On November 27, the Social Security Administration (SSA) announced that the 2018 social security wage base will be $128,400, not $128,700 as it previously reported on October 13. This is still an increase of $1,200 from $127,200 in 2017. The lower amount is due to approximately 500,000 Forms W-2c (correcting 2016 Forms W-2) submitted to the SSA in late October by a payroll service provider.
The U.S. Department of Labor has announced that California and the Virgin Islands will lose the full Federal Unemployment Tax Act credit for 2017 because they could not pay their federal loans by the November 10, 2017, deadline. Each will have a credit reduction of 2.1% for 2017.
On its December 7 industry payroll call, the IRS stated that several items, including the 2018 federal withholding tables, Form W-4, and Publications 15, 15-A, and 15-B, will be issued later than usual due to the potential enactment of H.R. 1, the Tax Cuts and Jobs Act. Employers should continue to use the 2017 information until the 2018 versions are issued.
OCCAPA tracks memberships on a calendar year basis
Jan. 1 – Dec. 31
$70 Individual – National Non Member
$60 – Individual – National Member with Member ID #*
Jan.1 – Dec. 31
$150 Corporate – National Non Member**
$40 per each additional Corporate Member – National Non Member**
$140 Corporate – National Member with Member ID #*
$30 per each additional Corporate Member – National Member with Member ID #*
*NOTE: You must provide member ID #.
**NOTE: Corporate membership within the same company consists of 3 members per fee. $40 for each additional member beyond 3 for a National Non Member and $30.00 for each additional member beyond 3 for a National Member.
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Regularly Scheduled Meetings – Chapter meetings are an ideal place to network and they provide educational opportunities for chapter members to learn more about critical payroll and compliance issues while earning Recertification Credit Hours (RCHs). Non members are charged a $20.00 Fee per Regular Meeting.
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Chapter Website – Our website, www.occapa.com, posts important chapter information and links to local government agencies, including a link to the APA National Website.
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By Alice P. Jacobsohn, Esq
Albert Einstein once said, “The hardest thing in the world to understand is the income tax.” With that in mind, APA’s Government Relations Task Force Subcommittee on IRS Issues made two requests of the IRS in September to help members with compliance. First, “APA is asking that the IRS waive late filing penalties for 2016 Form W-2 submissions filed after January 31, 2017, but in time to meet the pre-PATH Act (Protecting Americans from Tax Hikes Act of 2015) filing deadlines of February 28, 2017 for paper-filed Forms W-2 and March 31, 2017 for e-filed Forms W-2.” Second, “APA is requesting electronic filing capabilities for amendments to the Form 94x series, related forms, and corresponding schedules to increase efficiency for both the IRS and employers.”
Transition Relief for Late-Filed Forms W-2
The PATH Act changed the dates employers file Forms W-2 to be at least a month earlier in 2017. January 31 was the new filing deadline. Penalties for late or incorrect Forms W-2 filed with the Social Security Administration (SSA) or furnished to an employee increased. The amounts are based on the employer’s behavior. The quicker the error is corrected, the lower the penalty amount.
Penalties are adjusted for inflation each year and include:
- $50 per form for corrected forms filed within 30 days
- $100 per form for corrected forms filed by August 1
- $260 per form if no correct form is filed by August 1
- $530 per form if the employer intentionally disregards filing requirements
APA said, “The goal of the earlier filing deadline is a laudable one: helping the IRS reduce instances of tax refund fraud by matching third party information reports (i.e., Forms W-2) with individual taxpayer Forms 1040. At the same time, the SSA has reported the number of late filed submissions more than doubled (from 25,000 to 50,000) and the number of Forms W-2c filed increased by approximately 35% (from 2 million to 2.7 million) so far in 2017.”
“The correlation between the accelerated deadline and the significantly increased late and incorrect Form W-2 filings seems clear,” APA said. “However, outreach takes time, especially to smaller employers. In addition, we know that our members have limited resources and the time offered in legislation and regulations to adjust processes and procedures is not always sufficient.”
Both the IRS and APA offered many opportunities to learn about the new deadline.
Electronic Capabilities for Filing the Amended Form 94x Series
Because of the increase in Form W-2c filing, the volume of corrected Form 94x series and related forms and schedules filed with the IRS also rose dramatically. APA said, “Although an employer can upload a Form W-2c file electronically to the SSA, which is then transmitted electronically to the IRS, the corresponding Form 94x series corrections must be filed on paper with the IRS. The lag time between these two filings (electronic and paper) creates an unnecessary administrative and cost burden for payroll departments and employers.”
In addition, paper versions are more difficult for employers to track in terms of when and in what order amended forms are processed by the IRS. APA expressed concern that the electronic forms filed by employers must be managed electronically at the IRS. APA said, “The IRS must be able to consume the returns electronically without manual intervention with a date and time stamp to ensure that multiple corrections are entered in the proper order.”
By filing electronically, employers and the IRS can avoid duplicate filings because of lost, undelivered, or misplaced forms. APA said, “Potentially, electronic filing reduces or eliminates errors including, but not limited to, returns processed out of order, confusion regarding amounts already reported to the IRS, and duplicate submissions. In addition, employers will have the ability to review and track the processing of tax returns much more effectively.”
The amended forms at issue include the following:
- Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, and related Schedule A
- Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, and related Form 941 Schedules B, D, and R
- Form 943-X, Adjusted Employer’s Annual Federal Tax Return for Agricultural Employees or Claim for Refund
- Form 944-X, Adjusted Employer’s Annual Federal Tax Return or Claim for Refund
- Form 945-X, Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund
IRS Commissioner John Koskinen and other IRS directors have often indicated that the agency is not looking to assess penalties but to achieve full compliance. APA hopes this will be the situation for late-filed Forms W-2 in 2017. With limited agency resources, increased electronic filing capabilities can go a long way to achieving the goal of full compliance.
Alice P. Jacobsohn, Esq., is Senior Manager of Government Relations for the APA.
IRS Announces 2018 COLAs for Transportation Fringes, FSA Deferrals, Foreign Earned Income Exclusion, and More
The IRS has released certain inflation-adjusted amounts for 2018. The maximum excludable qualified transportation fringe increases to $260 per month, the maximum employee deferral to a health flexible spending arrangement increases to $2,650, and the maximum foreign earned income exclusion amount increases to $104,100.
The IRS has announced the cost-of-living adjustments applicable to dollar limits on the benefits and contributions under qualified retirement plans, as well as other items for tax year 2018. The dollar limit on employee elective deferrals to 401(k), 403(b), and 457(b) plans increases to $18,500 (up from $18,000) and the limit on catch-up contributions for individuals age 50 or over remains unchanged at $6,000.