May 2018 Compliance Updates

The IRS is allowing employees to use $6,900 as the maximum deductible health savings account contribution for 2018 instead of $6,850. This change provides much-needed transition relief to payroll departments. The $50 change had to be reported as taxable income, and an adjustment like this would have cost employers as much as $150 per account. The recalculated contribution limit was first introduced as a response to the new tax law.

The IRS will release forms and guidance on a new employer credit under the Family Medical and Leave Act (FMLA) this summer.

The credit is effective for wages paid in tax years 2018 and 2019 and may be claimed by employers that provide at least two weeks of paid family and medical leave a year at a rate of at least 50 percent of the employee’s normal wages. Qualified employees must have been employed by the business at least a year and must have an annual income of up to $72,000.

For more information, the IRS has provided a list of frequently asked questions on their site.

Overtime Rule, Take Two

The DOL also plans on a January 19 release of its second attempt at an updated overtime rule that would expand the number of workers eligible for overtime pay. The first attempt would have doubled the salary level under which employees would have qualified, but was shot down by the federal courts.

The IRS is considering requiring all employees to file a 2019 Form W-4. The IRS plans to revise Form W-4 for 2019 so that income tax withholding calculations will better conform with changes under the new federal tax law.

Under bill A.B. 1827, private employers in New Jersey are to provide paid sick leave to employees effective October 29, 2018. The paid sick leave may be used by employees for the following purposes:

• To tend to personal, mental, or physical health or that of a family member
• To handle domestic or sexual violence matters
• To attend school meetings
• Because a workplace, school, or childcare center is closed by a public health official because of a public health concern

One hour of paid sick leave is to accrue for every 30 hours worked, up to 40 hours, in an employer-established benefit year. Earned, unused paid sick leave may be carried over, but need not be paid on separation from employment.

New Hampshire is decreasing its unemployment tax rates for the fourth quarter of 2018. Tax rates will be lowered by 0.5 percent because the state unemployment trust fund balance is projected to exceed $300 million. Other tax rate changes include:

• The fourth-quarter solvency-threshold tax rate reduction for positive-rated experienced employers will increase from 1 percent to 1.5 percent
• The surcharge for negative-rated experienced employers, which increases tax rates by 0.5 percent, will not be in effect
• The new-employer unemployment tax rate will be 1.2 percent for the fourth quarter

Unemployment tax rates for positive-rated experienced employers will range from 0.1 percent to 1.2 percent for the fourth quarter. Rates for negative-rated experienced employers will range from 2.8 percent to 7 percent for the fourth quarter. New Hampshire is the only state that may adjust its unemployment tax rates quarterly.

Kentucky has updated its income tax withholding tables and a computer formula. The computer formula implements legislation H.B. 366 that sets the state’s individual income tax rate at a flat 5 percent. This is retroactive to January 1, 2018. The standard deduction remains $2,530 and the formula no longer uses an exemption credit of $10.

The hourly minimum wage for workers in the U.S. Virgin Islands will increase from $9.50 to $10.50 on June 1, 2018.