Important Year-End Information for 2023

Your AllianceHCM Team

For even more related information, see this guide about importing Box 12DD amounts for employee Form W-2s and this guide about specifying delivery options for W-2s in AllPay.

Form W-2 Hold Requests

• Without a “Hold Request,” we will begin scheduling your Form W-2s for processing and printing following your final scheduled check date of 2023.
• To hold your W-2 processing for any reason, log in to AllPay and go to Configuration>>Utilities>>W-2 Status. Click on “Add Hold,” complete the information requested and then choose “Submit Hold Request.”
• If you do not have access to AllPay, please contact your customer service representative to request a W-2 hold.
• Please release any holds on your W-2s by January 5 so we can promptly process and print them. All W-2 holds will be released on January 6 and W-2 forms will be printed afterward.
• All W-2s will be processed and shipped by Monday, January 15.

Key Deadlines by Form

• Form W-2s: Must be delivered to individual employees on or before January 31. AllianceHCM will submit your W-2 files to the Social Security Administration (SSA). NOTE: The deadline for file submission to the SSA and the majority of states is also January 31. See more about how to specify W-2 delivery options in AllPay.
• Form 1099s: Must be delivered to individual contractors on or before January 31. The 1099s and your IRS filing copies will be prepared and delivered to you for your convenience. NOTE: AllianceHCM does not file your 1099s. It is your responsibility to file your IRS paper copies by January 31. If you have more than 10 forms you must file electronically with the IRS.
• ACA Form 1095-C: Must be delivered to subject employees by March 1, and the deadline for electronically filing employer data is March 31.
• Holds: Because of a significantly reduced time frame for us to submit your W-2 files and deliver employer copies of your 1099s, please release any W-2 or 1099 holds by Friday, January 5.

Form 1095-C Processing

This applies to clients using our Affordable Care Act (ACA) year-end filing service.

• Without a “Hold Request,” we will begin scheduling your Form 1095-Cs for processing and printing after your final scheduled check date of 2023.
• Each client is responsible for delivering the 1095-Cs to their employees.
• You should have received emails regarding ACA errors/warnings that need attention. The errors/warnings also may be accessed on your AllPay home page.
• AllianceHCM will not process 1095-Cs for any company with unresolved “Errors.” Although AllianceHCM will process 1095-Cs with unresolved “Warnings,” you should review all “Warnings.”
• AllianceHCM will electronically file all 1095-C/1094-C information with the IRS.
• Find additional information regarding the Affordable Care Act on your AllPay home page or the IRS website: https://goo.gl/ZeMPDb

Year-end Adjustment Runs and Bonus Payrolls

• Make sure to process any 2023 adjustment runs by Thursday, December 28, for timely tax deposits.
• 2023 adjustment runs processed after January 1 will be subject to late tax deposits and penalties. AllianceHCM is not responsible for these late deposit penalties.

Form 1099 Processing

This applies to clients who have paid 1099 wages during 2023.

• We will begin processing Form 1099s on Friday, January 5. and will deliver them to your office by Thursday, January 18.
• AllianceHCM will provide you with the following paper forms:
• Employee copies to distribute accordingly.
• IRS “Red” copy of Form 1096 and 1099-MISC for you to file with the IRS.
• Employer copies for your records.
• NOTE: AllianceHCM does not file 1099-NEC forms as part of our tax filing service. It is your responsibility to file the 1099s and Form 1096s with the appropriate agencies.

Estimated Tax Deposits

If you anticipate an adjustment will need to be processed after January 1, AllianceHCM can collect and deposit an estimated tax amount to avoid a penalty situation. Contact our tax department before January 1 to discuss this option.

Void or Manual Checks

Any 2023 void or manual checks that need to be posted must be processed along with or before your final scheduled 2023 payroll. NOTE: Please review your final payroll upon receipt and notify your customer service representative immediately regarding any changes or corrections!

Review Employee Demographics

• Encourage current employees to review the demographic information on their checks, which matches how it will appear on their W-2s and 1095-Cs. You may print a complete “W-2 Edit” report in AllPay or contact your customer service representative to have one printed and delivered to you.
• AllPay clients can make demographic corrections before submitting your final 2023 payroll.
• Phone/fax clients may submit employee corrections via fax before processing your final 2023 payroll.
• NOTE: Your company could face substantial penalties for filing W-2s or 1095-Cs with missing SSN or address information. AllianceHCM is not responsible for these penalties. Please review your employee demographic information thoroughly.

Additional Review Items for December 2023

• Third-Party Sick Pay: These amounts should have been received as your provider paid them. Please ensure all amounts are entered before January 1.

• Group-Term Life: If you paid more than $50,000 for group-term life insurance for an employee, you must report the cost of the excess coverage. See IRS Pub 15-B for more information.
• Health/Accident Premiums Paid on Behalf of >2% S-Corp Shareholder: These amounts must be included in Box 1 of the W-2 but are not subject to Social Security or Medicare.
• Fringe Benefits: You may have additional fringe benefit amounts that need to be included as taxable wages. See IRS Pub 15-B for more information.
  

Employer-Sponsored Health Coverage - Reported in W-2 Box 12DD

Requirements are the same as 2022 W-2 reporting.

If your company issued 250 or more W-2s in 2022, you must report the cost of employer-sponsored health premiums on employee 2023 W-2s (issued in January 2024). This requirement is optional if you filed fewer than 250 in 2022. This relief will continue until further guidance is provided.

Medicare Withholding Rates Are Unchanged

Medicare tax withholdings are 1.45% on employee Medicare wages paid up to $200,000. Employee wages that exceed $200,000 will continue to be subject to the additional .9% withholding (for a total of 2.35%). The employer portion is not affected by these limits and will continue at 1.45% on all Medicare wages.

Social Security Wage Base Is Increasing for 2024

The Social Security withholding tax rate continues at 6.2% for 2024. The social security wage limit will increase to $168,600 in 2024. The 2023 wage base is $160,200.

FUTA Credit Reduction States – California, New York, Virgin Islands

NOTE: Additional FUTA tax will be due if you have employees in California, New York, or Virgin Islands.

The Department of Labor released its final listing of 2023 FUTA credit reduction states. If you pay wages in California, New York, or the Virgin Islands, your company will be subject to additional FUTA taxes when you file Form 940 for 2023 (in January 2024). NOTE: The states are not known until November of each year. As a result, each payroll tax calculation does not include the additional tax. Any additional taxes due will be calculated and collected in January 2024.

2024 State Unemployment Rates and Filing/Deposit Frequency Notices

In the coming months, all employers will receive state unemployment rate notices and filing frequency changes. Please forward these notices to the AllianceHCM Tax Department to help us provide you and the tax agencies with accurate and timely payroll tax information. Send us notices through email or mail:

Email: taxsupport@alliancehcm.com

Mail: 9110 Forest Crossing Dr., The Woodlands, TX 77381

Appendix A: W-2 Reporting of Employer-Sponsored Health Coverage

Employers are required to report the cost of employer-sponsored health premiums on the employee’s 2023 Form W-2 (issued in January 2024). However, relief continues for employers that filed fewer than 250 W-2s for 2022. This relief will continue until the IRS provides further guidance.

Here are some of the key points and helpful information:

• Amounts are reported on Form W-2 in Box 12 using code DD.
• The IRS has stressed that these reported amounts are informational only and are not taxable.
• In general, the amount reported would include the portion the employee pays and the employer portion. Calculate the reportable cost using one of the following methods:
  1. COBRA applicable premium method
  2. Premium charged method (the premium amounts charged by your insurance carrier)
  3. Modified COBRA premium method
  NOTE: These methods are discussed in IRS Notice 2012-9 (see Q&A #24-27). Please consult your benefits advisor for more information about the value of coverage reportable for your plan or calculation method to choose.
• You must report the cost of group health plans. However, you can exclude the cost of benefits such as stand-alone vision, stand-alone dental, or long-term care benefits.
• You are not required to include employer contributions to a Medical Savings Account, Health Savings Account, or Health Reimbursement Account in the reported coverage amount.
• You do not need to report contributions to Flexible Spending Accounts unless the contribution amount exceeds the amount of the employee’s payroll deductions.
• The IRS provides guidance on this topic, along with a Q&A covering various scenarios, in IRS Notice 2011-28 and IRS Notice 2012-9. The IRS also has a more general Q&A and a helpful chart showing what should and should not be reported. Below are the links to these items:
• IRS Info & Chart: https://goo.gl/2UIT4v
• General Q&A: https://www.irs.gov/newsroom/employer-provided-health-coverage-informational-reporting-requirements-questions-and-answers

Form W-2 Box 12DD: FAQ

1. What must be done in the payroll system to allow the entry of the 12DD health care premiums amounts?

• You must have a memo earning code(s) set up and mapped to W-2 Box 12DD. NOTE: Box 12DD must include the total premium (employee and employer portion) as mentioned above.
• Amounts may be entered with payrolls throughout the year or you may choose to enter one annual amount for each employee on a payroll processed prior to 12/31/2023. We can also import amounts from an Excel spreadsheet. See more about importing Box 12DD amounts in this guide.
• Please send any questions regarding the memo code(s) setup or spreadsheet questions to 12DD@alliancehcm.com.

2. How can I review the codes and amounts that are mapped to Box 12DD?

There is a report in AllPay with the Report ID “Box 12DD” titled “Healthcare Reporting Codes.” Run this report for a given date range to generate a listing of employees with their amounts sorted and totaled by memo code. NOTE: If the amount/memo code does not appear on this report, it will not be recorded on the employee’s W-2.

3. What if I am also using the AllPay Benefit Module?

Some clients have already had memo codes set up and linked to amounts recorded in the Benefits Module. If so, you should review the report mentioned in Question 2 to ensure all expected amounts are reported in Box 12DD.

Appendix B: Final FUTA Credit Reduction States for 2023 (November 2023)

Please review as additional FUTA taxes may be due at year end.

The Department of Labor released the final list of 2023 FUTA “credit reduction” states. Employers paying wages in these states will be subject to additional FUTA taxes when the Form 940 is filed for 2023 (in January 2024). NOTE: If you pay wages in one or more of the listed states, the additional tax could be significant depending on the number of employees you have in those states. See below for more information and a report in AllPay to assist in calculating the additional tax.

Which states are affected for 2023?

The following are subject to the additional tax:

• California: 0.6%
• New York: 0.6%
• Virgin Islands: 3.9%

What is a “credit reduction” state?

A “credit reduction” state borrowed money from the federal government to pay unemployment benefits and still has an outstanding loan balance as of November 10. As an employer in one of the applicable states, this has been an issue for the past several years. More information can be found on the IRS website.

Can I calculate an estimate based on payrolls processed this year?

AllPay has an export available that will calculate the additional amount due based on the applicable states. Go to Reports>>Exports to run the export with Report ID “FUTACredRed” titled “FUTA Credit Reduction.” If the export is not listed please select “Add New” and add the export to your company. Enter the date range for the current year to calculate the additional tax based on the payrolls processed.

When will the additional amount be collected and paid?

The additional tax is calculated and paid when we prepare your annual Form 940 as part of your Q4 tax package. The additional tax is not included in each payroll’s tax calculation, but will be calculated and collected in January 2024. If you use our tax filing services, we will send you a notice regarding the collection of the additional taxes and draft your account in mid-January 2024.

We hope this information will help you budget for the additional FUTA tax. If you have additional questions about this notification or need help running the export, please feel free to contact the Alliance HCM Tax Department at 800-789-7655.