In Indiana, HEA 1485-2015 combined county adjusted gross income tax, county option income tax, and county economic development income taxes into one combined local income tax. The new local income tax goes into effect January 1, 2017.
Effective January 1, 2017, the Indiana Department of Revenue will publish one local income tax rate in Departmental Notice #1 and in its return instructions for tax years starting in 2017. That rate will be applicable to both resident and nonresident taxpayers. Any changes to local income tax rates for withholding will be published by the department in Departmental Notice #1, which is published on the department’s website twice a year and is effective January 1 and October 1 each year. Other than listing one rate as opposed to two, no changes in the publication dates or location of publication on the department’s website will occur.
Do any of your employees claim “Exempt” on their W-4 Forms? If so, remember that the form expires annually. If your employee wants to continue to claim “Exempt” from withholding in 2017, he or she will need to fill out a new W-4 Form for 2017. Your system should allow you to create a report listing all the employees who are set up in payroll as “exempt from withholding”. Make sure to send out a reminder memo to all employees regarding withholding – both those claiming exempt and those who don’t. January is a good time to fill out new forms. Based on changes in their tax situations in 2016, some employees may want to make changes to their withholding.
California EITC (Earned Income Tax Credit)
The state of California requires that a separate notice be sent to employees advising them to file for the Federal Earned Income Tax Credit if they are eligible. Effective with this year end, California employers must also advise their employees that they may be eligible for the California Earned Income Tax Credit. This credit is offered in addition to the Federal Earned Income Tax Credit. Form FTB-3514 plus a California Income Tax return will assist any eligible taxpayer. See more about this credit here.
Ohio FUA Repayment
The state of Ohio has repaid its FUA (Federal Unemployment Account) loan balance. These loans are available to states that have depleted their unemployment account balances. As long as Ohio does not borrow any more money from the fund before the deadline of November 10, 2016, Ohio can avoid being a FUTA credit reduction state for the 2016 reporting year. This would mean that Ohio employers would be able to take the full FUTA credit of 5.4% as long as all of their state unemployment returns were filed and paid timely during 2016.
If you’re an employer, you’ll need to be looking out for changes, new rules, and any other compliance measures for year-end 2016. We’ll be supplying a round-up of these in our blog posts over the next few weeks.
Social Security Wage Base for 2017
The Social Security Administration has released the wage base for 2017. Please see the fact sheet here.
The wage base will be $127,200, an increase of $8,700 from the 2016 base of $118,500. The total amount withheld from employees will be $7,886.40, an increase of $539.40 from $7,347 in 2016. As in previous years, all Social Security deductions are matched by you, as the employer. This year again, there is no cap on Medicare withholding for employees or employers.
W-2 Filing Deadline – are you prepared?
REMINDER: The due date for filing 2016 W-2 Forms is January 31, 2017. We discussed earlier this year the fact that the Federal government and many state governments have accelerated the W-2 filing deadlines in an attempt to stem tax return fraud. Here’s a link to a useful fact sheet that will put this information at your fingertips.
Make sure your calendar is updated. See you soon.
To fight tax fraud, many states have accelerated the filing deadline for employers to file Forms W-2, says APA Director of Publications Laura Lough, Esq. Eleven states, as well as the Commonwealth of Puerto Rico, require employers to file W-2 forms electronically or on magnetic media by January 31. Nebraska will have a filing deadline of February 1.
As you will recognize, this is a significant change. More and more states are taking another action to fight tax fraud: delaying personal income tax (PIT) refunds to taxpayers. Sometimes employees file early hoping to get a refund faster. They may use information from a final paycheck to complete their PIT returns, rather than wait for a Form W-2 (due to employees January 31). Says Lough, “This is not a recommended practice as a final paycheck may not have all the necessary information that a Form W-2 will have”.
South Carolina and Utah have both indicated that they will delay personal income tax refunds to taxpayers in order to minimize fraud. The delay gives the states the time to verify employer filings of W-2 Forms against taxpayer returns. In some cases, the states will pair this action with an accelerated employer filing deadline for W-2 Forms, making that date January 31, instead of February 29 (this year’s deadline) for paper forms and March 31 for e-filing.
.Need more information? Contact us or visit the American Payroll Association website for more information.
Internal Revenue Service officials yesterday issued an alert to payroll professionals regarding a new phishing scam. Professionals are being targeted with phony requests for payroll records, W-2 Forms and personal data.
Most importantly, the requests appear to be official, coming from an officer of the teams’ own companies. Since the information requested usually contains Social Security numbers, extreme caution should be exercised at all times. A legitimate request will come from identifiable sources, and the professional should always know how to respond.
Don’t ever give out Social Security numbers. Even if you receive a legitimate request, use another identifier, or ensure that the numbers are masked (e.g. xxx-xx-2345). Ensure that your company’s policy on information sharing is clear and protects both you and your employees.
Read more about the alert here.
Did you catch the little detail in all the PATH (Protecting Americans from Tax Hikes Act) documentation about the parity between transit benefits and parking benefits? Yes, that’s right – it was made retroactive to January 1, 2015!
If you have not made this adjustment yet, please make sure you do it soon! There are a few steps involved. First, make sure that you can identify all your employees’ pre- and post-tax transit benefits by month. Then create a macro or statement in EXCEL (or other calculation program) to identify the difference between $130 (the original monthly amount) and $250 (the parity-adjusted amount for 2015). This will affect only those who had pre-and post-tax deductions, of course.
You’ll need to arrive at: a revised pre-tax deduction amount for each month and the year; a refund amount for any Social Security and Medicare deducted based on the original post-tax deductions; revised Federal taxable wages, and state taxable wages, if applicable. Then you’ll be able to create new W-2 Forms or create W-2C’s for your employees.
This is not a small task, but with a clear idea of all the steps, it can be done.
Need help? We can assist. Contact us for a lifeline!
This will sound obvious, but: Be as prepared as you can be for multiple changes that will occur on January 1st. For example, if you are a New York City employer, you already know that you are required to offer transportation benefits to your employees (if you have 20 0r more employees in New York City). Have you taken all the necessary steps to implement this change? Have you identified a vendor to assist with the transit benefit administration?
Also, the new law passed by Congress last week provides for permanent parity between transit and parking benefits. This will allow for higher pre-tax deduction amounts for transit benefits.
The parity is retroactive to January 1, 2015. Do you have your true-up calculations and refunds completed so that they can be processed in December? Remember, the alternative is W-2C’s issued to each affected employee.
Be prepared, and the year-end process won’t be so stressful or scary!