APS December Compliance Updates: Final
Tax Bill and 1095-Cs
With 2018 right around the corner, it’s time for our final compliance update of 2017. A lot of compliance changes occurred in December, so let’s go through them together before the new year. Here are your December compliance updates:
- Tax Cuts and Jobs Act Signed Into Law
- IRS Extends Form 1095-C Distribution Deadline
- IRS Releases 2018 Tax Calendar
- Standard Mileage Rate to Increase
- 2018 State UI Wage Base Updates
- 2018 Minimum Wage Rate Updates
- California Disability Insurance Tax Rate
- New York Minimum Wage and Exemptions
- Rhode Island Tax Amnesty
- Illinois Revised W-2 Electronic Filing Threshold
- Washington Adopts Rule to Enforce Paid Sick Leave
Tax Cuts and Jobs Act Signed Into Law
Employers and their employees will see withholding methods change in 2018. The Tax Cuts and Jobs Act was signed into law on December 22 and includes the elimination or suspension of many exclusions and deductions:
While the new tax bill keeps the seven individual federal income tax brackets, most of the rates have been lowered: 10, 12, 22, 24, 32, 35, and 37 percent. These percentages will expire December 31, 2025.
Revisions to Form W-4
Personal exemptions were suspended from 2018 to 2025, requiring the IRS to update the existing Form W-4. However, 2017 Form W-4s that have already been filed by employees would continue to be used by employers. Until the IRS releases initial guidance on the 2018 tax bracket percentages, employers and payroll service providers are instructed to continue using existing 2017 withholding tables and systems.
Furthermore, the new law calls for a transition period that would give employers and payroll service providers time to adjust to the new requirements. This period could last most of 2018.
While the new tax law suspends personal exemptions until the end of 2025 in favor of allowance amounts, it does not explain what an allowance amount is. The IRS will have to decide whether the allowance will be equivalent to a personal exemption and/or a specified amount.
States with income tax withholding policies that follow the federal system for personal exemptions would have to change their withholding methods. There are ten states that require a federal Form W-4: Colorado, Idaho, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, Oregon, South Carolina, and Utah.
New Flat Rate for Supplemental Wages
The optional flat tax rate used to withhold on supplemental wages of up to $1 million is to increase to 28 percent. This optional rate could drop to 22 percent if Congress passes a technical amendment or the Treasury Department issues new rules establishing the rate.
The new tax law contains several payroll-related provisions:
- Employees would not be able to deduct moving expenses from 2018 to 2025 unless the move was completed and paid for before December 31, 2017.
- Tax-free employer-provided educational assistance, tax-free employer-provided adoption assistance, employee achievement awards, and the Work Opportunity Tax Credit were preserved under the new law.
- Tangible property would be defined as it relates to employee achievement awards, to exclude cash, merchandise cards or coupons, meals, or similar items.
- The qualified bicycle transportation fringe benefit of $20 a month and the individual mandate tax under the Affordable Care Act (ACA) would be eliminated.
- Employer deductions for entertainment, amusement, or recreation activities would be eliminated, but deductions for 50 percent of food and beverage expenses associated with operating a trade or business would be allowed.
- Employers would no longer receive a deduction for subsidizing qualified transportation fringe benefits.
- Backup withholding would be reduced to 24 percent.
IRS Extends Form 1095-C Distribution Deadline
The IRS has extended the deadline to provide Forms 1095-B, Health Coverage, and 1095-C, Employer-Provided Health Insurance Offer and Coverage. The original deadline was January 31, but the IRS has extended this due date to March 2, 2018. The deadline applies to applicable large employers (ALEs), insurers, self-insuring employers, and other coverage providers.
The deadline to file information returns for 2017 has not been extended. The due dates are February 28 for paper filing and April 2 for electronic filing. Check out our Year-End Payroll and HR guides for more information.
IRS Releases 2018 Tax Calendar
Publication 509 has been released by the IRS. The employer’s tax calendar is divided into three-month quarters and contains due dates for filing tax forms and paying taxes. The publication also contains a table of semiweekly deposit dates for payroll taxes and a list of federal holidays.
Standard Mileage Rate to Increase
The standard mileage rate for transportation or travel expenses involving the business use of a vehicle is increasing to 54.5 cents per mile in 2018. The standard mileage rate for medical or moving purposes is increasing to 18 cents per mile and the rate for charitable purposes will remain at 14 cents per mile.
2018 State UI Wage Base Updates
The following states have announced their 2018 SUTA wage bases:
- Alaska: $39,500
- Arizona: $7,000
- Illinois: $12,960 (unchanged)
- Kansas: $14,000 (unchanged)
- Maine: $12,000 (unchanged)
- Michigan: $9,000 (unchanged)
- North Dakota: $35,500
- Tennessee: $7,000
- Virginia: $8,000
For more information and updates, visit our SUTA Wage Bases page.
2018 Minimum Wage Rate Updates
The following states have announced their 2018 hourly minimum wage rates effective January 1:
- Alaska: $9.84
- Arizona: $10.50 and $7.50 for tipped workers
- California: $11.00 for employers with at least 26 employees and $10.50 for employers with less than 26 employees
- Colorado: $10.20 and $7.18 for tipped workers
- Florida: $8.25 and $5.23 for tipped workers based on a maximum tip credit of $3.02
- Hawaii: $10.10 and $9.35 for tipped workers based on a maximum tip credit of 75 cents
- Maine: $10.00 and $5.00 for tipped workers
- Minnesota: $9.65 for large employers and $7.87 for other small employers, youth wage, and summer-work travel exchange visitor program
- Montana: $8.30
- New Jersey: $8.60
- New York: $10.40 and $7.50 for tipped workers based on a maximum tip credit of $2.90.
- Ohio: $8.30 and $4.15 for tipped workers
- Rhode Island: $10.10 and $6.21 maximum tip credit for tipped workers
- South Dakota: $8.85 and $4.425 for tipped workers
- Vermont: $10.50 and $5.25 for tipped workers
- Washington: $11.50 and $9.78 for workers 14 or 15 years old
California Disability Insurance Tax Rate
California’s tax rate for employers, partners, and self-employed individuals who choose to be covered in the state’s temporary disability insurance program is increasing to 4.59 percent effective January 1, 2018. The previous tax rate was 4.55 percent for 2017.
New York Wages and Exemptions
Effective December 31, 2017, New York’s hourly minimum wage will increase to $13.00 for New York City employees of at least 11 employees and $12.00 for New York City employers with fewer than 11 employees. Employers in Nassau, Suffolk, and Westchester counties will increase to $11.00 and the rest of the state will increase to $10.40.
Fast food workers in New York City will see a minimum wage increase to $13.50, while the remainder of the state will increase to $11.75.
In addition, employers must allow eligible employees to take paid family leave to care for family members with serious health conditions effective January 1.
For more information on New York state wage changes, visit the New York state labor site.
Statutory Exemption from Garnishment
Effective December 31, 2017, the following exemptions will apply to New York state employees:
- For New York City employers with at least 11 employees, the statutory exemption from garnishment is to be $390 based on a $13.00 minimum wage.
- For New York City employers with fewer than 11 employees, the statutory exemption from garnishment is to be $360 based on a $12.00 minimum wage.
- For employers in Nassau, Suffolk, and Westchester counties, the statutory exemption from garnishment is to be $330 based on an $11.00 minimum wage.
- For the rest of the state, the statutory exemption from garnishment is to be $312 based on a $10.40 minimum wage.
The following overtime exemption amounts are effective December 31, 2017 to December 30, 2018:
- For New York City employers of at least 11 employees, the applicable amounts are $50,700 annually, $4,225 monthly, $2,112.50 semimonthly, $1,950 biweekly, and $975 weekly
- For New York City employers of no more than 10 employees, the applicable amounts are $46,800 annually, $3,900 monthly, $1,950 semimonthly, $1,800 biweekly, and $900 weekly.
- For employers in Nassau, Suffolk, and Westchester counties, the amounts are $42,900 annually, $3,575 monthly, $1,787.50 semimonthly, $1,650 biweekly, and $825 weekly.
- For the rest of the state, the amounts are $40,560 annually, 3,380 monthly, $1,690 semimonthly, $1,560 biweekly, and $780 weekly.
Rhode Island Tax Amnesty
The state’s department of taxation has issued a payment amnesty period from December 1, 2017 to February 15, 2018. This amnesty period applies to all Rhode Island state taxes, including employer income tax withholding, for all taxable periods ending on or before December 31, 2016.
All penalties and a quarter of the accumulated interest are to be waived for taxes paid under the amnesty. The amnesty does not apply if unpaid taxes are the subject of an audit.
Illinois Revised W-2 Electronic Filing Threshold
Washington Adopts Rules to Enforce Paid Sick Leave
The final rules on the enforcement of paid leave requirements in Washington have been adopted and will become effective January 1. Employees must accrue sick leave at a rate of at least one hour for every 40 hours worked. Accrued leave may be used 90 days after the start of employment and up to 40 hours of sick leave may be carried over to the next year. Paid sick leave compensation is to be paid at the worker’s normal compensation rate.
The Washington Department of Labor and Industries has provided an explanation as to how they would respond to employer violations of the paid sick leave law and has launched an online Employer Resource Center that covers implementation. New required workplace poster and updated paid sick leave information has been mailed to employers.
How APS Can Help
APS provides cloud-based solutions for Core HR and Payroll processes to provide organizations with the technology the need to be more productive and efficient. Our self-service technology for employees and managers makes it easier for HR managers to delegate responsibility while maintaining accountability. By maintaining a vision of unified systems that make human capital management nearly effortless, we support our clients in their growth and success.
To learn more, please visit our website at www.apspayroll.com or call 855-945-7921.
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