December, 2004

Iowa Workforce Development Tax Bureau 2 General Information

Specific Information: 800-972-2024
Tax FAX: 515-242-6301
Web Home Page: www.iowaworkforce.org

Tax Rates for a New Business in Iowa

Year New
Const
Rate 		New Non-
Const Rate 		Plus
Surcharge 		Taxable Wage
Base 		Tax Table
1999 7.00% 1.00% 0.050% $16,500. 8
2000 7.50% 1.00% 0.050% $17,300. 7
2001 7.50% 1.00% 0.040% $17,900. 7
2002 7.50% 1.00% 0.037% $18,600. 7
2003 8.00% 1.00% 0.036% $19,200. 6
2004 8.00% 1.00% 0.000% $19,700. 6
2005 8.00% 1.00% 0.000% $20,400. 6
Benefit Charge Statement: 01 — 50 Benefit.Charges1@iwd.state.ia.us
51 — 00 Benefit.Charges2@iwd.state.ia.us

As a result of Senate File 458 enacted into law in 2003, a Reserve Fund has been created that is actually an integral part of the tax rates that are indicated on the tax table for 2005. The contribution rates will remain the same, but will consist of a State Experience Rate and Reserve Fund Rate. The State Experience Rate and Reserve Fund Rate will equal the Contribution Rate. This is not a tax rate increase but does reflect a change in that the distribution of each quarters contribution paid will go into the employer tax account and into the Reserve Fund using ratios indicated on the tax rate notice and tax report. The tax rate is calculated based upon Taxable Wages and Benefit Charges, not the balance in the tax account.

Changes have been made to the forthcoming information sheets and quarterly tax reports that more clearly explain this new fund. The Reserve Fund will be used to pay unemployment benefits and fund Iowa Workforce Development centers. Employers that will be excluded from participation in the Reserve Fund include zero rated employers, new non-construction employers, governmental entities and certified nonprofit organizations.

For Federal 940 Certification purposes, the State Experience Rate indicated on line 2 of the tax rate notice is the State Experience Rate as defined on the federal form 940

There will be no Administrative Surcharge assessed for 2005.

December, 2004

All 2005 Iowa Department of Revenue Returns Must Be Filed Electronically

All deposits and quarterly returns must be filed electronically for tax periods that start on or after January 1, 2005. The IA DOR will no longer be providing paper returns for the deposits or for filing the quarterly withholding tax returns.

All registered withholding agents will be receiving several mailings detailing the switch to electronic filing. The following web site will be the best place to keep updated on all the developments: http://www.state.ia.us/tax/

December, 2004

The Massachusetts Department of Revenue encourages Payroll Service Providers to utilize the filing frequency match service available through WebFile for Business.

November, 2004

Virginia Department of Taxation — New Withholding Rates Effective January 1, 2005

Effective January 1, 2005, the withholding formula used to determine employee Virginia state income tax is changing to account for increases in the personal exemption and the standard deduction amounts. The personal exemption amount of $800 increases to $900, except for the additional personal exemptions allowed for taxpayers age 65 and over and for the blind, which remain at $800. The standard deduction amount of $2,500 previously used to compute withholding increases to $3,000.

These changes will result in an increase in employee take-home pay.

In addition, the filing thresholds will increase for the 2005 taxable year. These increases will affect whether employers are required to withhold taxes from certain taxpayers. The filing threshold increases are as follows:

  • The filing threshold for single taxpayers increases from $5,000 to $7,000;
  • The filing threshold for married taxpayers filing jointly increases from $8,000 to $14,000; and,
  • The filing threshold for married taxpayers filing separately increases from $4,000 to $7,000.

The following forms and documents will be made available for downloading at www.tax.virginia.gov the week of November 15th. Go to www.tax.virginia.gov, Tax Professionals, Early Forms Release. The password is VA_Tax.

  • Withholding Tables by pay period
  • Virginia Employees Income Tax Withholding Exemption Certificate
  • Virginia Withholding Exemption Certificate for Recipients of Pension & Annuity Payments

With the additional personal exemptions for persons age 65 and over and for the blind remaining at $800, the VA-4 and VA-4P have been redesigned to include separate exemption totals on the employer portion of the forms. Employees claiming exemptions for being age 65 and over, or blind, must complete a new VA-4 or VA-4P.

If you have any questions, please contact Anne Grim at Agrim@tax.state.va.us or Lee Mikelson at Lmikelson@tax.state.va.us

New Virginia Withholding Formula effective January 1, 2005

Key

 
G= Gross Pay for Pay Period
A= Annualized gross pay
T= Annualized taxable income
W/H= Tax to be withheld for pay period
P= Pay periods per year
E1= Personal and Dependent Exemptions
E2= Age 65 and Over & Blind Exemptions
W= Annualized tax to be withheld

Formula

1. (G) P — . [. $3,000 +. (E1 X $900) .+ .(E2 X 800).]. = T

2. If T is: Not over $3,000… W is: 2% of T

Over But not over Then
$3,000 $5,000 $60 +.(3%of excess over$3,000)
$5,000 $17,000 $120 +.5%of excess over $5,000)
$17,000 $720 +.(5.75%of excess over$17,000)

3. W/P = W/H

November 10, 2004

Connecticut Withholding Tax Payments (Announcement)

Dear Payroll Service Provider:

This announcement is for all payroll service providers that remit electronic payments via the ACH Credit Method. Effective January 1, 2005, all ACH Credit payments must now include the Date of Payroll within the addenda record, not the Period End date. The Date of Payroll will be inserted in the Tax Period Ending Date field of the addenda record.

You may have recently received a letter discussing Connecticut legislative changes that will affect the filing requirements of many of your customers for calendar year 2005. By way of background: Effective January 1, 2005, the legislation establishes new due dates for employers to pay over Connecticut income tax withholding to the Department of Revenue Services (DRS). In the past, employers were required to pay the Connecticut withholding tax at the same time they made a deposit of federal income tax withholding. Employers will soon be notified of their new filing due dates.

The new Conneticut withholding tax payment schedule is as follows:

Reported Liability During Look-Back Period Employer Classification Due Dates
$2,000 or less Quarterly remitter Last day of the month following the calendar quarter during which the wages were paid
More than $2,000 but not more than $10,000 Monthly remitter Fifteenth of the month following the month during which the wages were paid
More than $10,000 Weekly remitter Wednesday following the weekly period during which the wages were paid. (The weekly period is the seven-day period beginning on a Saturday and ending on the following Friday.)

If a weekly remitter has two or more paydays during a weekly period, the weekly remitter is generally required to make only one payment for weekly period to DRS and should enter the date of the last payday when making the payment. However, if the paydays fall in different quarterly periods, the weekly remitter must make separate payments for the separate Connecticut income tax withholding liabilities.

IMPORTANT: effective July 1, 2004, Connecticut law requires all taxpayers whose liability for a tax exceeded $10,000 during the twelve-month period ending the preceding June 30 to pay that tax by Electronic Funds Transfer. Beginning with any payments due on or after January 1, 2005, these taxpayers must make all withholding payments electronically and must file the corresponding quarterly reconciliation, Form CT-941, electronically as well. For additional information on the electronic filing initiatives, please refer to our web site, www.ct.gov/drs and click on electronic services.

If you have any questions, you may contact the Electronic Commerce Unit at 860-297-4973.