APS May 2018 Compliance Updates
APS reports on relevant, impactful compliance updates each month to help keep you at the top of your compliance game. This month we are seeing the release of state unemployment wage bases, state withholding tables and methods changes, and extended tax filing deadlines. Here are your May compliance updates:
IRS PROVIDES RELIEF ON HSA CONTRIBUTION LIMITS
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.
IRS TO RELEASE FMLA CREDIT FORMS AND GUIDANCE
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.
DOL TO BETTER DEFINE LAW ON OVERTIME CALCULATIONS
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.
IRS CONSIDERING NEW FORM W-4 FILING REQUIREMENT
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.
NEW JERSEY PAID SICK LEAVE
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 UI RATES TO DECREASE
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 UPDATES WITHHOLDING METHODS
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.
U.S. VIRGIN ISLANDS MINIMUM WAGE
The hourly minimum wage for workers in the U.S. Virgin Islands will increase from $9.50 to $10.50 on June 1, 2018.
IRS UPDATES TABLES ON LEVY EXEMPTIONS FOR WAGES
The revised tables include changes to exemption amounts. For example:
- For a single taxpayer who is paid weekly and claims three dependents, $470.20 would be exempt versus $364.42.
- For a married taxpayer filing jointly who is paid biweekly and claims two dependents, $1,242.32 would be exempt versus $819.23.
The revised tables should be used with Form 668-W, Notice of Levy on Wages, Salary, and Other Income.
Guidance Issued on Calculating Exempt Amounts
Guidance has also been issued on how to determine the wage and salary amounts that are exempt from levy. Notice 1439 helps employers calculate exemption amounts and even provides an example of a statement for dependents and filing status.
DEADLINE EXTENDED FOR EMPLOYER SURVEY ON W-2 PAY DATA
The deadline for employers with at least 100 employees to report W-2 pay data as part of an Equal Employment Opportunity Commission (EEOC) survey has been extended from March 31 to June 1.
2019 CONTRIBUTION LIMITS TO RISE FOR HSAS
The annual contribution limits for health savings accounts will increase in 2019 based on inflation:
- The annual limit for deductions for an individual with self-only coverage under a high-deductible plan will increase from $3,450 to $3,500.
- The annual limit on deductions for an individual with family coverage under a high-deductible plan will increase from $6,900 to $7,000.
- A high-deductible health plan for 2019 will be defined as a health plan with an annual deductible of at least $1,350 for self-only coverage or $2,700 for family coverage, both unchanged from 2018.
- Annual out-of-pocket expenses, such as deductibles and copayments, are not to exceed $6,750 for self-only coverage and $13,500 for family coverage, up from $6,650 and $13,300 respectively.
CALIFORNIA WORKER STATUS
The classification of a worker will now be determined by a three-condition test. A worker is an independent contractor under the new standard if:
- The work may be performed free from employer control and direction,
- The worker performs work that is outside the usual course of the employer’s business, and
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the employer.
IOWA PASSES INCOME TAX REDUCTION FOR 2019
Iowa has passed new income tax rates for tax year 2019. The income tax wage brackets were not changed, but are to be adjusted for inflation each year. The bill also updates the Internal Revenue Code conformity date to March 24, 2018.
CONNECTICUT ENACTS BILL TO BOOST CARE-WORKER WAGES
Measure H.B. 5460 states that workers who care for those with intellectual disabilities at group homes and day programs will be paid an hourly minimum wage of at least $15, effective July 1, 2018. The measure applies to private providers of state-contracted employment, day, and behavioral services and group-home services.
VERMONT MINIMUM WAGE, PAID LEAVE
MARYLAND PERSONAL EXEMPTIONS AND STANDARD DEDUCTION
Maryland has opted to retain personal exemptions, which remains at $3,200 under S.B. 184.
Maryland has also updated standard tax deductions, increasing the individual amount from $2,000 to $2,250 under bill S.B. 138. The deduction is to adjust for inflation each year. Maryland’s standard deduction is calculated at 15 percent of gross income annually, with a minimum of $1,500.
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