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There are two primary components to the plan:

The plan includes a tax credit for employees called "Making Work Pay". The IRS modified the withholding tables to lower income tax calculations for employees who qualify. There won't be any retroactive tax calculations. Instead, the IRS adjusted withholding for the rest of 2009 to give each tax payer their $400 or $800 credit. If you're processing payroll on your own, you should be sure to check out the IRS website for these updated tax tables, so you can begin putting more hard-earned dollars in your employees' pockets.

The plan also includes tax credits for employers based on COBRA Health Insurance premiums. The IRS has modified quarterly Form 941 and annual Form 944 to report the Cobra credit. Employers who provide Cobra Premium Assistance can request a refund of the tax credit or apply the credit to future tax deposits. You will need to retain the appropriate documentation to justify the credits claimed and you will also need to consult their benefit and tax advisors to confirm eligibility, timing, and other qualifying details. I'm not sure if you're using a payroll provider or not, but if so, you're most likely on track--payroll companies have been working very hard to implement the changes for their customers. Because PayCycle is an online provider, it was easy to implement these changes in our customer's accounts even ahead of the deadline. (One of the benefits of using an online provider, in partial answer to your second question) You will want to be sure if you use a software provider that you've updated your software after April 1, which is when the changes were effective. PayCycle has also posted a free online recorded webinar that can be viewed at any time regarding this topic. It is available here: https://www1.gotomeeting.com/register/845818179.

Further benefits of online payroll include convenient 24 x 7 access to your payroll account and records, the security of your payroll information (no paper floating insecurely around your office), and the ability to securely share that access with others, like your accountant or your office or payroll manager. It's also easy. Most payroll tasks can be completed with a mouse click or two.

Great question! To be perfectly blunt: cost is a big factor for employers today. The most important thing to understand is whether you're getting the benefits and features you need, at a cost that makes sense for your business. Don't be overwhelmed by long lists of features. What most small business employers need is the ability to pay employees accurately by check or direct deposit, a way to pay and file taxes securely, electronically (so you don't have to make trips to the bank and post office) and on time, and access to payroll records and information all the time, so you can work on payroll at times that are most convenient for you. If you have other needs, make sure those are also included. Having a list of your needs ahead of time is a big time saver.

Most small businesses also need strong, friendly, human-based support services from their payroll companies. A payroll company should provide multiple, easy-to-find methods of contacting them and have lots of available support hours. The bottom line: when you have a payroll emergency, the last thing you want to do is search through someone's online database of FAQ's instead of reaching a real, concerned human being. You should be able to get these services, with expert support included in the cost, for a flat, understandable fee. Check in particular for hidden charges related to checks, direct deposits, extra payroll runs, and tax form filing services.

Yes, PayCycle calculates vacation, sick and personal time balances for customers. We allow customers to set up policies based on hours worked, anniversary date, or calendar year plans. Once these are set up, PayCycle keeps track of the balances being earned and the hours used/taken for the employee.

We provide the balances to employers online, in a report, so it is easy to keep track of where your employees are. We also warn if an employer is granting vacation or sick time hours to an employee who doesn't have a sufficient balance available (however, we do allow negative balances -- this is at employer discretion).

This easy way of tracking vacation and sick as a part of payroll takes out much of the guesswork and discrepancies that arise through other tracking methods.

Half way through the year, I switched from writing checks to an online solution. I'm not looking forward to tax time. Does your solution offer capabilities to easily manage federal and state tax?

Multi-state payroll is a big challenge for employers who have to contend with it. Understanding that this is a big need for our small business customers, PayCycle does indeed allow for employees to live in states other than the primary work state. We call these "commuter employees". We also allow for an employer to have multiple work locations in different states and we handle the multistate calculations, tax payment reminders and forms for employers in both of these situations.

What trends do you see in how businesses are managing payroll these days?

Tax time is definitely a scary time for many businesses. PayCycle completely manages tax time for employers and we top that off with a tax guarantee, where we guarantee for employers that our tax calculations and forms are correct. PayCycle keeps employers on track for important payroll deadlines with tax and form filing email reminders and a To Do list, which shows the deadlines for critical tasks.

An important idea for businesses doing payroll to understand is that tax time is not a one time a year event. Taxes are due continuously throughout the year, based on payroll activity, and payroll tax forms are due for many businesses on either a monthly and/or quarterly basis. This is in addition to the annual forms (Form W-2, 1099, 940) that most employers are familiar with.

Great question! We founded our business ten years ago and we have seen a big movement in recent years toward doing and transacting business online. This, of course, has been a boon for our business, since we've been online since the start.

We're also seeing small businesses gravitate toward offering paperless payroll: direct deposit and online tax payment and form filing as a way of more conveniently operating their businesses. Small business owners are concerned with convenience -- they have so many tasks to complete during the day associated with running their businesses, that they may want to do payroll in the evenings or on weekends, from home or from the office. Payroll services need to be able to keep pace with these needs, and help employers to deal with payroll in between the many distractions of their day and during "off-hours".

A very recent trend, according to some research PayCycle conducted, shows that 30% fewer small business employers are worrying a lot about the economy in recent days, but that also corresponds with a 48% lack of confidence in the recent stimulus package. The research can be viewed in more detail here: http://www.prweb.com/releases/2009/02/prweb1950124.htm. It remains to be seen how this will play out in payroll decision making and management, but a segment of employers are definitely postponing both hiring and termination decisions while they wait to see how this will ultimately all shake out.