Speed of service is key when setting up disaster relief to employees of small businesses. The federal government allows employers to replace or supplement part of taxable salary with tax free disaster relief payments. Each dollar sent through a disaster relief plan saves up to $.40 in total payroll and income taxes. That savings allows employers and employees to make available cash flow go further during the crisis.
WHO IS ELIGIBLE: All businesses are eligible but Freedom Benefits limits service to small businesses with less than 500 employees.
PURPOSE: The plan is intended to make direct payments from an employer to its employees that are not subject to the usual wage and income taxes.
COVERAGE: The coverage, amount, length and plan design is largely up to the employer. The IRS has few restrictions on these types of employee benefits. Your plan adviser will answer any questions and help guide this process.
EXPEDITED SERVICE OFFER: Freedom Benefits announces expedited one day setup for new Section 139 disaster relief plans. The first step is to schedule a planning call with the plan adviser to answer all questions, plan the benefit and authorize the adviser. Initial appointments and plan setup are available are available on same or next business day.
WHAT WE DO: At your option or request, your designated plan adviser will: 1) Plan the benefit with the business owner or representative, 2) prepare prototype plan documents and employee communications, 3) enroll employees, 4) integrate the new plan with the business payroll system, 5) integrate the plan with the employer’s existing health plan, 6) establish accountable plan policies, 7) administer claims. We recognize that every business works a little differently, so the plan is customized to match your employee benefit practices.
COST: Consult and setup fee is $300. The plan administrative cost is $3 per employee per month. Freedom Benefits has a minimum annual fee of $1,000 for all tax, accounting, payroll and benefits services combined for each business client for continued service.
MORE INFORMATION: Information about all of Freedom Benefits plans is available online at FreedomBenefits.org. See our latest blog post titled “Five practical steps in setting up a Tax Free Small Business Section 139 Qualified Disaster Relief Payment Program“.
A Small Business Section 139 Qualified Disaster Relief Payment Program can be used to get tax free payments to employees without the burden of income taxes, social security and wage taxes, and other expenses. This post entirely skips the explanation, legal background and strategy and jumps right into the practical steps in setting up a tax free benefit plan plan within a small business employer.
1) Use a written plan document. This is not a legal requirement but just a good business practice.
2) Use a third party administrator. It’s creepy and inappropriate for the employer to ask about employee personal expenses. Yet the IRS wants appropriate verification. An outside benefits administrator is best.
3) Piggyback off the payroll system. Even though this is not taxed as payroll, we can use the same financial infrastructure to make the payments and keep records.
4) Communication is key. Since employees are not at work, email and text message announcements are the key, combined with live real time support professional to answer employee questions.
5) K.I.S.S. – Act sooner rather than later. Employees and firm owners face growing stress daily. An independent small business benefits firm like Freedom Benefits can launch this plan in just a day. Keeping a simple approach will also keep administrative costs to a minimum. When designed as proposed and combined with the payroll service, this plan should only cost a few dollars per employee per month.
If you have questions, please reach out to @tonynovak, by phone (856) 265-0306, or email firstname.lastname@example.org for a free no-obligation discussion of this plan for your business.
It is one thing for Congress to pass a tax bill but it is quite another to see increases in the paychecks of employees – especially the paychecks of America’s small businesses. The mechanical process of increasing paychecks is dependent of the system of controls used by employers and their payroll contractors. The IRS recently issued statements saying that might happen by the end of February 2018 thanks to the independent efforts of payroll companies acting more quickly than the IRS. But for small businesses the process of boosting employee paychecks may take longer.
As of today. February 21, 2018 this is where small businesses stand on he issues:
- Form W4 for 2017 is obsolete bu can be used until February 28, 2018 per IRS Notice 2018-14
- IRS has not yet issued a new Form W4 for 2018. (A draft version published cannot actually be used yet because it is missing important information). Obviously employers will not have time to have the new forms. when issued, executed and in use by March 1, 2018.
- Revised 2018 withholding tables are available so employers should be clear on their legal requirement to withhold payroll taxes.
Payroll accountants and their software platforms are generally proficient in these matters so the only problems I expect are among those relatively few ‘do-it-yourself’ manual payroll operations.
While this article focuses on employer actions and responsibilities, I strongly recommend that individual taxpayers prepare an estimate of 2018 taxes based on the new law to accurately plan for payroll tax withholding.
I am pleased to discuss this issue as it relates to your small business.