PAYROLL AND PAYROLL TAX CHANGES Effective January 1, 2007                 2008                      2007           Social Security rate 6.20% 6.20% Medicare insurance rate         1.45%          1.45% FICA rate         7.65%          7.65% Self-employment rate       15.30%        15.30% Social Security-covered wage base $ 102,000.00 $ 97,500.00 Medicare-covered wage base NO LIMIT NO LIMIT Minimum Wage- On May 25, 2007, President Bush signed legislation that increases the federal minimum wage to $7.25 per hour in three steps over 26 months, effective July 24, 2007.  The changes will affect employers differently, depending on the states in which employees reside and work.  Following is a summary of how the phased increase will work: The federal minimum wage will increase from the current $5.15 per hour to: $5.85 60 days after enactment (effective, July 24, 2007), $6.55 1 year after the first increase (July 24, 2008), $7.25 2 years after the first increase (July 24, 2009). Currently, the state minimum wage in Ohio is $6.85.  As of January 1, 2008 the rate will increase to $7.00 per hour for the State Ohio.  Thus, the Ohio minimum wage is greater than the required federal minimum wage.  There are a few exceptions to minimum wage rules. IRS Increases Standard Business Mileage Rate to 50.5 Cents for 2008- The standard business mileage rate for transportation expenses paid or incurred beginning January 1, 2008 will be 50.5 cents per mile, up from 48.5 cents per mile rate in effect for 2007. In addition, the 2008 standard mileage rate for operating a passenger car for charitable purposes will stay at 14 cents per mile.  The rate for medical and moving expenses will decrease to 19 cents per mile, down from the 20 cents per mile rate in effect during 2007. Electronic Federal Tax Payment System (EFTPS) If your Federal tax deposit liabilities exceeded $50,000 you should have been notified by the IRS of your requirements to make various federal tax deposits electronically.  If you meet this requirement you should complete and mail the enrollment form 9779. New Hire Reporting Policy All Ohio employers continue to be required to report certain information about employees who are newly hired.  If you need additional information please contact us. For the first time in 16 years, the Federal Government has changed the I-9 Form.  It has now been released and ALL employers, regardless of size are required to fill one out for each new employee.  In additional, all companies will be required to use the new, 2008 Federal W-4 Forms for all employees.  You can download the new I-9 at the following website: http://www.uscis.gov/files/form/i-9.pdf.  You can go to www.irs.gov to find the new W-4 form. State Withholding- If your state withholding liability was $2,000 or more for the period 7/1/06 - 6/30/07, you are required to make monthly payments starting in January, 2008.  The monthly payment is due no later than 10 banking days following the last day of the month. As a result of a reduction in Ohio's income tax in the recently enacted two-year state budget (House Bill 66), the Department of Taxation will be issuing new withholding tables for use by employers.  The new tables will be effective for pay periods that include January 1, 2008 and are now available on their website at tax.ohio.gov.  The more frequently used tables will be included with the employee withholding tax returns that have been mailed to employers in December.  School District Withholding- The State of Ohio will be posting any school district rate changes for 2008 to their website after December 15th.  The following is the website for rate changes: http://tax.ohio.gov/divisions/tax_analysis/tax_data_series/school_district_data/documents/sdit_map_and_list.pdf Ohio Bureau of Employment- The base wage limit will continue to be $9,000 for 2008. Ohio Bureau of Worker's Compensation- The officer's maximum average reportable wage will be $1,056 per week.  If you have not applied for Group Rating Worker's Compensation please contact us for potential savings in premiums.  In additional, you should have received a notification letter from BWC on your new rates. Increased Self-Employed' Health Insurance Deduction For 2007 and 2008, the self employed health insurance deduction is 100%.  Qualifying premiums also include coverage for qualified long-term care.  Health savings accounts are an option to consider for individuals with high deductible medical insurance. Increase Section 179 Expensing If a business already has reached its expensing deduction limit of $125,000 for 2007, it might postpone placing other qualifying property into service until 2008.  In order to deduct qualifying property under the Code Sec. 179 expensing deduction, the taxpayer must own the property and it must be placed in service in the tax year in which the deduction is claimed.  For tax years beginning in 2008 the expensing deduction increases to $128.000. Research and Development Tax Credit Due to recent IRS interpretations through case law, regulations and rulings, R&D tax credits may now be applied to a broader range of industries and activities than in the past.  Companies with traditional R&D or engineering departments often qualify for tax benefits in other departments-areas in which they were unaware of opportunities.  Consequently, many companies miss out on qualified R&D expenditures in manufacturing, engineering, quality assurance, purchasing, information technology and other areas. Thus, the ability to claim tax credits for R&D presents a valuable opportunity for you to recoup a significant part of your costs incurred in developing your innovative products and services.  Fully capitalizing on these credits requires capturing relevant R&D - related information, and a clear understanding of IRS regulations to ensure such claims can stand up to scrutiny.  If you believe you may have R&D expenditures, please contact us. Sales and Use Tax: Origin Sourcing of Delivery Sales The purpose of this is to notify vendors in Ohio that the anticipated requirement to change to destination sourcing for delivery sales January 1, 2008 will not go into effect. Vendors who have not previously switched to destination sourcing, and who were not required to so switch under prior law, may continue to source their sales under the origin sourcing provisions of R.C.5739.035.  All vendors that have previously either switched voluntarily to destination sourcing, or that were required to switch due to having made thirty million dollars of delivery sales in Ohio in calendar year 2005, must continue to use the destination sourcing provisions of R.C.5739.033 for their delivery sales. Vendors who wish to adopt the destination sourcing provisions of R.C.5739.033 may irrevocably elect to do so at any time.  No formal notice e of this election is required to be provided to the Department of Taxation.  any such change should be made at the beginning of the vendor's tax return period (monthly or semi-annual). Please pay attention to your county's changing sales tax rates. http://tax.ohio.gov/divisiond/sales_and_use/rate_changes/index.stm New Annual Electronic Filing Requirements for Small Tax-Exempt Organizations- Previously small tax-exempt organizations, whose gross receipts are normally $25,000 or less, were not required to file form 990, Return of Organization Exempt From Income Tax, or Form 990-EZ, Short Form return of Organization Exempt From Income Tax.  These small tax-exempt organizations will now be required to file electronically Form 990-N, also known as the e-Postcard, with the IRS annually.  Exceptions to this requirement include organizations that are included in a group return, private foundations required to file Form 990-PF, and section 509(a)(3) supporting organizations required to file Form 990 or Form 990-EZ.  In addition, this filing requirement does not apply to churches, their integrated auxiliaries, and conventions or associations of churches.