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Tax News:
FUTA Minimum Threshold Increased;
Social Security Number On-line Verification; and
Social Security Administrative Wage Garnishment
Reprinted from the SSA/IRS Reporter, Spring 2005

IRS Increases FUTA Minimum Threshold

The Internal Revenue Service (IRS) has increased the minimum threshold for Federal Unemployment Tax Act (FUTA) deposits.

Employers are now required to make a quarterly deposit for unemployment taxes if the accumulated tax exceeds $500. The previous threshold was $100.

“The IRS is committed to reducing burden on taxpayers whenever we can,” said IRS Commissioner Mark Everson. “The new rules will help cut paperwork for missions of small businesses. The IRS Office of Taxpayer Burden is continually reviewing what other steps we might take that will save money and time for businesses.”

The maximum amount the IRS collects from employers per employee is $56 per year, if the employer timely made state unemployment tax payments. The previous $100 threshold required most employers with two or more employees to make at least one federal tax deposit per year. Raising the requirement to $500 will reduce burden for employers with eight employees or less by eliminating their requirement to make up to 4 FUTA tax deposits yearly.

For more information on this topic please go to IRS.gov at http://www.irs.gov/newsroom/article/0,,id=131682,00.html.

More Employers Now Able to Verify the Accuracy of SSNs Online

Social Security and the Department of Homeland Security (DHS) are working together to help employers keep accurate records and employ only people who are eligible to work in the United States.

In November 1997, Social Security and the U.S. Citizenship and Immigration Services began piloting a new electronic service for employers that would verify a new employee’s Social Security number and his or her work eligibility in the U.S. At the time, this service was available only to employers in California, Florida, Illinois, Nebraska, New York and Texas.

In November 2003, Congress extended this pilot program until November 2008 and expanded it to include employers in all states.

Employers must meet the following criteria to use this service:
• Not discriminate against any person in hiring, firing or recruitment practices;
• Hire the employee and complete Form I-9 prior to initiating verification;
• Make a verification check within 3 business days of hiring;
• Electronically verify all newly-hired employees;
• Have a personal computer with access to the Internet; and
• Enter into a Memorandum of Understanding with Social Security and DHS.

Social Security and DHS provide the pilot verification services free of charge to employers. The confirmation system contains safeguards designed to protect the integrity of personal information contained in Social Security and DHS data bases.

Also, when your employee records agree with Social Security, you can accurately report your employee’s earnings.
You can find more information at: http://uscis.gov/graphics/services/SAVE.htm#twoA. If you have any questions or want to participate in the pilot program, call DHS at 888-464-4218.

Social Security Preparing to Begin Administrative Wage Garnishment

This spring, Social Security will begin using administrative wage garnishment to collect delinquent debts owed by former beneficiaries of the Social Security and Supplemental Security Income (SSI) programs. Administrative Wage Garnishment was authorized by the Debt Collection Improvement Act of 1996 (DCIA).

DCIA authorized Federal agencies to use non-judicial wage garnishment to collect delinquent debts. Wage garnishment is a process in which an employer withholds up to 15 percent from an employee’s disposable wages and pays that money to the employee’s creditor until the debt is paid, or otherwise resolved. Administrative wage garnishment does not require a court order.

The administrative wage garnishment authority is important because Social Security estimates that, over a 5-year period, it could collect about $105 million in delinquent overpayments owned to the nation’s Social Security and SSI programs.

Social Security’s final regulations for administrative wage garnishment became effective in 2004 and notices to debtors were mailed in February 2005 telling them that Social Security proposes to use wage garnishment and giving them an opportunity to dispute the debt owed or repay it before garnishment begins.

If the debtor does not respond to the notice, Social Security will screen earnings records to determine the debtor’s employer. The first garnishment orders will be mailed to employers on or about April 15, 2005.

It is important to note that an employer who does not comply with the wage garnishment order can become liable for any amounts that should have been withheld from the worker’s pay – as well as punitive damages. Also, employers cannot fire or take disciplinary action against an employee on the basis of wage garnishment.

Social Security will send a notice to employers each month explaining the status of the debt.

If employers have any questions when they receive a wage garnishment order, they should contact Social Security at the telephone number shown on the order.