2008 Year End Newsletter

December 1, 2008

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 2009. 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!

In these challenging economic times we at Checkmate will continue offering the same top notch payroll services with an eye toward the future. Our goal is to exceed our clients’ expectations. A client survey form is now available on our website (www.checkmate-payroll.com). Please complete the survey at your convenience, so that we can learn from your feedback.

Payroll Deliveries

One of the impacts we have felt with the struggling economy is the loss of DHL as our payroll delivery service. We are now contracting with UPS to deliver payrolls for all former DHL clients and any new clients that start with Checkmate. We are also talking with a courier service to see if this will be an economical alternative to the US Mail. We are continuing to experience delivery problems with the US Postal Service. It seems that as mailing costs increase, service decreases. We have been working with customer service staff at the post office, trying to trace problem packages using barcodes. So far the post office has not been able to identify the problem. For this reason we have lost confidence in the Postal Service’s ability to deliver payroll in a timely manner. We strongly encourage all clients to have their payrolls delivered via UPS or a courier service, going forward. There is a little extra cost for delivery, but the savings realized knowing that your payroll is going to get there when it should, far outweighs the additional cost.

A new way to correct previously filed 941’s.

Starting in January 2009, when employers and payers need to correct previously filed employment tax returns, the new Form 941X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, will be used, replacing the Form 941c. Form 941X is a stand-alone form corresponding to, and relates line-by-line with, the employment tax return it is correcting. The employer will be able to file Form 941X when an error is discovered, rather than having to wait to file it at the end of the quarter with the next employment tax return.

Minimum Wage

New Hampshire law requires employers to pay employees at either the Federal or State minimum wage, whichever is higher. The current minimum wage in effect is the NH minimum wage of $7.25 per hour ($3.27 for tipped employees). As of July 24, 2009 the Federal minimum wage will increase to $7.25 per hour. What if your payday falls on a Holiday? Please keep in mind that if your payday falls on a Holiday you must move the payday to the previous business day. If January 1st (a Thursday in 2009) is your payday then you are required to move the payday back to December 31st. If this happens the first paycheck which would have been included in 2009 wages (if January 1st wasn’t a holiday), will be included on your employees’ 2008 W2.

New 403b Regulations

Comprehensive regulations issued in 2007 require that generally in 2009 your §403(b) plan must have a written plan document that provides a summary of its 403(b) plan and identifies the approved list of vendors, eligibility rules, contribution limits, loan rules and limits, and distribution and withdrawal rules, among other things.

Will you be affected by an extra pay period in 2008 or 2009?

Each year, some employers will find themselves faced with a dilemma caused by the calendar. Because a normal year has 365 days, one day a week will occur 53 times in a year. In a leap year (2008 is one) two days in a 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. Also, if your agreement with the employee indicates they will be paid a certain amount each pay period (as opposed to an annual salary) you cannot adjust the employees per pay period salary to account for the extra pay period. 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.

Top Labor Law Violation

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. You can obtain this form on our website, or call us and we’ll be happy to provide a copy.

Please Note

Keep in mind that both mail and UPS 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) S
• ocial Security Number verification
• W-4 (Employees Withholding)
• Health Insurance for S-Corp Employment of children, spouses, or parents
• Changes for 2009
• 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 2008

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 2008.

• 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 February 2, 2009.
• Checkmate will start printing W-2’s on Thursday, January 1st. 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, 2009. 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 2009 to retain their exempt status. If a new W-4 is not received by February 15, 2009, you must switch the employee's withholding to Single/Zero. 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, a Single Member LLC or a family partnership 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 2009

Social Security wage base has increased to $106,800 from $102,000. 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 increases to $16,500. Employee and employer contributions to Simple plans increase to $11,500. The catch-up contribution for employees who reach age 50 during the plan year, increases to $5,500 for 401K and 403B plans and stays at $2,500 for Simple plans.

Health Savings account contribution limits increase to $3,000 for single plans and $5,950 for family plans. The catch-up contribution for employees who reach age 50 during the plan year, increases to $1,000.

Holiday Schedule

Just a reminder -- Our offices will close at 2pm on Wednesday December 24th and be closed Thursday and Friday December 25th and 26th, and Thursday 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.