We know, you’ve got a lot going on. So much, in fact, that you don’t have a ton of time to worry about what’s new in the payroll world. That’s where we come in!
Want to make sure you’re not missing important developments in the payroll scene? Never fear: we’ve got the round-up of payroll news and updates that you need to know in order to stay in the loop. This is Pay Matters – the March 2018 edition.
Read on to stay informed and stay in compliance with relevant alerts and insights that matter most for your payroll.
Confused about which OSHA reporting and recordkeeping requirements apply to your organization? Learn what you need to know with our upcoming HR webinar!
In this session, we’ll review these requirements – who they apply to, what your company must do for compliance, and when to complete various responsibilities. We’ll review the OSHA 300 forms in detail, and will cover OSHA’s new electronic submission of injury and illness records requirements.
Register for this webinar over on our webinar page.
IRS Issues 2018 Form W-4 and New Tax Calculator
In general, Form W-4 is used by employees to indicate their marital status and number of allowances so that employers can calculate how much Federal income tax to withhold from their pay. Due to the Tax Cuts and Jobs Act, tax rates, tax tables, and withholding calculations have undergone significant changes. The new Form W-4 more accurately reflects these changes. Employees are not required to file a new Form W-4, but completing a new Form W-4 is recommended to ensure more accurate payroll tax withholding.
The IRS has also released a 2018 withholding calculator, promoting a “Paycheck Checkup”, encouraging employees to use the calculator to determine their correct withholding allowances for 2018. The calculator guides employees through a series of questions such as marital status, income, and anticipated deductions to suggest the appropriate allowances.
Employers should consider notifying their employees of the new Form W-4 and calculator.
The biggest tax reform since 1986 has its fair share of HCM-related changes. Check out the following chart for a quick overview of these changes.
|Personal exemptions ($4,050 in 2017)||Allowance amount instead of personal exemptions||There will be a new Federal withholding system in 2019 to reflect this change. This system has not yet been unveiled by the IRS but they are promising education and outreach in advance of the release. The old system of using personal exemptions is retained for 2018.|
|IRS will phase changes into the withholding system. 2018 tables have been issued and the IRS has released the 2018 Forms W-4 and an updated tax calculator.|
10%, 15%, 25%, 28%, 33%, 35%, 39.6%
10%, 12%, 22%, 24%, 32%, 35%, 37%
|25% supplemental rate up to $1M||22% supplemental rate up to $1M|
|39.6% supplemental rate over $1M||37% supplemental rate at least $1M|
|Moving expenses tax-free.||Moving expense taxable.||Still can be taken by employers as a deduction|
|Bicycle commuting $20 per month tax-free||No tax-free bike benefit||Tax-free parking and auto commuting continue|
|Backup withholding rate of 25%||Backup withholding rate of 24%||Applies when payee doesn’t provide a TIN|
Several Republican senators are collaborating on a bill which would allow employees to designate Social Security contributions as a funding source for a continuance of pay during parental leave. Under the proposed legislation, employees who opt in would have to delay retirement to repay the funds.
This legislation would follow the already enacted tax reform bill giving employers a tax credit if they offer employees up to 12 weeks of paid family leave.
The proposition has been met with opposition from some Democrats who are against using Social Security to pay for such a program.
States Look for Ways to Counterbalance Federal Tax Reform
Tax reform’s removal of the deduction for state and local taxes paid has sent states scrambling to find ways to compensate their residents for the lost deductions. In addition, the IRS will no longer allow personal exemptions. States that had followed the federal model of allowing personal exemptions must now decide whether to cast out on their own, or continue conforming to the IRS. Before tax reform, 21 states accepted the federal W-4.
Here’s a digest of state activity:
New York Gov. Andrew Cuomo’s fiscal 2019 budget includes an opt-in payroll tax starting in the tax year 2019. This tax would be a type of employee benefit. Employers would pay a 5 percent tax on all compensation exceeding $40,000 for each employee, according to a Feb. 12 news release. Employers would have until October 1, 2018, to decide to opt in for 2019.
In return, employees of participating employers would receive a credit in the amount of the payroll tax paid by their employer to use toward their individual income tax return. The tax would be phased in starting Jan. 1, 2019, at rates of 1.5 percent in 2019, 3 percent in 2020, and 5 percent in 2021 and on.
Cuomo proposed legislation including the payroll tax plan February 15.
Note: this is still not the law in New York. Viventium Compliance Services will closely follow and report on developments.
Idaho modified its law to conform to the Internal Revenue Code only until December 21, 2017, thus excluding the tax reform changes.
Georgia Gov. Nathan Deal proposed H.B. 918 on February 13 by to update the state's conformity date to January 1, 2018, while increasing the state's personal exemption to $3,750 from $3,000. The bill also would allow residents to take the increased federal standard deduction with either standard or itemized state deductions, according to a news release.
Michigan's bill (H.B. 5420), which passed its House on January 25, would increase the state's personal exemption to $4,800 from $4,000 by 2020. It would also strike a provision linking the number of state exemptions to the number claimed on the W-4.
Nebraska is considering a bill (L.B. 1090) to maintain the state's credit and retain the federal standard deduction as it existed before tax reform.
New Mexico tried to pass a bill (H.B. 367) similar to West Virginia’s (see below) but ran out of time as its legislative session ended on February 15 before its Senate could vote.
Vermont’s tax department proposed a plan February 2, and Gov. Phil Scott presented a draft bill to the legislature with a personal exemption of $4,000 and standard deduction of $6,000 instead of the current conformity to federal amounts. This change would ensure that residents’ 2018 tax liability would be about the same as in 2017. Vermont's deduction and exemption previously depended on federal amounts.
West Virginia removed its dependence on the number of exemptions claimed on the federal W-4. The bill, requested by Gov. Jim Justice (R), was sent to him Feb. 15 for signing.
Colorado stated on January 29 that it is still figuring out if it needs to change its withholding rates.
Louisiana issued an emergency rule on February 12 with a new formula which took effect on February 16.
Missouri changed its rates on January 22, but its website asserts that it still plans to release final withholding guidance.
Oregon issued its 2018 formula on January 19.
Though the attempt to change overtime rules on the federal level may not have succeeded, Pennsylvania has made steps towards an overtime overhaul on the state level that will affect half a million workers.
Pennsylvania Governor Tom Wolf announced a proposal updating the state overtime law. Under current law, a salaried worker earning $23,660 annually ($455 per week) who meets the duties test, is not entitled to overtime pay. This potentially means that someone earning $24,000 a year can work 60 hour weeks without overtime pay.
Under the proposal, the salary threshold that requires employers to pay overtime would increase gradually as follows:
Starting in 2022, the salary threshold would increase automatically every three years. In addition, the duties test would also be clarified for easier understanding.
Sound familiar? The U.S. Department of Labor tried to enact similar legislation back in 2016 but was ultimately halted. Viventium will keep an eye on whether the state of Pennsylvania will have more success.
For more, click here.
The City of Santa Fe, and County of Santa Fe, New Mexico are increasing their minimum hourly wages effective March 1, 2018, from $11.09 to $11.40. The county’s minimum cash wage for tipped employees increases from $3.32 to $3.41 (in unincorporated areas only). The city did not say anything about tipped minimum cash wage, but federal and New Mexico law allows $2.13 per hour if direct wages plus tips equal at least the minimum wage.
Upcoming EEO-1 Reporting Deadline
HR teams and practitioners had a break last year from completing an annual EEO-1 report. While the pay data reporting has been suspended, covered employers must submit their 2017 EEO-1 reports no later than March 31, 2018.
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