New reporting requirements mean more paperwork for employers.

Over the past several months, two new Federal regulations have been introduced that will require employers to begin gathering even more employee data for their records and report that information annually to the proper government authority. One regulation will require that employers report certain information about medical coverage to the Department of Health and Human Services. The second regulation mandates the separate reporting and depositing of all payroll and non-payroll withholding taxes. A summary of both regulations follows.

MEDICARE DATABANK

If you have employees, the IRS requires you to report employee wage information. Now, too, the Department of Health and Human Services will require information reports from employers when employees are covered under the employer's health insurance plan.

The Department of Health and Human Services has established a new Medicare coverage databank that will begin collecting information for 1994 in 1995. Employers will be required to provide the following:

* Name and Social Security number of both the employee and any other individuals (e.g. children of employees) covered by an employer sponsored health plan;

* The type and period of coverage; and

* The name, address, and federal identification number for both the employer and the group plan.

This information must be reported annually on a form not yet promulgated but intended to be similar to a Form W-2. Yes, potentially severe penalties will apply for failure to comply. It is likely that the regulations concerning this requirement will be issued in the near future, possibly by April 1994. These regulations are not likely to contain any significant relief from the reporting obligation as set forth in the statutory rules.

Even though this information will not be needed immediately, we recommend that employers begin the process of collecting the data now. While much of the information may already be contained in employer records, some information will have to be obtained from the employee. The 1994 open enrollment period for your health plan will generally provide an opportunity for you to collect any required information not already captured in your files.

New Rules for Depositing Non-Payroll Withheld Taxes

On December 22, 1993, IRS issued regulations mandating the separate reporting and depositing of all payroll and non-payroll withholding taxes. These new rules are effective January 1, 1994.

The new rules apply to non-payroll taxes withheld from:

* amounts paid for pensions, annuities, IRAs, and certain other deferred income,

* certain annuities,

* backup withholding on reportable payments,

* retirement pay for service in the Armed Forces, and

* certain gambling winnings

Specifically, all non-payroll taxes withheld must be reported on a new Form 945, Annual Return of Withheld Income Tax. Form 945 is required to be filed annually. Non-payroll taxes should no longer be reported on Form 941.

Deposits of the withheld taxes to be reported on Form 945 will be made under either a monthly or semi-weekly rule. For calendar years 1994 annd 1995, a taxpayer's status as a monthly or semi-weekly depositor for taxes reported on Form 945 will generally be the same as its depositor status for taxes reported on Form 941. Beginning with calendar year 1996, a taxpayer's depositor status for taxes reported on Form 945 will be determined annually based on a look back to amounts reported on Form 945 for the second preceding calendar year. For example, depositor status for 1996 will be determined by the amounts reported on the taxpayer's 1994 Form 945. If the taxpayer reported non-payroll withheld tax liabilities of $50,000 or less on the look-back form, the taxpayer will be a monthly depositor for the current year. If the taxpayer reported non-payroll tax liabilities in excess of $50,000 on the look-back form, the taxpayer will be a semi-weekly depositor.

Form 8109, Federal Tax Deposit Coupon, has been revised to accommodate deposits of withheld income taxes reported on Form 945. The IRS will automatically send taxpayers revised Forms 8109 as taxpayers use up their current supply of coupons. If a taxpayer is required to make a deposit for Form 945 withheld taxes before they receive the revised form, they should use the current form 8109, darken the "Sch. A" box in the Type of Tax section and the applicable quarter box in the Tax Period section and make the deposit following the instructions for Form 8109.

Taxpayers will not be required to file their first Form 945 until the first calendar year in which the taxpayer incurs a non-payroll tax liability. Taxpayers required to file a Form 945 for one year, will be required to file a Form 945 for each subsequent year, regardless of whether they have non-payroll tax withholding.

Arthur L. Heisman, CPA, is a partner in the Los Angeles office of Urbach Kahn & Werlin, Certified Public Accountants.