2007 End of Year Newsletter

November 20, 2007

Dear Valued Checkmate Client:

As another year draws to a close, we want to thank you for your business and look forward to working with you in 2008. During the past year, many of you have referred new clients to us. Please know that this is the highest compliment we can receive. We are committed to maintaining your confidence!

Please review the following pages for news about Checkmate’s staff and a recap of important payroll related legislation that you should know about.

Staff News

I am proud to announce that Vicki Paquin has earned the designation of Certified Payroll Professional by the American Payroll Association. The CPP designation recognizes those individuals who have achieved an advanced level of proficiency in taxation, human resources, and accounting as it relates to the payroll environment.

I am also pleased to announce that Becky Cross has been promoted to Payroll Operations Manager. In her new position Becky will be responsible for the day to day operations of the business.

Recent Legislation

1. Minimum Wage

The New Hampshire Legislature has been very busy this year and has passed a number of laws affecting employers. Both the state and federal government increased their respective minimum wages, but not at the same time. The current NH minimum wage is $6.50 per hour and the current federal minimum wage is $5.85 per hour. New Hampshire’s minimum wage applies to all NH employers, since it is higher than the federal minimum wage.

The minimum wage will increase twice in 2008.

• The first change will occur on July 24th when the federal minimum wage increases to $6.55 per hour.
• The second increase will occur on September 1st when the New Hampshire minimum wage increases to $7.25 per hour.

2. Health Insurance – Coverage for Dependants Up to Age 26

Effective September 15, 2007, health insurance companies are required to extend coverage to children up to age 26. However, according to IRS rules, the definition of a dependant is limited to children under age 19 (24 if a full time student). Therefore, insurance benefits provided to non-dependent children (according to IRS rules) might result in additional taxable income to the parents.

3. Civil Unions

Effective January 1, 2008, New Hampshire will recognize civil unions. However, the federal government limits the recognition of a spouse for all federal purposes to an opposite sex individual. Due to this conflict, it is likely that health insurance benefits provided to civil union partners will result in increased federal income tax liability for the covered employee.

4. Employee Classification

Effective August 17, 2007, employers are required to post a new labor law notice, titled: “Criteria to Establish an Employee or Independent Contractor.” Please let us know if you need a copy of this posting.

5. Automated Payroll Cards.

Effective September 11, 2007, employers can pay their employees via automated payroll cards, provided that certain requirements are met.

6. Payday vs. Holiday Rules

Please keep in mind that if your payday falls on a Holiday you must move the payday to the previous business day. For example, if January 1st is your payday, then you are required to move the payday back to December 31st.

7. Leap Year Complications

Each year, some employers will find themselves faced with a dilemma caused by the calendar. Because a normal year has 365 days, one day of the week will occur 53 times in a year. In a leap year (2008 is one) two days of the week will occur 53 times. For weekly and bi-weekly employers whose payday occurs 53 times or 27 times during a calendar year, a couple of decisions need to be made.

• The first decision is whether to adjust salaried employees’ weekly/bi-weekly pay to account for the extra pay period. Many employers do not adjust the per pay period salary for employee relations reasons.

• The next decision is how to compute deductions for things like health insurance. If there is an extra pay period during a calendar year this should be taken into consideration when determining the per pay period deduction amounts.

The days of the week that will occur 53 times over the next few years are:
• 2008 – Tuesday and Wednesday
• 2009 – Thursday
• 2010 – Friday

8. Employers Must Provide Written Notice of Changes to Employee Wages & Benefits

According to the NH Department of Labor, the top labor law violation is the failure of employers to provide written notice to employees of their wage rate, pay period, pay day and description of fringe benefits including any changes. The Department of Labor provides a form to comply with this requirement. The form can be obtained on our web site or give us a call and we will be happy to provide a copy.

9. A new version of form I-9 should be used starting December 7

The Department of Homeland Security has announced and published a new, version of the I-9 form used to confirm the identity and work authorization of every new hire since 1986. The new form puts into practice the reduction of the number of documents that had been technically required since 1996. Employers should start using the new I-9 form as quickly as possible, and no later than December 7. This new form can be found on our web site.

Please keep in mind that both mail and DHL delivery slows down during the holidays so please plan accordingly.

The attachment to this letter is intended to inform you of specific payroll related items that you should be aware of. Issues addressed include the following:

Christmas or Year-End Bonuses
Tax Deposits
Year-End Reporting
W-2 (Statement of Earnings)
Social Security Number verification
W-4 (Employees Withholding)
Health Insurance for S-Corp
Employment of children, spouses, or parents
Changes for 2008
Holiday Schedule

We hope you find this information useful. As always, if you have any questions, please don’t hesitate to call.

Thank you for your continued support.

We wish you Happy Holidays and a prosperous New Year!

Sincerely,

THE CHECKMATE STAFF

CHECKMATE YEAR-END 2007

Christmas or Year-End Bonuses- Please notify us a week in advance if you want a separate payroll run.

Do you plan to issue Christmas or Year-End bonus checks? If so, Checkmate needs to know the following:
• Do you want a separate check for the bonus?
• Direct Deposit- If an employee is normally paid by direct deposit, the bonus will also be direct deposited, unless you specify that you want a paper check.
• Tax Withholding- We use each employee’s regular tax withholding status for bonus payments, unless instructed otherwise. As an alternative, the bonus can be taxed at a rate of 25%, but you must specify this instruction to Checkmate.
• Deductions- Please let Checkmate know if the existing deductions (401K, simple IRA, etc.) should be taken out of bonus payments.
• Gross-up- If you want us to gross-up a net bonus let your payroll specialist know. There is a $3.00 charge per check for this service.

Tax Deposits

If your total Payroll Tax deposits in the previous year were in excess of $50,000, you are required to make tax deposits with every payroll. You may receive a notice from the IRS regarding the frequency of your tax payments. If so, please forward the notice to Checkmate, for our records. You may always submit tax payments more frequently than required by the IRS.

Year-End Reporting

Are there any adjustments necessary? If any of the following examples apply to you, please advise Checkmate no later than your last scheduled payroll of 2007.

• Voided checks
• Manual paychecks written by you and not yet reported to Checkmate
• Group Term Life Insurance coverage over $50,000
• Personal use of a company vehicle
• Third-Party Sick Pay benefits
• Non-Cash compensation
• If you offer your employees a pension plan that does not run through your payroll please let us know.

W-2 (Statement of Earnings)

• Employers must provide their employees with a completed W-2 by January 31, 2008.
• Checkmate will start printing W-2’s on Saturday, December 29th. We must have any changes with your last scheduled payroll of the year. If you need more time, please let us know and we will adjust accordingly. If you do not notify Checkmate of these changes and W-2’s must be reprocessed, an additional processing fee will be charged.
• We will begin distributing W-2’s to our clients by January 15, 2008.
• Please verify addresses for current and terminated employees. If you are using Paychoice online you can run an employee W-2 and Social Security verification report otherwise a master list is available for $5.50.
• Verify Social Security numbers. If you question the validity of an employee's Social Security number, call the Social Security Administration at 800-772-6270 for verification of the number. If Form W-2 does not contain the correct name and Social Security Number, the Internal Revenue Code provides that the employer may be penalized up to $50 for each incorrect Form W-2.
• Encourage your employees to hold onto their W-2s. Due to the processing time involved, there is an $11 charge to re-issue a lost W-2. You can pass this charge on to your employees. We will provide you with a form for the employee to fill out in the event that they need a W-2 reissued.

W-4 (Employees Withholding)

IRS regulations require employers to remind employees to file an amended Form W-4 if their filing status, exemption allowances or exempt status has changed since their last filing of Form W-4. This notice must be provided by December 1st of each year. A new W-4 is not required if the employee status does not change.

Checkmate can put a reminder message on your employees' pay check. If you are using Paychoice online you can input the reminder message on the date screen.

Any employee claiming exempt must file a new W-4 for 2008 to retain their exempt status. If a new W-4 is not received by February 15, 2008, you must switch the employee's withholding to Single/Zero. We will send you a master file status report with one of your December payrolls if you have employees using exempt status. Please let us know if this status needs to be changed.

W-5’s for any employee who is receiving advanced earned income credit expire on December 31. Notify any employees receiving the advanced credit to complete a new Form W-5 if they want to continue receiving the credit.

Health Insurance for S-Corp

If you are an S-Corp, providing Health Insurance benefits to employee shareholders, the annual premium paid by the company must be included on the employee shareholders W-2. Please notify us of this amount, with your last scheduled payroll of the year, so that Checkmate can properly report this W-2 item.

Employment of Children, Spouses, and Parents

If you operate your business as a Proprietorship or a Single Member LLC and you employ your children under the age of 18 their wages are not subject to Social Security or Medicare taxes. If you employ your children under the age of 21, or your spouse, or your parents their wages are not subject to federal or state unemployment taxes. If any of these situations apply to you please make sure to let us know. We also need to be notified when children reach the age of 18 and 21 so that we set them up to start withholding Social Security and Medicare taxes.

Changes to note for 2008

Social Security wage base has increased to $102,000 from $97,500. As in prior years, there is no limit to the wages subject to the Medicare tax; therefore, Medicare wages are still subject to the 1.45% tax.

Maximum annual employee contribution to 401K and 403B plans remains unchanged at $15,500. Employee and employer contributions to Simple plans remain unchanged at $10,500. The catch-up contribution for employees who reach age 50 during the plan year, remains unchanged at $5,000 for 401K and 403B plans and $2,500 for Simple plans.

The Massachusetts minimum wage is increasing to $8.00 per hour from $7.50 effective January 1, 2008.

Holiday Schedule

Just a reminder -- Our offices will close at noon on Monday December 24th and be closed Tuesday December 25th, and Tuesday January 1st . Please refer to the enclosed Holiday Notice.

Again, if you have any questions regarding the information contained in this letter, please call 225-2004.