Payroll Preview: what you need to know in 2007

Several federal agencies hold sway over your payroll, and all of them have recently issued regulations or other mandates that impact your payroll operations. Here’s what you need to know to comply. Employee name/SSN mismatches. Employees’ names and Social Security numbers (SSNs) must match on W-2 forms. If they don’t, the IRS can levy hefty penalties against employers. Through the Social Security Number Verification Service’s online program (ssa.gov/employer/ssnv.htm), you can verify up to 10 employee name/Social Security number (SSN) combos at one time. SSNVS requests can also be submitted via an Excel spreadsheet sent to ssa.gov/employer/ssnvssheet.htm. (For more information on this, see Are Your Employees Legal… and Can You Prove It?) 
Debit cards in lieu of paychecks. Paying employees who don’t have bank accounts is always challenging. The Federal Reserve Board of Governors, the country’s central banker, has made it a little bit easier by extending the consumer protections that apply to electronic fund transfers to plastic pay debit cards. With official guidance in hand, pay card issuers (mostly credit card companies) will be approaching employers of all sizes. Child support restrictions. Beginning with the federal government’s 2007 fiscal year on October 1, 2006, travelers who owe at least $2,500 in back child support won’t be able to get passports.
What else is on tap for 2007:

• The Social Security taxable wage base increases to $97,500. The maximum Social Security tax is $6,045 (6.2% x $97,500).

• The personal exemption amount is $3,400.
• The most employees can defer into their 401(k) accounts on a pre-tax basis increases $500, to $15,500.
• If your 401(k) plan provides, the maximum pre-tax, catch-up contribution for employees who turn 50 during 2007 remains unchanged at $5,000.
• The maximum contribution to 401 (k) plans, including both employee and employer contributions (also known as 415 limitations) increases $1,000, to the lesser of 100% of compensation or $45,000.
• The annual salary limit for figuring contributions into 401(k) plans increases $5,000, to $225,000.

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