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APS February 2018 Compliance Updates
APS reports on relevant, impactful compliance updates each month to help keep you at the top of your compliance game. This month we are seeing the release of state unemployment wage bases, state withholding tables and methods changes, and extended tax filing deadlines. Here are your February compliance updates:
IRS RELEASES THE 2018 FORM W-4 AND WITHHOLDING CALCULATOR
The IRS has released the 2018 Form W-4, which is now expanded to four pages total. The form retains the personal allowances worksheet and describes how employees may apply the credit for dependents in determining withholding allowances. The amount of one withholding allowance increased to $4,150 in 2018.
The worksheets on the form are similar to the 2017 version, but the 2018 W-4 was modified to reflect changes under the federal tax code.
The IRS has also released an updated online calculator to use with Form W-4. The calculator allows employees to do a quick paycheck assessment to make sure they are withholding enough taxes.This is especially important due to the recent federal tax code changes.
EMPLOYEE BENEFIT GUIDANCE TO BE ISSUED
Guidance has been requested on the many changes to the taxation of employee benefits under the new tax law. The IRS will develop this guidance in response to the following request:
- Clarity on how employers handle reimbursements for qualified moving expenses incurred in 2017 but paid in 2018.
- Whether the value of working condition fringe benefits remains tax-free to employees receiving the benefits or not.
- How the change in the calculation of the Consumer Price Index may impact 2018 benefit thresholds.
- An explanation of how meals provided for an employer’s convenience and other employer-provided meal and entertainment expenses apply for employment-tax purpose.
According to the IRS, these issues will be addressed in the 2018 Publication 15-B, Employer’s Tax Guide to Fringe Benefits.
ELEVENTH CIRCUIT COURT ALLOWS EMPLOYEE TIP SHARING
The Eleventh Circuit Court, which covers Florida, Georgia, and Alabama, has ruled in favor of employee tip sharing. The ruling states that as long as an employer pays employees the minimum federal wage ($7.25 per hour) without using the tip credit, the employer can require the employee to share tips with other employees or with the employer. The current tip credit is $2.13 per hour and the remaining $5.12 is made up using the tips received.
The decision falls in line with a proposed Department of Labor (DOL) rule that, if passed this year, would allow employers to require the sharing of tips with employees who do not normally receive direct tips (dish washers, restaurant cooks, etc.) or with the employer.
PROPOSED WHITE HOUSE BUDGET CREATES PAID LEAVE PLAN
The proposed White House budget would create a federal- and state-paid parental leave program to start in 2020. The proposed benefit would provide six weeks of paid leave for new parents.
MASSACHUSETTS WAGE AND HOUR
According to a state supreme court ruling, payment for accrued, unused sick time does not count as a form of wages that must be paid to workers upon separation from employment.
NORTH CAROLINA WAIVES LATE-FILING PENALTY
North Carolina is waiving the $50 late-filing penalty for NC-3 Annual Withholding Reconciliation. The waiver is in response to questions about filing requirements for Form NC-3, as well as Forms W-2, 1099-R, and 1099-MISC.
Employers are to submit Forms 1099-R and 1099-MISC to the state department even if the forms do not contain North Carolina withholding.
SANTA FE, NEW MEXICO MINIMUM WAGE
The minimum wage for Santa Fe, New Mexico will increase from $11.09 to $11.40 on March 1, 2018. Employers who have a business license or registration from the city must pay employees at least the city’s minimum hourly wage for all hours worked within the Santa Fe city limits. This also applies to part-time and temporary employees.
OREGON EARNED INCOME TAX CREDIT
Starting with tax year 2018, employers must provide a notice to employees about state and federal earned income tax credits with Form W-2. The notice must also be included on the Oregon minimum wage poster.
TWO TAX CODE CHANGES THAT AFFECT EMPLOYERS
Sexual Harassment and/or Abuse Settlement Payments
Prohibits employers from deducting any settlement or payment related to sexual harassment or abuse claims if there is a nondisclosure agreement in place.
Paid Family Leave Tax Credits
Employers can claim a tax credit if they decide to provide paid family and medical leave to their employees beginning in 2018. The credit is equal to a percentage of wages paid to qualifying employees on leave under the Family and Medical Leave Act (FMLA).
IRS REVISING 2018 TABLES FOR LEVY EXEMPTIONS
The 2018 tax levy withholding guidance will be revised in February to address the passage of the tax code overhaul. Publication 1494, “Tables for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income,” was released in January with adjustments made for inflation only.
The revised withholding guidance will take into account the removal of personal exemptions for 2018. Forms 668-W will also be revised to reflect the changes. It has not yet been determined whether employees subject to a tax levy on wages will be required to submit a new statement to their employer due to the removal of personal exemptions.
IRS SETS FEBRUARY DEADLINE TO OVERHAUL TAX FORMS
The IRS plans to have all tax filing forms overhauled by the end of February. These updated forms would be used during the 2019 filing season. Once the forms have been rewritten, the IRS will then go through the process of updating corresponding instructions and issuing guidance.
IRS PLANS TO CUT 298 REGULATIONS
The IRS is proposing to eliminate 298 tax regulations that are considered obsolete or unnecessary. The list includes rules dealing with intercompany debt, partnership liabilities, and estate tax valuation. The agency is planning to review each regulation to ensure there isn’t some part of it that could still be applicable to the current tax code.
EEO-1 REPORTING CHANGES
Employers with employees who “regularly report” to client sites must now report those employees on an appropriate EEO-1 report using the address of the client site, as opposed to the employer’s address. While details about this change are included in the How to File an EEO-1 Report and 2017 EEO-1 User Guide, what constitutes “regular reporting” has not been defined.
PUERTO RICO UNEMPLOYMENT WAGE BASE
Effective 2018, Puerto Rico’s state unemployment wage base is $7,000, unchanged from 2017.
SEVERAL STATES LOOKING TO OFFSET TAX CODE OVERHAUL
Several state legislatures are working on plans to deal with the federal tax code changes. Some states have passed or are considering bills to preserve personal exemptions while other states are updating their withholding methods.
States With Passed or Proposed Legislation
- Idaho introduced a bill to annually update the state’s static Internal Revenue Code (I.R.C.) conformity date, but only to December 21, 2017, which would exclude changes made by the federal tax law.
- West Virginia used its annual update to its I.R.C. conformity date to preserve the number of personal exemptions residents may claim on state income tax returns.
- Nebraska was considering a bill to maintain the state’s credit and retain the federal standard deduction as it existed before the new federal tax code was signed into law.
- Georgia proposed a bill to update the state’s conformity date to January 1, 2018, increase the personal exemption to $3,750, and allow residents to take the increased federal standard deduction with either standard or itemized state deductions
- Michigan’s Senate was considering a bill to increase the state’s personal exemption to $4,800 by 2020 and remove a provision stating the number of exemptions allowed depends on the number claimed on an individual’s Form W-4.
- New Mexico’s proposed bill would have preserved the federal personal exemption from 2017 for heads of households, as well as the number of exemptions that would have been allowed on the federal W-4.
- Vermont has offered a plan to offset the effects of the Federal Tax Cuts and Jobs Act. The 2018 Vermont Income Tax Reform Plan would create a Vermont-defined income deduction of $6,000 or single filers and reintroduce a state personal exemption of $4,000.
- New York proposed a budget that include an opt-in payroll tax starting in tax year 2019.
States With Updated Withholding Methods
- Oregon has delayed the release of its 2018 withholding formula so adjustments can be made to ensure compliance.
- Louisiana revised its withholding formula and an emergency rule has been released.
- Colorado is still determining if its withholding requirements need to change this year and may have to update its tables.
- Missouri updated its 2018 formula but still plans to release final withholding guidelines.
- North Dakota has released its 2018 withholding tables and plans to continue using annual federal withholding allowance.
- Vermont is delaying the release of its 2018 withholding tables and employers are using the 2017 withholding tables for now.
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