APS September Compliance Updates
The IRS has published drafts for Forms W-2 and W-4, and many states are making adjustments to wages. Here are your September compliance updates:
- Labor Department to Clarify Franchise Rule
- IRS to Release Redesigned Form W-4 in 2020
- Interest Rates Remain Steady for the 4th Quarter
- Inflation-Adjusted Amounts for Payroll are Estimated for 2019
- IRS Makes Minor Adjustments to Some Levy-Exemption Amounts
- IRS to Release Draft Form, Guidance on FMLA Credit
- California Worker Status
- District of Columbia Wage and Hour
- Flordia Minimum Wage
- Iowa Unemployment Tax Rates
- Louisana Unemployment-Taxable Wage Base
- Maine Income Tax
- Maryland Paid Sick Leave
- Michigian Minimum Wage
- Montana Minimum Wage
- New Jersey Paid Leave and Minimum Wage
- New York Paid Leave and Income Tax Withholding
- Ohio Minimum Wage
- Oregon Workers’ Compenstation
- South Dakota Minimum Wage
- Vermont Minimum Wage
- West Virginina Unemployment Tax Rates
- Wisconsin Unemployment Tax Rates
Labor Department to Clarify Franchise Rule
On September 2nd, Secretary Alexander Acosta told a hospitality industry group the Labor Department is giving serious consideration to creating a rule to clarify when a franchise is liable for acts by its franchisees. The Department of Labor has been working on an initiative to restrict situations in which a business can be liable for hour and wage violations of a related company’s employees.
The National Labor Relations Board is currently working on a proposal that will limit the situations in which one business can be held responsible for unfair labor practices against a related company. The efforts by the two agencies are a response to undo joint employment rules imposed during the Obama administration.
IRS to Release Redesigned Form W-4 in 2020
The IRS announced the Form W-4 will be redesigned in 2020 instead of 2019. In June, the IRS released a draft of the form for 2019 with significant changes due to the tax code overhaul (Pub. L. 115-97), which took effect on January 1, 2017. Employers and payroll organizations alike expressed their concern for the extent of the proposed changes in the short time available for a 2019 implementation. By postponing the changes to 2020 will “allow for continued work to refine the new approach for the form.”
The IRS plans to release an update to the 2019 tax year draft Form W-4, which is similar to the 2018 version currently in use. The Treasury and the IRS are to revise the wage withholding system and Form W-4 because of changes in the tax code overhaul, which reduces personal exemption to zero and modified tax withholdings from wages.
Interest Rates Remain Steady for the 4th Quarter
Interest rates are unchanged for the fourth quarter starting October 1, 2018. Under the Internal Revenue Code, the rate of interest is determined quarterly. The rates are:
- 5 percent for noncorporate overpayments and underpayments.
- 4 percent for corporate overpayments.
- 2.5 percent of the portion of a corporate overpayment exceeding $10,000.
- 7 percent for large corporate underpayments.
For taxpayers other than companies, the overpayment and underpayment is the federal short-term interest rate plus 3 percentage points.
Inflation-Adjusted Amounts for Payroll are Estimated for 2019
Bloomberg Tax has estimated the inflation-adjusted amounts for some payroll-related provisions for tax-year 2019. The provisions projected to increase are:
- Foreign earned income exclusions amounts to increase from $103,900 to $105,900.
- The fringe benefit exclusion amount for transit passes, transportation in a commuter highway vehicle, and for qualified parking to increase from $260 to $265.
- The adoption credit to increase from $13,810 to $14,080.
- Standard deductions to increase from $24,000 to $24,400 for married employees filing jointly, from $18,000 to $18,350 for heads of household, and from $12,000 to $12,200 for all other taxpayers.
- The voluntary employee salary reductions for contributions to health flexible spending arrangements to increase from $2,650 to $2,700.
IRS Makes Minor Adjustments to Some Levy-Exemption Amounts
On Sept. 6, the IRS released a reviewed Publication 1494 that is used to determine the amount of wages, salaries, and other income that may be exempted from a notice to collect delinquent taxes. The revision to the publication changes some of the exemption amounts for the head of household filing status.
IRS to Release Draft Form, Guidance on FMLA Credit
The IRS is planning to release a new draft form and proposed guidance related to the employer credit for paid family and medical leave. The new Form 8994 is to be used by employers claiming the Family and Medical Leave Act (FMLA) credit. Form 8994 is to help employers compute the credit that would be reported on Form 3800, General Business Credit. The agency has not set a date for the release of the second Form W-4 draft.
California Worker Status
On Sept. 10, the Ninth Circuit Court of Appeals ruled that California’s labor commissioner is not preempted by a federal law from using a generally applicable, common-law test to determine whether drivers were properly classified by motor carriers. The California Trucking Association claimed that the labor commissioner’s use of the common-law test to determine worker status disrupted contracts between motor carriers and their owner-operators which caused service inefficiencies and was inconsistent with the law. The appeals court noted in a footnote to its ruling that a new standard established by the state’s high court was not meant to apply in every instance or in the case at hand.
California Wage Payment Requirements
Starting January 1, 2019, employers must make copies of relevant employment records after employees request to inspect and copy employment records. Measure S.B. 1252 clarifies the existing requirement that when employees request to inspect and copy employment records, the records must be copied by employers.
District of Columbia Wage and Hour
Status updates on the implementation of the Universal Paid Leave Act are to be the topic of a roundtable held on October 9, 2018 by the Council of the District of Columbia’s Committee on Labor and Workforce Development. Also to be discussed are the quarterly reports on implementation of the Universal Paid Leave Amendment Act of 2016 (L21-264), which are due on September 30, 2018, and the status of other elements of the implementation.
The Universal Paid Leave Amendment Act of 2016, which took effect on April 7, 2017, provides up to two weeks of annual paid leave to eligible employees for their serious health condition, up to six weeks for family members with serious health conditions, and up to eight weeks for the reasons related to the birth of a child or legal placement of a child. Paid-leave benefits are funded through employer contributions equal to 0.62 percent of each covered employee’s wages. Collection of taxes from employers for the paid leave is to start on July 1, 2019, and leave payouts are to start in 2020.
Florida Minimum Wage
Starting January 1, 2019, Florida’s hourly minimum wage is expected to rise from $8.25 to $8.46. The direct wage for tipped workers, which is calculated as equal to the minimum wage minus the state’s $3.02 tip credit, is expected to rise from $5.23 to $5.44 on January 1, 2019. Adjustments to the 2019 minimum wage would be published by October 15 to the Department of Economic Opportunity internet home page.
Iowa Unemployment Tax Rates
Effective January 1, 2019, Iowa’s unemployment tax rates are unchanged from 2018. Unemployment tax rates for experienced employers are to be determined with Table 7 in 2019 and range from zero to 7.5 percent, unchanged from 2018. For 2019, also unchanged from 2018, the unemployment tax rate for new non-construction employers is 1 percent and the tax rate for new construction employers is 7.5 percent.
Louisiana Unemployment-Taxable Wage Base
A spokesman for the state Workforce Commission reported that effective Jan. 1, 2019, Louisiana’s unemployment-taxable wage base will be $7,700. This wage base is unchanged from 2018.
Maine Income Tax
On Sept. 12, a bill addressing Maine’s conformity with the federal Internal Revenue Code became law without the signature of Gov. Paul LePage. The measure made several changes in response to the federal tax code overhaul (Pub. L. 115-97) and will now conform to the federal standard deduction for tax year 2018 and later. The bill moved Maine’s conformity date with the I.R.C. from Dec. 31, 2016 to March, 23, 2018.
Maryland Paid Sick Leave
On Sept, 17, the state announced that small Maryland companies that provide paid sick and safe leave may apply for a refundable tax credit to help them comply with Maryland’s new paid sick leave requirements. The Small Business Relief Tax Credit would be up to $500 per employee and $7,000 per small business for each year they qualify for the tax credit. The state’s commerce department will begin accepting applications for the tax credit on Jan. 3, 2019.
Michigan Minimum Wage
On Sept. 5, the state legislature approved two ballot measures (The Improved Workforce Opportunity Wage Act and The Earned Sick Time Act) regarding minimum wage and paid sick leave.
The Improved Workforce Opportunity Wage Act is to raise the state’s hourly minimum wage from $9.25 to $10 on Jan. 1, 2019. The Earned Sick Time Act is to require employers to provide paid sick time to their employees at a rate of one hour of paid sick time for every 30 hours worked with a cap of 72 hours on the amount of paid sick time used in a year. Since these two measures were approved on Sept. 5, they will not appear on the Nov. 6 ballot.
Montana Minimum Wage
Montana is set to raise its minimum wage from $8.30 to $8.50 effective Jan. 1, 2019 based on data released by the Bureau of Labor Statistics. Montana usually announces its annual minimum wage adjustment by early October.
New Jersey Paid Leave and Minimum Wage
Proposed rules to implement New Jersey’s earned sick leave law are to appear in the New Jersey Register on October 15, 2018, which will be followed by a 60-day period where public comments can be submitted. New Jersey’s earned sick-leave law (2018 N.J. Laws 10 (A. 1827)) requires employers to allow eligible employees to accrue one hour of paid sick leave for every 30 hours worked, up to a maximum of 40 hours in a year.
The proposed rules (N.J.A.C. 12:69) address topics such as earned sick-leave administrative penalties and fees, interest, hearings, retaliatory action, etc. New Jersey’s earned sick leave law is to take effect on October 29, 2018. New Jersey’s minimum wage is expected to rise by 24 cents from $8.60 to $8.84, effective Jan. 1, 2019. Minimum-wage adjustments for the next year are announced by September. 30.
New York Paid Leave and Income Tax Withholding
The rate of New York’s new paid family leave tax will rise from 0.126 percent to 0.153 percent effective January 1, 2019. The tax generally must be deducted from each employee’s wages. However, employers may choose to forgo deductions from employees’ wages and pay premiums equal to the amounts that would have been deducted instead. For 2019, the weekly taxable wage base for the paid family leave tax is lesser of the employee’s total wage for the week or the applicable state average weekly wage of $1,357.11, up from the 2018 weekly average of $1,305.92. The maximum total contribution for 2019 is $107.97 for each employee.
On September 14, the Department of Taxation and Finance released a proposed rule revising tables for New York state and the city of Yonkers. The changes would implement tax rate decreases specified for 2019 in New York’s fiscal 2017 budget bill (S. 6409-C). The rule is to be published October 3 in the New York Register.
Ohio Minimum Wage
Based on data from the Bureau of Labor Statistics, Ohio is set to increase the state’s minimum wage from $8.30 to $8.55 effective January 1, 2019. Ohio’s hourly minimum cash wage for tipped workers is to be no less than half of the minimum wage.
Oregon Workers' Compensation
On September 10, Oregon’s Department of Consumer and Business Services announced Oregon’s compensation payroll assessment rate may decrease for 2019 under proposed rulemaking. Under the proposed changes, the 2019 workers’ compensation payroll assessment rate would go from 2.8 cents an hour to 2.4 cents an hour or part of an hour worked by each employee. The rule is expected to be finalized in early October.
South Dakota Minimum Wage
South Dakota’s hourly minimum wage is set to increase from $8.85 to $9.10 effective January 1, 2019, based on the Bureau of Labor Statistics’ data. The Department of Labor and Regulation publishes any minimum-wage adjustments by October 15 on their website.
Vermont Minimum Wage
Vermont’s hourly minimum wage is expected to rise to $10.78 from $10.50 and the hourly minimum cash wage for tipped workers, which is to be no less than half the minimum wage, is expected to increase in 2019 to $5.39 from $5.25. Under the bill (H.B. 552) signed in June 2014, the state’s hourly minimum wage rose in annual increments through 2018 and is to be annually adjusted for inflation starting January 1, 2019.
West Virginia Unemployment Tax Rates
West Virginia’s unemployment tax rates for experience employers in 2019 are to be determined with Column C and are to range from 1.5 percent to 4.5 percent for positive-rated employers and 6.5 percent to 8.5 percent for negatively rated employees. The state’s unemployment-taxable wage base is to be $12,000 for 2019.
Wisconsin Unemployment Tax Rates
The state’s unemployment tax rates are to range from zero to 12 percent in 2019 and the unemployment tax Schedule D is to be in effect for Wisconsin employers in 2019. Unemployment tax rates for experienced employers are to be determined with Schedule D for 2019, as in 2018. For experienced employers with taxable payroll of less than $500,000 over a 12-month period ended June 30, 2018, rates are to range from zero to 12 percent. For employers with taxable payroll of at least $500,000, rates are to range from 0.05 to 12 percent. These rates include a solvency surtax.
How APS Can Help
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