Tax Briefing as of 12-16-17

As the house and senate vote on the new tax law, here’s the latest tax briefing reflecting the provisions of the conference report.  We will keep you up-to-date when there is more information available.  Please click here to view the new agreed upon provisions: Tax Briefing by Wolters Kluwer

Although the final version of the new tax law has not been passed, we know the conference report has the provision that the nonbusiness deduction for state and local taxes (SALT), including sales tax, will be limited to $10,000 (married filing joint and $5,000 married filing separately) next year. There is also uncertainty as to the tax changes the states may make in 2018.

Therefore, please consider prepaying your 2017 state taxes and real property taxes before the end of the year.  This would include state income taxes you would owe in April and real property taxes on your principal residence and vacation home that are due. The proposed bill has a provision that you cannot deduct prepaid 2018 state and local income taxes and real property taxes not assessed in 2017.

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Year-End 2017 Wrap Up

As 2017 quickly comes to a close and 2018 is right around the corner, it is important to keep in mind some essential items as we head into the new year:

  • On January 1, 2018, the New York Paid Family Leave Act (“PFLA”) goes into effect. The PFLA allows qualifying employees to take paid family leave for several different situations, such as the birth of a child, caring for a family member with a serious health condition or military deployment of an active duty member of the Armed Forces. Employers that are currently covered under NYS Disability Benefits through a private insurance carrier must obtain PFL coverage through the same insurance carrier. Employers that are not covered with Disability Benefits Coverage may purchase private PFL insurance coverage by getting coverage through the NYS Insurance Fund. Prior to January 1, 2018, employers should take the necessary steps for the implementation of PFLA, such as preparing to collect employee contributions, updating employee handbooks, and posting adequate notice to make employees aware of their rights and responsibilities under the PFLA. For more information regarding the PFLA, click here.
  • In the aftermath of the 2017 Equifax breach in which over 140 million Americans’ personal data was stolen, many consumers have wondered what to do next to protect their personal information. All three major credit bureaus provide consumers with the ability to freeze (and unfreeze) their credit via their websites. Following please find the links to the three major credit bureaus:
  • Employers pay both Federal (FUTA) and State (SUI) Unemployment Insurance taxes on wages paid. The FUTA wage base remains $7,000 for 2017. The FUTA tax rate is 6.0% for 2017, however, employers receive an offsetting credit of 5.4% for payment of state UI taxes. This makes the effective FUTA rate 0.6%. The State UI wage base is the portion of remuneration subject to contribution. On January 1, 2018, the NYS UI wage base will increase from $10,900 to $11,100.
  • Report health insurance premiums paid for 2% or more shareholder-employees for “S” Corporation shareholders on Form W-2. These benefits are not subject to Social Security, Medicare, or unemployment taxes.  (Report these amounts to your payroll service before 12/31 to ensure your payroll service has the information before processing your Forms W-2). For more information, click here.
  • The IRS has not changed the mandate for reporting health benefits on Form W-2. Employers with more than 250 W-2 employees are still required to report the cost of coverage for employer-sponsored group health plans in Box 12 of Form W-2 using code DD. Click here for more information.
  • Form 1095-C for employer provided health insurance is required to be provided to employees by January 31, 2018, the same day Forms W-2 and 1099 are required to be distributed.
  • All year-end and holiday bonuses are considered compensation and should be included on your employees’ Forms W-2.
  • Be sure to update Forms W-9 for vendors and subcontractors. This information is needed to prepare Forms 1099 in January.
  • Fringe benefits provided to an employee are subject to employment taxes and must be included in the recipient’s taxable wages in Box 1 of Form W-2. This may include group term life insurance benefits over $50,000, employee use of a company automobile and medical insurance for an S Corp shareholder with ownership of more than 2%. For more information, click here.
  • Retirement Plans – Be sure to have complete employee census information, including dates of birth, dates of hire, dates of termination etc. ready for the actuarial computation.
  • Employers are still required to have a Form I-9 for each newly hired individual for employment in the United States. This form is used to verify the identity and employment authorization of the employee. It is to be completed by both the employee and the employer. U.S. Citizenship and Immigration Services (USCIS) have released a new version of Form I-9 that must be used beginning September 18, 2017. While the core aspects of the form have not changed, there are minor revisions, such as the addition of an option for a Consular Report of Birth Abroad to List C, and renumbering of all List C documents except the Social Security Card. The new version of the form can be downloaded here.
  • Remember to update your NY Wage Theft Reporting forms for any increases or changes in employees’ wages. While the annual requirement has been eliminated, employers are still required to give written notice to the employee at which time the employee needs to provide a signed acknowledgment of the pay rate/change and return to the employer. Employers are also still required to give written notice of wage rates to new hires to include the following:
    • Rate or rates of pay, including overtime rate of pay (if applicable)
    • How the employee is paid: by the hour, shift, day, week, commission, etc.
    • Regular payday
    • Official name of the employer and any other names used for business (DBA)
    • Address and phone number of the employer’s main office or principal location
    • Allowances taken as part of the minimum wage (tips, meal and lodging deductions)
  • Per New York Governor Andrew Cuomo’s signed 2016 law to gradually increase the New York State minimum wage, the rate is set to increase again on December 31, 2017. The scheduled changes are as follows:

    General Minimum Wage Rate Schedule

    Location 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 2021*
    NYC – Large Employers (of 11 or more) $11.00 $13.00 $15.00
    NYC – Small Employers (10 or less) $10.50 $12.00 $13.50 $15.00
    Long Island & Westchester $10.00 $11.00 $12.00 $13.00 $14.00 $15.00
    Remainder of New York State $9.70 $10.40 $11.10 $11.80 $12.50 *
    Fast food Employees in NYC $12.00 $13.50 $15.00
    Fast food Employees outside of NYC $10.75 $11.75 $12.75 $13.75 $14.50 $15.00
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Fall 2017 Updates

New Version of I-9 Form and Instructions
On July 17, 2017, the U.S. Citizenship and Immigration Services released a new version of Form I-9 and accompanying instructions. As of September 18th, employers must use this form, or they may be subject to penalties. While the core aspects of the form have not changed, there are minor revisions, such as the addition of an option for a Consular Report of Birth Abroad to List C, and renumbering of all List C documents except the Social Security Card. The new version of the form can be downloaded here.

Long-Term Capital Gain Tax Reform (Proposal)
There are currently tax reform plans heating up in Congress that would do away with the 0% tax rate on long-term capital gains. The proposal in the House would tax profits from stocks and other assets held for more than a year at 6%, 12.55%, or 16.5%, depending on your tax bracket. While this is below the current top rate of 23.8%, it is not as favorable as 0%. For 2017, those taxpayers who fall into the 10% and 15% tax brackets with taxable income as high as $75,900 married filing jointly qualify for the 0% long-term capital-gains rate. So if you qualify for the 0% rate, make use of it while you still can.

Federal Court Strikes Down Department of Labor’s Overtime Rule
On August 31, 2017, the U.S. District Court for the Eastern District of Texas struck down the Obama administration’s 2016 overtime rule. The rule would have expanded overtime protection for more than four million “white collar” workers including executive, administrative, and professional employees. If the law would have gone into effect, it would have essentially doubled the minimum salary for these overtime exempt employees. In the court’s decision, it held that the Department of Labor exceeded its authority by raising the salary threshold too high by doubling it. This court ruling will likely end the possibility of future litigation over the rule. The Department of Labor is still examining whether to adjust the salary level. For now, these employees will continue to qualify for an exemption from the federal minimum wage and overtime pay requirements, if they are compensated on a salary basis at a rate not less than $455 per week ($23,660 annually) and perform certain job duties, as outlined by the DOL.

NY Paid Family Leave Act Goes Into Effect January 1, 2018
On January 1, 2018, the New York Paid Family Leave Act (“PFLA”) goes into effect. The PFLA allows qualifying employees to take paid family leave for several different situations including the birth of a child, to care for a family member with a serious health condition or due to military deployment for an active duty member of the Armed Forces. All NYS employers are required to provide PFL benefits for their employees on or before January 1, 2018. Employers that are currently covered under NYS Disability Benefits through a private insurance carrier must obtain PFL coverage through the same insurance carrier. Employers that are not covered with Disability Benefits Coverage may purchase private PFL insurance coverage by getting coverage through the NYS Insurance Fund. Prior to January 1, 2018, employers should take the necessary steps to prepare for the implementation of PFLA, such as preparing to collect employee contributions, updating employee handbooks, and posting adequate notice in order to make employees aware of their rights and responsibilities under the PFLA. For more information regarding the PFLA, click here.

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