President Trump’s proposed budget for fiscal year 2018 would reduce funding to the U.S. Department of Labor and IRS. There is also a proposal to create a paid parental leave program.
The 2017 Form 941, Employer’s Quarterly Federal Tax Return, Schedule B, Schedule R, and their instructions have been released by the IRS. Form 941 has been updated to allow eligible employers to claim the qualified small business payroll tax credit for increasing research activities.
The 2017 Form W-2, Wage and Tax Statement, Form W-3, Transmittal of Wage and Tax Statements, and the 2017 General Instructions for Forms W-2 and W-3, have been released by the IRS. A new Box 12 Code FF has been added to Form W-2. They are available online at he IRSA website:
On March 24, the American Health Care Act (AHCA), which would have repealed and replaced many provisions of the Affordable Care Act (ACA), was removed from consideration by the Republican leadership in the House of Representatives. The proposed legislation contained several payroll-related provisions. It is unclear whether Congress will attempt further changes to the ACA. Employers should continue to comply with the requirements of the ACA.
The IRS has announced that the business standard mileage rate for transportation expenses paid or incurred beginning January 1, 2017, will be 53.5 cents per mile, down 0.5 cents from the 54 cents-per-mile rate in effect during 2016 [Notice 2016-79, released 12-13-16].
The mileage rate may be used to compute the amount to reimburse employees who are using their own cars for business purposes. It may also be used by employers that elect to use the “cents-per-mile” valuation method for purposes of determining the amount that needs to be imputed to an employee’s income for personal use of certain company-owned or leased nonluxury vehicles (see The Payroll Source®, pp. 3-23 – 3-24).
In addition, the 2017 standard rate for miles driven for medical or moving purposes will decrease to 17 cents per mile, down from the 19 cents-per-mile rate in effect during 2016. Note, however, that the standard mileage rate for operating a passenger car for charitable purposes, which is set by law, will stay at 14 cents per mile in 2017.
Finally, for purposes of computing the allowance under a fixed and variable rate (FAVR) plan, the standard automobile cost may not exceed $27,900 in 2017, down $100 from 2016. A FAVR allowance uses a flat rate or stated schedule that combines periodic fixed and variable rate payments, and it relieves employees of the need to keep a record of their actual expenses (see The Payroll Source®, p. 3-56).
U.S. Citizenship and Immigration Services (USCIS) has released the new Form I-9, Employment Eligibility Verification, and updated the Instructions for Form I-9. Employers must begin using the new version (dated November 14, 2016) by January 22, 2017. Until then, either the new version or the version dated March 8, 2013, may be used [USCIS News Release, 11-14-16]. The new form and instructions are available on the USCIS website.
Computer version. The Form I-9 has been revised so that it is easier to complete on a computer. Enhancements include drop-down lists and calendars for filling in dates, on-screen instructions for each field, easy access to the full instructions, and an option to clear the form and start over. Note: The Spanish version of the Form I-9 does not include the additional instructions and drop-down lists and may be filled out by employers and employees in Puerto Rico only.
Employers may use either the computer version, the hard copy, or both when completing the Form I-9. However, the form available on the USCIS website may not be electronically signed. The form must be printed, signed, and dated by hand, where required. Note: Employers that have their own electronic Form I-9 systems that meet DHS requirements may choose to use electronic signatures.
When the employer prints the completed form, a quick response (QR) code is automatically generated, which can be read by most QR readers.
IRS Announces 2017 COLAs for Transportation Fringes, FSA Deferrals, Foreign Earned Income Exclusion, and More
The IRS has released inflation-adjusted tables for 2017 reflecting any increases in the FSA deferral limit, foreign earned income exclusion, and excludable transportation fringes, among other changes [Rev. Proc. 2016-55, 10-25-16; https://www.irs.gov/pub/irs-drop/rp-16-55.pdf].
Qualified transportation fringes
The amounts that may be excluded from gross income for employer-provided “qualified transportation fringe benefits” for 2017 are as follows: $255 per month for “qualified parking” (unchanged from 2016), and $255 per month for “transportation in a commuter highway vehicle and any transit pass” (unchanged from 2016).
Health flexible spending arrangements
For plan years beginning in 2017, the dollar limitation under IRC §125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $2,600 ($2,550 in 2016).
The standard deduction amounts for 2017 for married couples filing jointly or surviving spouses increases to $12,700 ($12,600 in 2016), increases to $6,350 for single taxpayers and married taxpayers filing separately ($6,300 in 2016), and increases to $9,350 for heads of household ($9,300 in 2016).
The personal exemption amount for 2017 is $4,050 (unchanged from 2016).
Foreign earned income exclusion
For 2017, the maximum foreign earned income exclusion amount under IRC §911(b)(2)(D)(i) is $102,100 ($101,300 in 2016). The maximum amount of the foreign housing cost exclusion is $14,294 ($14,182 in 2016).
Medical Savings Accounts
To be eligible to make contributions to a Medical Savings Account (or to have the employer make the contributions), an employee must be covered by a high deductible health plan. For 2017, a high deductible health plan is a plan with an annual deductible of $2,250-$3,350 for individual coverage (unchanged from 2016) and $4,500-$6,750 for family coverage ($4,450-$6,700 in 2016).
Maximum out-of-pocket expenses can be no more than $4,500 for individual coverage ($4,450 in 2016) and $8,250 for family coverage ($8,150 in 2016).
Long-term care insurance benefits
If a long-term care insurance contract makes per diem benefit payments, the amount of the payments that is excluded from income in 2017 is capped at $360 per day ($340 in 2016).
For 2017, the maximum amount that can be excluded from an employee’s gross income for qualified adoption expenses under an employer’s adoption assistance program is $13,570 ($13,460 in 2016). The maximum amount that can be excluded in connection with the adoption of a child with special needs is $13,570 ($13,460 in 2016).
The amount excludable from an employee’s gross income begins to phase out for taxpayers with adjusted gross income of $203,540 ($201,920 in 2016) and is completely phased out for taxpayers with adjusted gross income of $243,540 ($241,920 in 2016).
Pipeline construction industry per diem option
For 2017, an eligible employer may pay certain welders and heavy equipment mechanics up to $17 per hour for rig-related expenses that will be deemed substantiated under an accountable plan (unchanged from 2016) and up to $11 per hour for fuel (unchanged from 2016), when paid in accordance with Rev. Proc. 2002-41 (2002-23 IRB 1098).
Penalties for failure to file correct information returns and to provide correct payee statements
For tax years beginning in 2017 (forms filed in 2018), the penalty amounts under IRC §6721, failure to file correct information returns, and the penalty amounts under IRC §6722, failure to furnish correct payee statements, are $260 under the general rule, $50 if corrected on or before 30 days after the required filing date, and $100 if corrected after the 30th day but on or before August 1 (all unchanged). For businesses with annual gross receipts of $5 million or less, the maximum penalty increases to $1,072,500 (from $1,064,000 in 2016) under the general rule, to $187,500 (from $186,000) if corrected on or before 30 days after the required filing date, and to $536,000 (from $532,000) if corrected after the 30th day but on or before August 1. For businesses with annual gross receipts of more than $5 million, the maximum penalty increases to $3,218,500 (from $3,193,000 in 2016) under the general rule, to $536,000 (from $532,000) if corrected on or before 30 days after the required filing date, and to $1,609,000 (from $1,596,500) if corrected after the 30th day but on or before August 1.
For intentional disregard of the obligations under either of these provisions, the penalty is $530 per return in 2017 (unchanged from 2016), and there is no calendar year limit.
401(k) Deferral, Over-50 Catch-Up Contribution Limits Unchanged for 2017
The IRS has announced the changes to the dollar limits on benefits and contributions under qualified retirement plans, as well as other items, for tax year 2017 [IR-2016-141, 10-27-16; https://www.irs.gov/uac/newsroom/irs-announces-2017-pension-plan-limitations-401k-contribution-limit-remains-unchanged-at-18000-for-2017].
• The limitation on the exclusion for elective deferrals under §402(g)(1) (e.g., §401(k) and §403(b) plans) remains unchanged at $18,000.
• The limit on annual additions to defined contribution plans under §415(c)(1)(A) increases to $54,000 (from $53,000).
• The limit on the annual benefit under a defined benefit plan contained in §415(b)(1)(A) increases to $215,000 (from $210,000).
• The annual compensation limit under §401(a)(17), §404(l), §408(k)(3)(C), and §408(k)(6)(D)(ii) increases to $270,000 (from $265,000).
• The compensation amount under §408(p)(2)(E) regarding elective deferrals to SIMPLE retirement accounts remains unchanged at $12,500.
• The limitation under §457(e)(15) concerning elective deferrals to deferred compensation plans of state and local governments and tax-exempt organizations (§457(b) plans) remains unchanged at $18,000.
• The limitation under §416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan increases to $175,000 (from $170,000).
• The limitation under §414(v)(2)(B)(i) for catch-up contributions to §§401(k), 403(b), and 457(b) plans for individuals age 50 or over remains unchanged at $6,000; the limitation under §414(v)(2)(B)(ii) for catch-up contributions to an employer’s SIMPLE plan for individuals age 50 or over remains unchanged at $3,000.
• The limitation used in the definition of “highly compensated employee” under §414(q)(1)(B) remains unchanged at $120,000.
• The compensation amount under §408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
• The compensation amount under federal regulation §1.61-21(f)(5)(i), concerning the definition of “control employee” for fringe benefit purposes, remains unchanged at $105,000. The compensation amount under §1.61-21(f)(5)(iii) remains unchanged at $215,000.
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.
Great Reasons to Join or Renew!
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.
Chapter Newsletters – Our OCCAPA – Payroll Insider newsletter keeps our members connected with chapter and APA events, as well as providing updates from various chapter officers and committees.
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.
Thank you for your support and interest in the Orange County Chapter of the APA.