In case you hadn’t heard Congress is working on a tax bill! Yes, a bit snarky there. But this new tax bill does have a direct effect on payroll, especially our year end and year beginning updates. Normally by now we would have received the Notice that gives us the 2018 tax charts, the Form W-4 would have been finalized etc. But we were notified in the monthly IRS payroll industry phone conference call, on Thursday Dec. 7, that these items are on hold until the tax bill is passed or abandoned. Now since it is unlikely this bill will just be abandoned, the massive changes to tax charts, taxing of fringe benefits etc. is going to require extensive updates for the IRS to incorporate. So even if the bill is effective January 1, 2018, which it is indicated to be, don’t expect the new charts immediately. The IRS needs time to “review and implement” the required changes. So what will probably happen is that we will have an “implementation period” as we did in 2009, when new tax legislation was passed. Employers will continue to use the 2017 charts and guidance until the info is received. This may pose a problem as many of the fringe benefits that we currently offer such as transportation passes, educational assistance and relocation may have tax status changes from nontaxable to taxable. So be sure to track these payments or benefits so they can properly taxed if need be when the final bill is implemented.
I attended the October 5th payroll industry telephone conference call. On the call Scott Mezistrano, with the IRS Industry Stakeholder Engagement and Strategy, provided the listeners with updated information on the W-2 Verification Code Pilot Program for the 2018 filing season (2017 Forms W-2).
First just a quick review of the program itself. It was implemented during the 2016 filing season. Its purpose is to combat tax-related identity theft and tax refund fraud. It requires a 16-character code be input into box 9 so that the tax filer can be verified when filing taxes electronically. It only appears on the Form W-2 copies B (filed with the employee’s federal tax return) and C (the employee’s copy). If the Verification Code (VC) is deemed valid, then the IRS treats the W-2 data submitted with the Form 1040 to be valid, thereby reducing false fraudulently filed tax returns.
For the 2016 Forms W-2 only ADP, Ceridian, Intuit, Paychex, Payroll People, Prime Pay and Ultimate Software participated in the test pilot program. If the taxpayer had a VC it was entered 34% of the time. However, when it was entered, it was validated 97% of the time.
For the 2017 Forms W-2 there will be 10-12 service bureaus or payroll software companies participating in the program. This includes the same companies as in 2016 along with the National Finance Center and a few more payroll service providers. This should result in approximately 66 million Forms W-2 containing the code. That results to about 1 in 4 forms that will be filed.
Nina Olson is with the Taxpayer Advocate Service (TAS). This is an independent organization within the IRS that assists taxpayers who are experiencing “troubles” with the IRS in getting issued resolve through the “normal channels”. During recent congressional hearing she was asked what seemed like simple questions concerning the types of IRS guidance taxpayers can rely on. But the answer was not simple. She has written a blog; IRS Frequently Asked Questions Can be a Trap for the Unwary on July 26, 2017, that contains excellent information for those of us who need to research tax questions and rely on tax guidance from the IRS. I recommend reading it to ensure you know what you can and cannot rely on when researching the IRS website for tax guidance.
If you are currently using the fluctuating workweek that is permitted under the Fair Labor Standard Acts (FLSA) you may want to review that decision. The Fifth Circuit Court of Appeals has drawn some limits on that method. Bill Pokorny has done a fantastic blog on discussing this recent court case. Check it out for the latest if you are currently using this type of workweek or just want to increase your current knowledge in this area.
When conducting my webinars on the FLSA requirements one area always seems confusing to attendees and that is the eight types of payments that can be excluded when calculating regular rate of pay. The one found most often to be confusing to my attendees and maybe to you as well is the one that is for bona fide overtime premiums. Bill Pokorny has done an excellent blog post on this subject that I know you will find helpful on this topic. Please take the time to check it out if you offer this type of payment or to improve your general payroll knowledge.
With the major disasters befalling us many employers and employees are looking for ways to help or seeking help to recover. The IRS, the states and others are providing relief for these disasters. For example the IRS is permitting pension plan hardship loans and filing extensions. They are also permitting leave sharing programs and leave donations with favorable taxation. Click here for outline of the IRS latest tax relief.
The states are also giving disaster relief. So far Alabama, Colorado, Georgia, Hawaii, Idaho, Illinois and Wisconsin have posted tax filing/payment relief for employers. You need to check the individual website for each state to see who is offering this type of relief.
In addition, Ernest and Young’ Workforce Advisory Services are offering a complimentary webcast tomorrow morning on Disaster Relief: Workforce Considerations for Employers at 9 am pacific/12 noon eastern.