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APS November 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 pension plan amounts, state minimum wage increases, and extended tax filing deadlines. Here are your November compliance updates:
2019 PENSION PLAN AMOUNTS RELEASED
Adjustments to 2019 pension plan amounts have been released by the IRS. They include:
- The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans will increase from $18,500 to $19,000.
- The catch-up contribution limit will remain at $6,000.
- The limit regarding SIMPLE retirement accounts will increase from $12,500 to $13,000.
- The maximum annual addition for defined contribution plans will increase from $55,000 to $56,000.
- The compensation limit used for defining a highly compensated employee will increase from $120,000 to $125,000.
- The annual compensation limit for qualified plans will increase from $275,000 to $280,000.
- The dollar limitation of a key employee in a top-heavy plan will increase from $175,000 to $180,000.
- The compensation limit of a control employee for fringe benefit valuation purposes will remain at $110,000.
For more information on pension plan changes, visit our Payroll Taxes: Rates and Changes page.
EMPLOYER-PAID FMLA LEAVE CREDIT DRAFT FORM RELEASED
The IRS has released the 2018 draft of Form 8894, Employer Credit for Paid Family and Medical Leave. The form is related to a business credit employers may claim on wages paid to employees who are on family and medical leave.
The form and its instructions are used to determine the employer’s credit, ranging from 12.5 percent to 25 percent of the wages paid to a qualifying employee under the Family and Medical Leave (FMLA) Act. An employer is eligible for a credit if they have a written policy in place that:
- Provides at least two weeks of annual paid family and medical leave for each full-time employee and at least a proportionate amount of leave for each part-time employee.
- Covers all employees have been employed for at least one year and earned up to $72,000.
- Provides for payment of at least 50 percent of the employee’s wages while the worker is on leave.
- Includes the rules that must be met for an employer to be eligible to receive credit.
The policy must be in place before employees take leave and the employer credit can be claimed. The deadline to adopt this type of policy is December 31, 2018. For more information, please see the guidance provided by the IRS.
2019 TAX CALENDARS RELEASED
The IRS has released Publication 509, Tax Calendars, for 2019. The publication provides filing due dates for use in 2019. Key changes include:
- Forms 1040A and 1040EZ are no longer available.
- Extended due dates for residents of Maine and Massachusetts.
- Form 1065-B for electing large partnerships cannot be filed for tax years beginning after 2017.
IRS CONFIRMS USE OF WITHHOLDING ALLOWANCES FOR 2019
In Notice 2018-92, the IRS has confirmed that withholding allowances will still apply for the 2019 Form W-4 and the withholding methods for 2019. The IRS has extended its temporary suspension of the requirement that employees must give employers new Forms W-4 within 10 days for reductions in allowances solely resulting from changes to the tax code overhaul to April 30, 2019.
Form W-4 for use in 2020 is expected to change because of the suspension of personal exemptions by the federal tax code overhaul.
2018 FUTA CREDIT REDUCTION
The U.S. Virgin Islands is the only jurisdiction that will have higher payroll costs for employers because of the Federal Unemployment Tax Act (FUTA) credit reduction. The FUTA credit reduction will apply because the U.S. Virgin Islands had a loan balance from the federal unemployment account and was assessed a credit reduction for 2017. Employers in the U.S. Virgin Islands will be assessed a FUTA credit reduction of 2.4 percent on wages paid to employees for 2018.
IRS UPDATES INSTRUCTIONS FOR NONRESIDENT ALIENS’ W-4
The IRS has released updated instructions for completing a federal income withholding form for nonresident aliens. Notice 1392 includes information about eligibility to claim an additional allowance for a child care credit and credit for other dependents.
2019 STATE UNEMPLOYMENT WAGE BASES
11 states have announced increases to their unemployment taxable wage bases for 2019, while two states are to decrease. The following states have SUTA wage base changes for 2019:
- Colorado - $13,100
- Iowa - $30,600
- Kentucky - $10,500
- Minnesota - $34,000
- Missouri - $12,000 (a decrease from $12,500 in 2018)
- Montana - $33,000
- Nevada - $31,200
- New Jersey - $34,400
- New Mexico - $24,800
- New York - $11,400
- North Carolina - $24,300
- Oklahoma - $18,100
- Oregon - $40,600
- Vermont - $15,600 (a decrease from $17,600 in 2018)
- Washington - $49,800
- Wyoming - $25,400
For more updates on state unemployment wage base changes, visit our SUTA Wage Bases page.
2019 STATE UNEMPLOYMENT TAX RATES
Kansas unemployment rates will decrease:
- Experienced employer’s tax rates will decrease by 0.5 percent
- Tax rates will range from zero to 4.9 percent for positive-rated employers
- Tax rates will range from 5.1 percent to 7.1 percent for negative-rated employers
Unchanged from 2018, the tax rate for new employers will be 2.7 percent and 6 percent for new construction employers.
South Carolina’s unemployment tax rates will range from 0.06 percent to 5.46 percent. Tax rates for experienced employers will include base rates of zero to 4.209 percent, solvency surcharges of zero to 1.191 percent, and an administrative assessment of 0.06 percent.
The tax rate for new employers will be 0.87 percent, which includes a base rate of 0.631 percent, solvency surcharge of 0.179 percent, and an administrative assessment of 0.06 percent.
Idaho’s unemployment tax rates will be the following:
- 0.251 percent to 0.836 percent for positive-rated employers
- 1.505 percent to 5.4 percent for negative-rated employers
- 1 percent for new employers
Tax rates for experienced employers not assessed the maximum rate will include a workforce development training-fund surtax ranging from 0.00753 percent to 0.07023 percent.
Louisiana’s unemployment tax rates will be the following:
- 0.1 percent to 6.2 percent for experienced employers
- 1.18 percent to 2.94 percent for new employers
- 6.2 percent for unclassified new employers
Tax rates include social charge assessments and a reduction of 10 percent applied to the base tax rates.
Minnesota’s unemployment tax rates for experienced employers will range from 0.2 percent to 9.1 percent. Each new employers will be assessed a tax rate equal to the average tax rate for experienced employers in its industry category.
New Mexico’s unemployment tax rates will be the following:
- 0.33 percent to 0.54 percent for experienced employers not assessed an excess claims premium
- The maximum tax rate for experienced employers assessed an excess claims premium will be 6.4 percent
- 1 percent to 1.62 percent for new employers
Oregon’s unemployment tax rates will be the following:
- 0.9 percent to 5.4 percent for experienced employers
- 2.4 percent for new employers
Tax rates for the first quarter of 2019 will include a special payroll tax of 0.12 percent for the state’s supplemental administration fund. The special payroll tax rate will be 0.09 percent for the second, third, and fourth quarters.
2019 STATE WITHHOLDING TABLES AND METHODS
The following states have announced their 2019 withholding tables and methods:
California has released its new withholding tables for 2019. The annual standard deduction amount for withholding is $4,401. Married employees with employed spouses are being instructed to use a single filing status to compute withholding amounts for each person or withhold an additional flat amount of tax.
Iowa has released its new withholding methods formula for 2019 in S.F. 2417, which implements income tax rate decreases. The state standard deduction will increase to $1,690 a year for employees who claim one or zero allowances on Form IA W-4. For employees who claim more than one allowance, the standard deduction will be $4,160 a year.
Furthermore, Iowa’s Internal Revenue Code conformity date is changing to March 24, 2018, and will automatically conform to the I.R.C. starting in 2020.
Georgia has released its 2019 employer’s guide, which includes withholding tables. The tables lower Georgia’s highest tax rate from 6 percent to 5.75 percent. The tax rate on supplemental payments of more than $15,000 has also decreased to 5.75 percent.
The standard deduction has increased from $2,300 to $4,600 for single individuals and the value of a personal allowance will remain at $2,700 for single individuals.
Maine has released its 2019 income tax withholding tables. The standard deduction has increased from $8,350 to $9,350 for single individuals who earn up to $81,450 a year. For single individuals who earn more than $81,450 a year, the standard deduction decreases until it reaches zero for single individuals who earn more than $156,450.
The value of a withholding allowance will increase to $4,200 and the supplemental withholding rate will remain at 5 percent.
North Carolina has released its 2019 withholding tables with the state’s flat income tax withholding rate decreasing to 5.35 percent. The standard deduction has increased from $8,750 to $10,000 and the value of a withholding allowance remains at $2,500 a year. The supplemental withholding rate was also reduced to 5.35 percent.
Rhode Island’s standard deduction will increase from $8,525 to $8,750 in a notice released by the Department of Revenue. The standard deduction will begin to decrease for an annual income of $203,850 and will decrease to zero at an annual income of $227,050. Rhode Island’s three income tax brackets will increase to $64,050 and $145,600.
2019 MINIMUM WAGE CHANGES
The following states, cities, and counties have announced changes to their minimum wage rates beginning January 1, 2019:
- Alaska - $9.89
- Arkansas - $9.25
- Missouri - $8.60
- Albuquerque, New Mexico - $9.20
- Las Cruces, New Mexico - $10.10
- Bernalillo County, New Mexico - $9.05
- SeaTac, Washington - $16.09 for hospitality and transportation industry workers
STATE ELECTRONIC FILING RULES
Employers that issue 250 or more W-2 forms and/or 1099-R forms must electronically file using CD-ROMS. Online filing is not currently available for Ohio employers. Employers that issue less than 250 W-2s and/or 1099-Rs are also encouraged to electronically file via CD-ROM.
Connecticut has released its Form W-2 electronic filing requirements for 2018. To view the requirements, please visit Connecticut’s Department of Revenue Services site.
Vermont has released its Form WHT-436 Quarterly Withholding Reconciliation electronic filing specifications. The filing rules include acceptable filing methods, record format, and layout specifications, as well as record definitions.
Starting in the spring of 2019, Indiana will require electronic filing as part of an update to the state unemployment filing portal. From UC-1, Quarterly Contribution Report will merge with Form UC-5, Quarterly Wage Report, into one report that will be filed electronically using the UPLINK Employer Self-Service System.
Pennsylvania’s electronic filing requirement for Forms W-2 will decrease for forms filed in 2019. The regulation requires employers filing at least 10 federal forms to file electronically, down from 250 forms.
ALABAMA HURRICANE TAX RELIEF
Alabama’s tax relief deadline for Hurricane Michael victims was extended to match the federal relief deadline. Alabama taxpayers in the federal disaster area now have until February 28, 2019, to file returns. The original extension due date was January 31, 2019.
CALIFORNIA STATE OVERTIME EXEMPTION RATES
Beginning January 1, 2019, computer software employees and licensed physicians and surgeons will be exempt from state overtime requirements if they meet the following criteria:
- Computer software employees who earn at least $45.41 an hour, $7,883.62 a month, or $94,603.25 a year.
- Licensed physicians and surgeons who earn at least $82.72 an hour.
KANSAS FORM K-4 RELEASED
Kansas has released its Form K-4 Withholding Allowance Certificate. The Kansas Department of Revenue has also released instructions for completing the individual income tax form and the requirements for qualifying for the withholding exemption.
MISSOURI REVISES ANNUAL RECONCILIATION FORM
Missouri has released its updated Form MO W-3, Transmittal of Tax Statements. Employers are to submit the form with federal Forms W-2 and 1099-R. Employers with at least 250 employees must submit the forms electronically. Form MO W-3 is due January 31 for employers with at least 250 employees and February 28 for smaller employers.
NEW JERSEY EARNED SICK LEAVE
New Jersey’s earned sick-leave law is now in effect, allowing employees to accrue one hour of earned sick leave for every 30 hours worked, up to a maximum of 40 hours. The earned sick leave may be used when an employee of a family member is sick, for routine medical care, to deal with issues related to domestic or sexual violence, to attend a child’s school-related meeting or event, or when schools are closed because of a public health emergency. The state labor office issued an FAQ sheet about the law to provide clarifications.
NEW YORK CITY LACTATION RULES, PAID SICK TIME, NEW YORK COUNTY EARNED SICK LEAVE
Expanded New York City Lactation Rules
Measures passed by the New York City Council would expand the current lactation rules if signed into law. New York City employers with at least 15 employees would be required to provide a lactation room for employees needing to express milk.
The room would need to be near running water, have an electrical outlet, chair, and provide a surface area for a breast pump and personal items. A refrigerator for storing breast milk also needs to be reasonably close to the employee’s work area.
A separate measure was also passed that would require employers to develop, implement, and distribute a policy to newly hired employees about the availability of a lactation room.
New York City Paid Safe, Sick Time
New York City employers are being advised to conform to revised rules regarding sick and safe time policies, which took effect September 20. The changes made include:
- Safe and sick time policies must be combined and maintained in one document.
- Policies must include a description of the act’s confidentiality requirements.
- Written policies must be distributed when an employee is hired, within 14 days of the policy change taking effect, and upon request by employees.
Westchester County, New York Earned Sick Leave
An earned sick time measure was signed into effect in Westchester County, New York announcing that employees are to accrue at least one hour of earned sick leave for every 30 hours worked, up to 40 hours per year. Domestic workers will earn at least one hour of sick time for every seven days worked, in addition to the one day of rest required by law.
OHIO ACCEPTING BITCOIN BUSINESS TAX PAYMENTS
Ohio has become the first state to accept Bitcoin for business tax payments. The state has plans to accept more cryptocurrencies and even apply the system to individual taxes. Businesses can register to pay with Bitcoin on an Ohio website.
WISCONSIN TAX RELIEF
The IRS has extended the filing deadlines of various payroll tax returns for victims of severe storms, tornadoes, straight-line winds, flooding, and landslides to December 17, 2018. The tax relief applies to employers in counties qualifying for assistance due to severe storms.
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