinted checks, micr ink and frequently dedicate a printer
    4. You are exposed to fines for compliance issues if by missing or miscalculating taxes, or making errors with compliance reporting
  2. Some Business Owners have experimented with the relatively newer Internet based online payroll. A cost effective solution for a few, internet based payroll services are basically another “do it yourself” solution. It is it is important to understand that these services will not take responsibility for compliance issues that result from errors in set-up, data entry, and compliance reporting.
  3. A payroll service is the most popular payroll option. Outsourcing your payroll to an experienced New Jersey payroll provider will save you time and reduce the risk of payroll compliance issues. Since most payroll outsourcers have very good technology, and take responsibility for compliance, service and price becomes a key differentiator. While most large businesses tend to use large National providers like ADP, PayChex, or Ceridian, smaller businesses frequently find reputable locally based independent providers are able to give them more attention and offer more reasonable rates.
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W2 and W3 Reporting in New Jersey

Every year I receive a few questions related to W2 and W3 reporting. Employees should receive a Form W-2, Wage and Tax Statement from each of their employers where they worked during the year. Employers have until January 31 to send their employees a Form W-2 earnings statement. If you haven’t received your W-2 by early February, follow these three steps:

  1. Contact Your Employer: Inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address.
  2. Contact your Payroll Company: If your employer was dealing with a local payroll company you are probably in luck. Smaller local payroll companies keep good records and are probably on a first name basis with the employer. They can easily check to see if there is a problem and re-issue the W2.
  3. Contact the IRS: Call the IRS for assistance at 800-829-1040. Based on the information you provide to the IRS, they will contact your employer for you. The IRS will also send you a Form 4852 which is a substitute for Form W-2. They will instruct you how to complete the form so you can file your taxes.

Always review your W2 carefully to make sure your Social Security Number is correct. If it isn’t advise your employer immediately so that it can be corrected before your payroll company submits the W2’s to Federal and State
reporting agencies.

All New Jersey based Employers must file a Gross Income Tax Reconciliation of Tax Withheld (Form NJ-W-3) each year to report the total monthly tax remitted, wages paid and withholdings. Registered employers must file Form NJ-W-3 even if no wages were paid and no tax was withheld during the year. The due date for filing the reconciliation is on or before the last day in February following the close of the calendar year.

If you are doing this yourself a copy of each employee’s Federal Wage and Tax Statement (W-2) must be enclosed with the NJ-W-3. You must also enclose a totaled listing, such as an adding machine tape, of income tax withheld as shown on the W-2’s.

Please note that in New Jersey each employee’s W2 should show their contributions to New Jersey State funds for Unemployment Insurance, Workforce Development, Disability Insurance, and Family Leave Insurance. These totals should reconcile to filings made during the year on your quarterly NJ-927 return.

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Payroll Management: What to look for when you hire a payroll manager

Most New Jersey based small business owners are looking the same thing when they seek to hire a NJ payroll service to handle their payroll management: Low cost, accuracy, convenience, and expert help. Local payroll services are your best choice when evaluating alternatives.

Low Cost: The best values are usually offered by local payroll servicesas they do not have the same overheads as the large national companies.

Today’s payroll services are so cost effective it is usually one of the first business services that is outsourced by a small business owner. Payroll companies have inexpensive packages that are no more than a few dollars per check, including services like employment tax calculations and direct deposit. Local payroll services generally charge lower rates because they do not have the same overhead as the national providers.

Accuracy: An owner operated payroll service frequently offers the best track record for accuracy because an owner operator is highly knowledgeable about your payroll situation.

Business owners are concerned with accuracy because one mistake can result in penalties, fees or interest chargers levied by Federal or State tax agencies. When you use a full service payroll company they take responsibility for the accuracy of your payroll. Surprisingly local payroll companies have the best track record in this area. The reason is that calculation errors are very rare
as software does a good job with the math. Errors, when they are made, are made by the data entry operator. The large national payroll companies have lots of turn-over and do not provide extensive training for special payroll situations. Owner operated payroll companies have the advantage due to the expertise of the owner operator.

Convenience: Local payroll services are more convenient to work with than the large national services that operate large data entry call centers.

All payroll services will save a business time when compared to the effort required to do payroll without a service. However, a local payroll service is frequently more convenient than the national providers. Local payroll services invariably do not require you to provide your payroll input at a scheduled time, or wait for a return call from your assigned representative (if they call back at all).

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NJ Employers: How the July 1, 2011 FUTA Tax Rate Change Affects You

In 1976, the Federal Government added a 0.2% surtax on the then 6% FUTA tax rate, or Federal Unemployment tax, that was created to repay loans made to cover the high demand on unemployment insurance and thus the resulting shortfall in funding.

The demand on funding was due to high unemployment in the early 70′s. The loans were repaid by 1987 but the Feds continued to approve extensions in the surtax to pay for other budgetary items. It appears that this is about to change as the IRS has seen no movement by Congress to extend this surtax.

Form 940 is an annual report for filing FUTA liability for the year. Pieper Payroll files this form for all of their New Jersey and out of state payroll clients. As a result of this potential change, the IRS is developing a new form 940 for 2011 that will actually allow for employers to designate two different FUTA tax rates for the year. For 2011, Pieper Payroll will be filing the new form in Jan of 2012

The current FUTA tax rate is 6.2% on the first $7,000 in wages paid to the employee for the year. This rate will apply for wages paid from January through June of 2011. If the surtax expires, The FUTA rate will fall to 6.0% for the second half of the year. The new form will also allow for indication of wages paid and liability incurred for the period July through December at the new rate. Pieper Payroll is already compliant with the proposed changes.

Remember that Feds grant a 5.4% credit for State unemployment taxes meaning that the FUTA tax will actually fall from .8% to .6%.

Keep in mind that those states that borrowed money from the Feds to fund their unemployment insurance programs these past few years, and have not repaid those loans by November of 2011, will be subject to at least a 0.3% reduction in that 5.4% credit. Employers in these states will see an overall increase in FUTA tax as a result. Currently 22 states and the Virgin Islands may be subject a reduction in their FUTA credit including New Jersey.

Pieper Payroll actively monitors these changes and no action is required by our clients to assure compliance.