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APS January 2018 Compliance Updates
A new year is here and along with 2018 comes many important compliance changes. To start your new year off right, here are your January compliance updates:
IRS RELEASES 2018 PERCENTAGE METHOD WITHHOLDING TABLES
For 2018, the withholding allowance amounts by payroll period are:
- Weekly: $79.80
- Biweekly: $159.60
- Semimonthly: $172.90
- Monthly: $345.80
- Quarterly: $1,037.50
- Semiannually: $2,075.00
- Daily or miscellaneous (each day of payroll period): $16
Employers should start using the 2018 withholding tables no later than February 15, 2018. The amount of one withholding allowance on an annual basis increased to $4,150 for 2018. Employees need to make sure they examine their withholding and match it to their expected tax liability to avoid withholding too little. For more information, see the IRS Withholding Tables Frequently Asked Questions.
ELECTRONIC FILING FOR EMPLOYER ACA FORMS NOW AVAILABLE
Employer forms for 2017 Affordable Care Act (ACA) reporting may now be filed electronically. Forms 1094-B, 1094-C, 1095-B, and 1095-C may be filed using the ACA Information Returns Program System. The deadline extension to provide Forms 1095-B and 1095-C to individuals is March 2, 2018.
LABOR DEPARTMENT RELEASES 2018 INFLATION-ADJUSTED PENALTIES
The civil penalty amounts imposed by the Labor Department’s Wage and Hour Division on employers that violate the labor laws it enforces have been increased for inflation as of January 2. These adjustments result in an increase from $1,925 to $1,964 for repeated or willful minimum wage and overtime violations.
IRS ROLLS OUT GUIDANCE FOR THE NEW TAX LAW
The IRS has issued guidance for the new tax law, but employers, payroll companies, and even workers have questions. Here are some factors to note:
FORM W-4 CHANGES ARE COMING
While the IRS has instructed employers and employees to continue using existing Forms W-4, there are changes on the horizon. By the end of February, the IRS will update its online tax calculator and provide information to help people determine whether they need to adjust their withholding.
Furthermore, a revised Form W-4 will be issued, but employees would not be required to file new forms. It is expected that at least by 2019 database fields will change for Form W-4 and a new system will be implemented to determine how to establish withholding.
TAX LAW BENEFIT CHANGES
Several tax deductions and credits have been eliminated, including moving expense deductions, deductions for subsidizing qualified transportation fringe benefits, and employee-related entertainment, amusement, or recreation activities deductions.
These changes could result in some employers modifying their programs to provide workers with additional amounts of pay instead of a subsidy amount paid into an employer-named plan.
PAYROLL DATA SECURITY
There will be a continued emphasis on data security and privacy for payroll professionals. The IRS continues to warn about the vulnerability of payroll data to email phishing schemes, and a verification code box is now included on Form W-2 to be used voluntarily by payroll service providers.
DOL POLICY CHANGES LIKELY TO IMPACT EMPLOYERS IN 2018
Employers will likely have to deal with several critical issues pertaining to federal labor policies and wage and hour disputes this year:
- Opinion letters for compliance assistance have been reinstated.
- A program will be established by 2019 to recognize the efforts of employers and others to implement apprenticeships.
- There will be a two percent increase overall for employers failing to comply with federal rules on family and medical leave, child labor, foreign workers, and construction contracts.
- There will be a $169 fine for employers that fail to post information about employees’ rights under the Family and Medical Leave Act (FMLA).
IRS RELEASES 2018 TABLES FOR LEVY EXEMPTIONS
The 2018 tables for wage and salary levy exemptions has been released by the IRS. The tables are used to calculate the amount of wages, salaries, and other income exempt from a notice of levy to collect delinquent taxes. The tables should be used with Form 668-W, Notice of Levy on Wages, Salary, and Other Income.
FEDERAL TAX CODE OVERHAUL SPELLS NEW STATE COMPLIANCE RULES
The tax code overhaul means many states will need to review their income tax withholding for 2018.
STATES WITH UPDATED WITHHOLDING TABLES
The following states have released updated 2018 withholding tables: Alabama, California, the District of Columbia, Idaho, Illinois, Kentucky, Maine, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, New York, Oregon, Rhode Island, and South Carolina.
North Dakota and Vermont are timing the release of their withholding tables to coincide with the IRS to ensure compliance.
ADDITIONAL STATE CHANGES
Oregon is planning to implement a new payroll tax separate from the withholding system, while New York is considering a payroll tax on employers in response to the new tax bill.
FINAL RULE ISSUED ON PAYROLL DEBIT CARDS
The Consumer Financial Protection Bureau (CFPB) issued a final rule on payroll debit cards, which will take effect April 1, 2019. The rule includes several changes to payroll card requirements that impact disclosures, change-in-terms notices, account histories, and overdraft fees:
- Disclosure of the financial institution’s name and the website and phone number through which it may be contacted must be provided on the payroll card or on the device through which wage payment is accessed, such as a website or mobile device.
- Notice of certain changes in terms that result from the final rule must be provided by the financial institution, as described in the final rule.
- Periodic statements and account histories generally must cover a longer time period.
- Payroll cards in circumstances detailed in the final rule are subject to certain credit card rules if the card may be used to access an overdraft credit feature.
- Employers generally coordinate with a bank to set up a payroll debit card program. The bank that issues the cards and holds the funds loaded onto the card is responsible for many of the final rule’s disclosure requirements.
For more information, see the quick-reference guidance on the CFPB’s website.
WITHHOLDING-EXEMPTION PERIOD EXTENDED
The effective date to claim exemption from income tax withholding using Form W-4 was extended from February 15 to February 28. The extension was given because the 2018 Form W-4 has not yet been issued. After the 2018 Form W-4 is released, employees have 30 days to refile.
The IRS has also released the 2018 Publication 15, (Circular E), Employer’s Tax Guide, which contains additional employer income tax withholding guidance.
MARYLAND PAID SICK LEAVE
Originally vetoed by the governor, Maryland’s legislature issued a measure to provide up to five paid sick days in a year. The bill is expected to take effect February 11.
Employers with at least 15 workers must provide those who work at least 12 hours a week with one hour of sick leave for every 30 hours worked, up to a maximum of five days a year. Employers with up to 14 employees must provide unpaid leave to those who work at least 12 hours a week.
ALASKA MINIMUM WAGE FOR THOSE WITH DISABILITIES
With the state minimum wage increase to $9.84 comes the repeal of subminimum wage for workers with disabilities. Effective February 16, workers with disabilities must be paid at least the minimum wage.
NEW JERSEY BREAK TIME
Effective January 8, employers must provide reasonable daily break times and extends civil rights protection for employees. Employers must also provide a suitable room or other location with privacy, other than a toilet stall, in close proximity to the work area for employees to breastfeed, express milk, or use for other related medical conditions.
NEW YORK COMPENSATION TIME, SCHEDULE CHANGES, PAYROLL TAX
An emergency rule clarifying that the hours worked by home healthcare aids may exclude meal periods and sleep times for aides who work shifts of at least 24 hours was re-adopted by the state labor department.
The rule, which took effect October 25, 2017, and expired January 4, was re-adopted on January 5 and is set to expire again on April 4. The state labor department intends to make the rule permanent.
Effective January 19, employers must allow employees within a year to make two temporary work-schedule changes for qualifying personal events.
The schedule changes include paid time off, remote work, work-hour changes, and unpaid leave. Qualifying reasons include caregiving emergency, a legal proceeding or hearing for subsistence benefits, or any reason that qualifies under the city’s law governing earned sick and safe leave.
The measure does not apply to employees who have worked for the employer fewer than 120 days, employees who work fewer than 80 hours in the city in a year, and employees covered under certain collective bargaining agreements.
As a result of the federal tax code overhaul, New York is evaluating several options for a payroll tax on employers. The purpose of the tax is to offset the decreased deductibility of state income taxes.
The options being considered are calculating the tax based on the current withholding system, replacing the income tax system with a progressive payroll tax on employers, and a combination of the first two options by implementing the progressive tax and retaining the state income tax system at lower rates.
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