FY2011-12: 2010 Tax Reporting and Year-End Processing (Issued 12/4/2010)

The purpose of this memo is to provide departments with instructions and important processing dates for year-end tax reporting and payroll processing.

TAX REPORTING and DISTRIBUTION

W-2 Distribution

Tax Year 2010 W-2 Forms for employees, along with the "Comptroller's W-2 Form Instructional Brochure," will be mailed to each employee's Home Address on or before February 1, 2011.

• Notices will be printed on pay advices to remind employees to confirm their Home Address as printed on the pay advice.
• Updates to Home Address must be made on or before 1/4/11. The "Home Address" is located on the Biographical Data panel in HR/CMS.
• Avoid using a PO Box as the Home Address, which may cause delays.
• Home Addresses cannot be outside of the United States. Departments must use the Department address and mail these W-2s individually.
• Employees who have more than four Box 14 items will receive a notice to expect two W-2 Forms. The second form will contain only additional optional reporting.
• All W-2 Forms that are undeliverable will be returned to CTR. Departments will be required to pick up any returned mail.

W-2 Questions

All W-2 questions should be referred to the employee's Payroll Office. The Comptroller's Payroll Bureau (CTR-PRB) will help with any questions submitted by the employee's Payroll Office. Please do not refer employees directly to CTR-PRB.

W-2 Form Reprint Process

Departments can reprint W-2 Forms directly from HR/CMS. There will be no Department access to W-2s on DocDirect. The instructions on how to print W-2s prior to 2010 can be found here.

W-2 on PayInfo for Employee Reference

An employee informational W-2 (not to be submitted to the IRS) will be available on PayInfo when W-2 forms are mailed. W-2 Brochure copies will also be posted on the CTR website. Go to: Payroll and Labor Cost Management section > Tax Information.

W-2 Form Corrections (W-2C)

If a Department or employee determines that the name, social security number or any of the information reported on an employee's W-2 Form is incorrect, the Department should submit a Request for Correction Form  , a copy of the original W-2, and a detailed memo to the Comptroller explaining the reason for correction using to the following procedures:

• Department Payroll personnel should complete a Request for Correction Form.
  
• The Request Forms should be forwarded to:
  Office of the Comptroller, Attn: Silas Shah
  One Ashburton Place, 9th Floor
  Boston, MA 02108 Phone: 617-973-2311.
  
• Include a copy of the original W-2. Provide a detailed explanation of what happened and explain how the change affects each box amount (negatively or positively).
  
• Update HR/CMS with corrections to non-tax information (e.g., name, address). Corrections that require updates to tax information will be made by the Comptroller's Office.
  
• The Employee must submit a new W-4 with accurate information.
  
• The Comptroller's Office will create the W-2C and W-3C Forms and file these with both the Social Security Administration (SSA) and the Department of Revenue (DOR). A copy will be mailed to the employee and the correction posted in HR/CMS. See: Payroll for North America > US Annual Processing > W-2 Adjustments

HR/CMS will contain W-2C information for future reference and audit trail purposes.

YEAR END BUSINESS

Final Wages/Deductions for 2010

The HR/CMS production runs on Tuesday, December 21, 2010 (for pay period ending 12/18/2010) and will produce the final employee compensation to be reported in Tax Year 2010. The final remittance advice/check date will be Friday 12/24/2010. Please encourage employees to go paperless to eliminate the need to for pick-up that day.

Reminder: Year-end balances on the pay stub may not match the W-2 values. Non-taxable earnings, such as travel reimbursements paid through HR/CMS are included on the pay stub but excluded from taxable earnings. Only earnings subject to income taxes will be reported on the W-2.

Payroll Refund Receipt Voucher Deadline

All payroll refund receipt vouchers and PRRVs must be processed and submitted to the Retirement Board as follows:

• Receipt vouchers for pay period ending 12/4/10 or earlier must be submitted to Retirement Board by 12/17/10.
• Receipt vouchers for pay period ending 12/18/10 must be submitted to Retirement Board by 12/31/10.

Vouchers not processed by the December 31 ^st deadline and received by the Retirement Board will require a W-2C.

Ending 2010 HCSA/DCAP/HCSAF and COMECC Deduction Fields

Benefit Strategies is the Plan Administrator for the GIC HCSA/DCAP pre-tax benefits. As a reminder, there is no automatic end dating of these deductions. If not already done, Departments should end date with the date of 12/18/2010. When entering the new deduction, use the effective date of 12/19/2010 and an end date of 12/17/2011.

The last 2010 Tax Year deduction for DCAP, HCSA, HCSAF and COMECC will occur for the pay period ending 12/18/10 with an advice/check date of 12/24/10.

PREPARATION FOR 2011

New Cap for Retirement Contributions

Section 23 of Chapter 131 of the Acts of 2010 (FY'11 budget) changed the definition of "regular wages" resulting in the capping of retirement deductions for employees hired after 1/1/2011 to 64% of the 26 U.S.C. 401(a) including, but not limited to, the applicable limits for any calendar year under 26 U.S.C. 401(a)(17).

Anyone hired on or after 1/1/11 cannot contribute to RET on salary above $156,800 (64% of $245,000).

Wages/Deductions for Tax Year 2011

There will be 26 pay periods reported in Tax Year 2011 beginning with the pay period ending 1/1/2011.

Savings Plans (Deferred Compensation)

• (Last 3 year Catch-up) When an employee elects the 3 year catch-up, they will only appear on the monthly deferral report once. There will be no further reporting unless there is another change submitted through the Plan Provider. Therefore any future years need to be created upon the initial notification.
• (Over 50) The Commonwealth will have an automatic update for employees who are 50 years old or turning 50 within the calendar year, this update will automatically insert a row "Age 50-Extend Limit (B)" into the Savings Management page.

2011 Enrollment for HCSA, DCAP and COMECC

Departments can now begin entering HCSA/DCAP/HCSAF and COMECC deduction data for 2011 by using an Effective Date of 12/19/10. You must end date the deduction with a December 17, 2011 date.

DCAP, HCSA, HCSAF and COMECC deductions are deducted every pay period. When entering the DCAP, HCSA and COMECC deductions in HR/CMS, be sure to enter the individual's pay period amount and annual goal amount. The annual limit for 2010 DCAP remains $5,000.00. The annual limit for HCSA remains $5,000.00 (minimum $500.00). The administrative fee (HCSAF) for the HCSA and DCAP remains $1.66 per pay period.

Departments should familiarize themselves with the HCSA/DCAP/IRS 2 ½ month grace period when considering 2011 goal amounts http://www.mass.gov/gic/ .

For more information about the HCSA/DCAP pre-tax programs, contact Benefit Strategies at (877) FLE-XGIC (353-9442) or www.benstrat.com or visit the GIC website at http://www.mass.gov/gic/. All other questions on this memo should be directed to the Comptroller's Helpline at 617-973-2468.

Advance Earned Income Credit (AEIC) Filing

The Advance Earned income Tax Credit (AEIC) has been eliminated for tax year 2011. However, individuals may still claim the credit on their Form 1040 each year. For tax year 2011 this will eliminate Form W-5, simplifies the completion of Form 941 each quarter, and eliminates the AEIC notice on the back of Copy B of Form W-2.

W-4 Filing (Employees must file W-4 Annually to Continue "Exempt" Status)

Employees must file a new form W-4 if they are making any changes to their withholding allowances or are claiming Exempt status or if the employee changes his or her name with the Social Security Administration. The deadline to continue with EXEMPT status is February 15. Failure to submit a new W-4 will result in tax withholdings at single and zero allowances. For those employees that have not filed a new W-4, departments must establish the single and zero allowance rates for the payroll processed on Feb 15, 2011.

Departments should notify their employees of the consequences of not filing a new W-4 by the February deadline.

To set-up an employee as exempt, use the 'Maintain Gross' button in the Tax Data Panel and leave the 'Additional Withholdings' as $0.

Please refer to the following websites for Job Aid Documents:

• HR/CMS Payroll Job Aids
• Tax Job Aid