Annual Payroll Tax Year End Update Jackson Thornton / Montgomery - - PowerPoint PPT Presentation

Annual Payroll Tax Year End Update

Jackson Thornton / Montgomery Area Chamber of Commerce

WiFi Information

Network Name: Renaissance_CONFERENCE Passcode: CHAMBER

Reporting Requirements

Alabama New Hire Reporting

2020 Form W-4

Form I-9

• Documents not on the acceptable list
• Inconsistent attestations
• Acceptance of facially invalid documents
• Over-documentation

I-9 Document Issues

• Retention of I-9s
• Consistent procedures
• Completeness

I-9 Document Issues

Receipt of Notice of Inspection Three days to turn over I-9 records ICE Agents will review I-9s and requested documents for compliance

I-9 Inspections

Substantive violations will result in: Warning Notice

• r

Notice of Intent to Fine (NIF)

I-9 Inspections

• Must be used for all new employees

(including rehires)

• Data must be entered within three business

days from start date

E-Verify

Payroll Taxes

• Salary
• Hourly Wage
• Bonus
• Sick Pay
• Taxable Fringe Benefits

What is reportable compensation?

100,000 102,000 104,000 106,000 108,000 110,000 112,000 114,000 116,000 118,000 120,000 122,000 124,000 126,000 128,000 130,000 132,000 134,000 136,000 138,000 140,000 2017 2018 2019 2020

Social Security Taxable Wage Bases

• .9% of excess wages
• No employer match

Additional Medicare Tax

• Monthly deposits
• Semiweekly deposits
• One-day rule
• Federal Tax Deposits are made through EFTPS

Federal Deposit Requirements

No penalty if:

• $100 or 2% rule
• Shortfall makeup date

Accuracy of Deposits Rule

• Monthly deposits
• Quarterly deposits
• My Alabama Taxes (MAT) for State Withholding
• Alabama Department of Labor (eGov) for State

Unemployment

State Deposit Requirements

Federal Payroll Forms

Form 941

Form 941 (page 2)

Form 940

Form 940 (page 2)

• Forms W-2 to SSA – January 31st
• Forms W-2 to Alabama – January 31st

W-2 Form Due Dates

Form W-2

Form W-3

• Requirement
• Website
• Penalties

Electronic Reporting

2020 Form W-4

• New form designed to increase transparency and

improve accuracy of the withholding system.

• Removes allowances
• The Form is now divided into 5 steps
• Only Steps 1 and 5 are mandatory

2020 Form W-4

Step 1 - Basic Personal Information

Step 2 - Multiple Jobs

Step 2 (con’t)

3 different options – Employees select only one of the three options

Option 1:

Use the Tax Withholding Estimator

Option 2:

Use the worksheet on page 3

Option 3:

Check the box

• WWW.IRS.GOV/W4APP
• Allow plenty of time for employees to complete
• Both employee and spouse should complete a new W-4

for the other jobs.

Step 2, Option 1 - The Withholding App

Tax Withholding Estimator

Step 2, Option 2 - Worksheet

• If the employee (and spouse together, if applicable) has
• nly two jobs, the employee/spouse may check the box
• n a Form W-4 for each job to have tax withheld at

higher rates so there will be enough withholding.

Step 2, Option 3

Step 3 - Dependents

• Allows employees to reduce withholding for child and

dependent credits and other tax credits.

• Employees can calculate the child and dependent

credits on the face of the form and add other credits to the total.

Step 3 - Dependents

Step 4 - Adjustments

• Allows employee to have income tax withheld for

income that normally doesn’t have withholding. – Retirement income – Certain investment income

• Allows employee to reduce withholdings for itemized

deductions (less the standard deduction) and/or adjustments to income (Form 1040 schedule 1).

Step 4 - Adjustments

• Employees can enter the amount from the Tax

Withholding estimator.

• Employees can enter an amount of extra withholding to

make sure they don’t owe or cover other income.

• Employees eligible to claim exemption from withholding

enter “EXEMPT” in the space below Step 4(c).

Step 4 (con’t)

Step 5 - Signature

• All newly hired employees in 2020 must use the new

form

• Any existing employee who wants to adjust their

withholding in 2020.

• You can ask current employees to fill out the new W-4

– Must tell them it is not required – If they do not submit the new Form W-4, their withholding will continue as is. – If spouse is completing new form, employee may want to do so as well.

Who Fills Out the New W-4?

Information Returns

Form 1099

Form 1099 - MISC

Form W-9

Employee or Independent Contractor

• Behavioral Control
• Financial Control
• Relationship

IRS Common Law Factors

Behavioral Control

IRS Common Law Factors

Financial Control

IRS Common Law Factors

Relationship

IRS Common Law Factors

Worker Classification in the Courts

• A. Employee
• B. Independent Contractor

How would you classify them?

Worker Classification in the Courts

• A. Employee
• B. Independent Contractor

How would you classify them?

• Workers treated consistently as non-employees
• Filed Forms 1099 for 3 previous years
• Not currently under a worker classification audit

Voluntary Compliance Settlement Program

• File Form 8952
• If accepted, finalize closing agreement
• Pay the amount due in full

Voluntary Compliance Settlement Program

Fringe Benefits

Personal Use of an Employer-Provided Vehicle

55 53.5 54.5 58.0 51.0 52.0 53.0 54.0 55.0 56.0 57.0 58.0 59.0 2016 2017 2018 2019

Cents Per Mile

• Use the annual lease value table
• Determine the FMV in 4 year increments

Annual Lease Value Method

Expense Reimbursement Plans

• Business connection
• Substantiation
• Return of excess advances

Accountable Plans

• Meals and entertainment rules are stricter
• Entertainment expense deduction disallowed

Meals and Entertainment

The taxpayer takes a customer to a baseball game and buys the hot dogs and drinks. The tickets are nondeductible entertainment, but the taxpayer can deduct 50% of the cost

• f the hot dogs and drinks purchased separately.

Example 1:

The taxpayer takes a customer to a baseball game in a luxury suite. During the game, they have access to food and beverages, which are included in the cost of the

• tickets. Both the cost of the tickets and the food/beverages

are nondeductible entertainment.

Example 2:

The facts are the same as in Example 2, except that the invoice for the baseball game tickets separately states the cost of the food and beverages. In this case, the taxpayer can deduct 50% of the cost of the food and beverages.

Example 3:

• Use of an accountable plan by the employer
• What if employer has a non-accountable plan?

– Can the employee report on Form 2106 and Sch. A like prior years?

Best Tax Results?

Tax-Favored Fringe Benefits

• Medical Plans
• Employee Achievement Awards
• Group-term Life Insurance

Tax-Favored Fringe Benefits

• Education Assistance Program
• Dependent Care Assistance Programs
• Qualified Employee Discounts

Tax-Favored Fringe Benefits

• No Additional Cost Services
• Working Condition Fringe Benefit
• De Minimis Fringe Benefits

Tax-Favored Fringe Benefits

Affordable Care Act

• Form 1095-B Health

Coverage

• Form 1095-C Employer-

Provided Health Insurance Offer and Coverage

The Affordable Care Act (ACA)

Employers with 50 or more FTEs for employer-provided health insurance:

• 1094-C to IRS
• 1095-C to employee and IRS

Reporting by Employers

Employed an average of 50 or more FTE (Full Time Equivalent) employees on business days during the preceding calendar year (For profit, not for profit, government entity)

Applicable Large Employer Defined

• Provide to full-time employees by March 2, 2020
• Provide to the IRS by February 28th (March 30th

if filing electronically)

• File electronically if you are filing 250 or more

Forms 1095-C

Form 1095-C

Employee Mandate Penalties

• No Coverage
• Less than minimum

coverage

• Unaffordable

Coverage

• Increase in employer penalties
• From $2,320  $2,500 per employee for not
• ffering full time employees and dependents

minimum essential coverage

• From $3,480  $3,750 per employee for plans

that do not meet the affordability rules

• From $260  $270 per return for failure to file

Form 1095

Penalties

How is the Mandate being monitored and enforced?

HIE/Federal Data Hub

• Individuals will no longer be charged a penalty for

not having ACA-compliant health coverage starting with the 2019 tax return (individual mandate repealed)

• Employer mandate has not changed
• If you are using the safe harbor amounts for what

an employee would have to pay per month for self-

• nly coverage, the amount is $99.75 per month

(2019)

Updates

• Penalty notices is triggered if one of your

employees obtains a premium tax credit and health insurance from the exchange

• IRS matches 1094-C and 1095-C forms
• Letter 226J being sent for 2015, 2016, 2017

– $1,750,000 in penalties abated

Updates

Form 1094-C

Form 1094-C

• Are you required to file 1094 / 1095 forms?
• Make sure Form 1094-C, Page 2, Part III

checkboxes are marked correctly

ACA Update – Most Important Items

Retirement Plans

The Bipartisan Budget Act of 2018:

• Eliminated the six-month suspension of salary deferral

after receipt of a hardship withdrawal

• Amended Internal Revenue Code to allow participants

to take a hardship withdrawal without having to first take all available plan loans

Hardship Withdrawal Changes

401(k)/403(b) Deferrals

17,000 17,500 18,000 18,500 19,000 19,500 20,000 2016 2017 2018 2019 2020

Catch-up contribution limit for employees age 50 and older increases to $6,500 for 2020

401(k)/403(b) Catch-Up

Cafeteria Plans

Limit for healthcare flexible spending account increases to $2,750 for 2020

FSA Limit

Family and Medical Leave Act (FMLA)

• Employers with 50 or more employees
• Employees are exempt at locations with less than 50

employees within 75 miles

• Public agencies, including state and local governments,

and public and private schools – regardless of the number of employees

FMLA Requirements

Worked 12 months prior to the commencement of leave and Worked at least 1,250 hours in the previous 12 months

Employees must have:

Up to 12 weeks of unpaid leave in any 12-month period

FMLA Requirements

FMLA Requirements

Up to 12 weeks

• f leave during

any rolling 12 month period

Service Member Family Leave

• Short-notice deployment
• Military events and related activities
• Childcare and school activities
• Financial and legal arrangements

Qualifying Exigencies

• Counseling
• Rest and recuperation
• Post-deployment activities
• Additional activities where the employer

and employee agree

Qualifying Exigencies

Up to 26 weeks of leave during a single 12-month period

Service Member Caregiver Leave

Lack of training for supervisors

Top 10 FMLA Mistakes

Not understanding notice requirements

Top 10 FMLA Mistakes

Not understanding criteria for a “serious health condition”

Top 10 FMLA Mistakes

Designating leave incorrectly

Top 10 FMLA Mistakes

Expecting an employee to work while on FMLA

Top 10 FMLA Mistakes

Not giving employee opportunity to “cure” an incomplete certification

Top 10 FMLA Mistakes

Asking for recertifications or doctor’s notes too often

Top 10 FMLA Mistakes

Returning an employee to a job that is not equivalent

Top 10 FMLA Mistakes

Not considering the ADA/ reasonable accommodation when FMLA leave is exhausted

Top 10 FMLA Mistakes

Inaccurate or incomplete written policies

Top 10 FMLA Mistakes

Lost wages and benefits Other damages Attorneys’ fees ADA violations

Fair Labor Standards Act (FLSA)

Two ways that an employee can be covered by the law:

• Enterprise coverage
• Individual coverage

Covered by the FLSA?

Enterprise coverage –

Those enterprises (which must have at least two employees) are:

• those that have an annual dollar volume of sales or

business done of at least $500,000

• Hospitals, businesses providing medical or nursing care for

residents, schools and preschools, and government agencies

Covered by the FLSA?

Individual coverage If work regularly involves them in interstate commerce (“engaged in commerce or in the production of goods for commerce”)

Covered by the FLSA?

FLSA Claims

• Federal minimum wage bills stalled
• Many states increasing minimum wage
• Federal contractors minimum wage increased to $10.80

FLSA News

DOL Opinion Letters Describe how the agency would enforce federal wage and hour laws in specific circumstances presented by an employer, worker, or other party requesting opinion

FLSA News

Minimum salary threshold for exempt status: FROM $455 per week ($23,660 annually) TO $684 per week ($35,568 annually)

FLSA News

Must meet all three criteria: 1. Perform duties of one of the exempt classifications 2. Paid on salary basis 3. Minimum salary of $684/week

Exempt Requirements

Administrative

Executive

Creative Personnel Learned Professional

Highly Compensated

Computer Professionals

Outside Sales Employees

Minimum salary threshold for exempt status: $684 per week ($35,568 annually) Employers can satisfy up to 10% of the new threshold through non-discretionary bonuses and other incentive payments, including commissions, but must be paid at least quarterly

FLSA News

What if someone who has been exempt makes less than $684 per week?

FLSA News

Prevent the loss of exemption with a safe harbor policy!

Safe Harbor Provision

PAID Program Payroll Audit Independent Determination –

• pportunity to cooperate with the DOL by

conducting self-audits and voluntarily correcting any errors

Are You Complying?

Back pay Penalties Attorneys’ fees Criminal prosecution

What If You Don’t Comply?

Questions for us?