Pay Matters! May 2017
Welcome to the May 2017 Issue of Pay Matters – a collection of payroll news and developments that may affect your company. Visit our blog daily for more payroll updates like these.
Read on to stay informed and stay in compliance with relevant alerts and insights that matter most for your payroll.
Trump Tax Proposal to Reduce Both Individual and Corporate Tax Rates
On April 26, President Trump proposed tax rate cuts for both individuals and corporations and provided a 1-page outline of his tax plan. Some of the highlights of the proposal include:
The top corporate tax rate would be reduced from 35% to 15%, and the new rate would also apply to pass-through entities, such as partnerships. Various corporate tax breaks would be eliminated.
Under the proposal, the current seven tier tax rate system would be reduced to just three rates-10%, 25%, and 35%. The standard deductions, currently at $12,700 for married taxpayers filing joint would increase to $24,000. Most itemized deductions, aside from charitable deductions and mortgage interest, would be eliminated, which may result in many taxpayers switching to the standard deduction, rather than itemizing. Under the proposal, taxpayers in states with high taxes, such as New York and New Jersey, could lose large tax savings with the elimination of the itemized deduction for state taxes paid.
The estate tax, also known as the “death tax”, would be eliminated, along with the alternative minimum tax and the 3.8% Obamacare tax on investment income.
Though still in its very early stages, if successful, the proposed tax reform could greatly alter the current tax system.
USCIS Warns of Potential Form I-9 Errors
The U.S. Citizen and Immigration Service’s (USCIS) new Form I-9 experienced a glitch upon roll-out on November 14, 2016.
The agency is advising employers who completed the form between November 14, 2016, and November 17, 2016, to double check the accuracy of the social security numbers. The glitch transposed numbers in the social security field when the employees completed and printed Section 1. The problem was repaired on November 17, but employers who may be still using the version with the glitch should be sure to download an updated version.
Employers who find that they do have Forms I-9 on file with transposed SSNs should have the employees draw a line through the transposed social security number, enter the correct social security number, and the initial and date the change. Employers should keep a written explanation for the change on file in case of an audit.
For more, click here.
W-2 Verification Code Program Deemed a Success
For the tax year 2016, the IRS continued its program of partnering with a few payroll service providers to include a verification code in Form W-2, Box 9.
The goal of the 16-digit verification code is to fight fraud and identity theft. Employees and tax preparers entered the code on their personal income tax returns, Forms 1040 when e-filing. Nearly 50 million W-2s were filed with the verification code for the 2016 tax year, up from 2 million for the 2015 tax year.
The IRS stated that of the forms that were filed with a verification code, 97% were successfully validated and $918.6 million in fraudulent refunds were prevented.
For 2017, the IRS plans to expand the program and increase the number of W-2s filed with the code.
For more, please visit the IRS website.
New York Paid Family Leave Law on the Horizon
Last year, as part of his 2016-17 state budget, Governor Cuomo signed into law 12 weeks of paid family leave policy. The policy is to be gradually phased in from 2018 through 2021.
Beginning in 2018, employees who have worked 6 months for their employers are eligible to receive 50% of their average weekly wage, capped at 50% of the statewide average weekly wage for each of their allowed 8 weeks of leave. By 2021, the percentage will increase to 67% of their average weekly wage, capped at 67% of the statewide average weekly wage for each of their allowed 12 weeks of leave.
The paid leave will not be funded by employers, but rather entirely through a nominal deduction from employees’ pay. The payroll deduction is set to go into effect July 1, 2017, though details on the nature of the deduction have yet to be published.
Viventium will continue to monitor the situation and keep you updated as more information is released on the upcoming payroll deduction requirement.
For more information, click here.
Iowa Passes Bill Restricting Local Minimum Wage Laws
Recent years have shown a rapid increase in local governments across the nation instituting minimum wage laws that exceed state minimum wage laws. In Iowa, that trend has been halted.
On March 30, Iowa Governor Terry Branstad signed into law a bill banning local governments from passing minimum wage laws. The bill also reverses any previously enacted local minimum wage laws that exceed or conflict with state and federal minimum wage laws.
Local government in the counties of Lee, Polk, Johnson, Linn, and Wapello, had already issued local minimum wage laws. Effective immediately, these laws are unenforceable, and the minimum wage will be rolled back to $7.25 per hour across the state.
For more information, click here.
Leaves of Absence: Navigating the FMLA
The Family and Medical Leave Act (FMLA) applies to public employers and any private employer with 50 or more employees and understanding all of its provisions can be daunting. Join us for an overview of FMLA regulations, common issues, and employer best practices. You’ll learn key aspects of the FMLA and what steps you need to take to manage employee leaves of absence under the law.
Register for this webinar over on our webinar page.