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Monthly Archives / November 2018

  • Nov 27 / 2018
What's New

State Unemployment Insurance Taxable Wage Bases for 2019

 

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Most states have released their state unemployment insurance (SUI) taxable wage bases for 2019.  State Unemployment Insurance Taxable Wage Bases 2016-2019

Following the Federal Unemployment Tax Act (FUTA) scheme, SUI contributions (taxes) are determined by applying a certain percentage to the taxable wages paid by the employer. FUTA requires that each state’s taxable wage base must at least equal the FUTA taxable wage base of $7,000 per employee, and most states have wage bases that exceed the required amount. The states use various formulas for determining their taxable wage base, with a few tying theirs by law to the FUTA wage base and others using a percentage of the state’s average annual wage.

  • Nov 27 / 2018
What's New

New Draft of 2019 Form W-4 Has Few Changes From 2018

 

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The IRS released a second draft of the 2019 Form W-4, Employee’s Withholding Allowance Certificate, on October 12. The latest draft Form W-4 is very similar to the 2018 Form W-4 with a few non-substantive language changes in the general instructions.  In several sections of the new draft of the Form W-4, the IRS added language clarifying that employees should take into account non-wage income “not subject to withholding” in using the various worksheets and that the child tax credit may be taken only for children who have a valid social security number.

Major Changes Delayed Until 2020

On September 20, the APA reported that the IRS announced it will delay major revisions to the Form W-4 until the 2020 version [IRS Statement on Form W-4, 9-20-18]. Therefore, the latest 2019 form draft is very similar to the final 2018 version. The IRS decided to delay the changes to the 2019 Form W-4 “[f]ollowing feedback from the payroll and tax communities.” In July, the APA submitted detailed comments to the IRS on the preliminary draft 2019 Form W-4.

American Payroll Association Staff

  • Nov 27 / 2018
What's New

IRS Announces Pension Plan Limits for 2019

On November 1, the IRS announced the changes to the dollar limits on benefits and contributions under qualified retirement plans, as well as other items, for tax year 2019 [IRS Notice 2018-83, 11-1-18, 2019 Pension Plan Limits].

IRC §415, which provides for dollar limits on benefits and contributions under qualified retirement plans, also requires that the IRS annually adjust these limits for cost-of-living changes. The IRC also requires various other amounts to be adjusted at the same time and in the same manner as these dollar limits.

The limitation on the exclusion for elective deferrals under §401(k), §403(b), and §457(b) plans increases to $19,000 for 2019 (from $18,500).

  • Nov 21 / 2018
What's New

IRS Announces 2019 COLAs for Transportation Fringes, FSA Deferrals, Foreign Earned Income Exclusion, and More

The IRS has released inflation-adjusted tables for 2019 reflecting any increases in the FSA deferral limit, foreign earned income exclusion, and excludable transportation fringes, among other changes [Rev. Proc. 2018-57, 11-15-18].

Qualified transportation fringes

The amounts that may be excluded from gross income for employer-provided qualified transportation fringe benefits (transportation in a commuter highway vehicle and any transit pass) and qualified parking for 2019 are both $265 per month ($260 in 2018).

Health flexible spending arrangements

For plan years beginning in 2019, the dollar limitation under IRC §125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $2,700 ($2,650 in 2018).

Standard deduction

The standard deduction amounts for 2019 increase to $24,400 for married couples filing jointly or surviving spouses ($24,000 in 2018), $12,200 for single taxpayers and married taxpayers filing separately ($12,000 in 2018), and $18,350 for heads of household ($18,000 in 2018).

Federal tax levies

The Tax Cuts and Jobs Act altered the way the amount of wages, salary, or other income exempt from a federal tax levy is calculated. For taxable years beginning in 2019, the dollar amount used to calculate the amount determined under IRC §6334(d)(4)(B) is $4,200 (up from $4,150 in 2018).

Foreign earned income exclusion

For 2019, the maximum foreign earned income exclusion amount under IRC §911(b)(2)(D)(i) is $105,900 (up from $103,900 in 2018). The maximum amount of the foreign housing cost exclusion is $14,826 (up from $14,546 in 2018).

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 2019, a high deductible health plan is a plan with an annual deductible of $2,350-$3,500 for individual coverage (up from $2,300-$3,450 in 2018) and $4,650-$7,000 for family coverage (up from $4,550-$6,850 in 2018).

Maximum out-of-pocket expenses can be no more than $4,650 for individual coverage (up from $4,550 in 2018) and $8,550 for family coverage (up from $8,400 in 2018).

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 2019 is capped at $370 per day (up from $360 in 2018).

Adoption assistance

For 2019, 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 $14,080 (up from $13,810 in 2018). The maximum amount that can be excluded in connection with the adoption of a child with special needs is $14,080 (up from $13,810 in 2018).

The amount excludable from an employee’s gross income begins to phase out for taxpayers with adjusted gross income of $211,160 (up from $207,140 in 2018) and is completely phased out for taxpayers with adjusted gross income of $251,160 (up from $247,140 in 2018).

Qualified small employer HRA

For 2019, a qualified small employer health reimbursement arrangement (QSEHRA) is an arrangement which, among other requirements, makes payments and reimbursements for qualifying medical care expenses of an eligible employee that do not exceed $5,150 (up from $5,050 for 2018), or $10,450 in the case of an arrangement that also provides for payments or reimbursements for family members of the employee (up from $10,250 for 2018).

Pipeline construction industry per diem option

For 2019, an eligible employer may pay certain welders and heavy equipment mechanics up to $18 per hour for rig-related expenses that will be deemed substantiated under an accountable plan (unchanged from 2018) and up to $11 per hour for fuel (unchanged from 2018), when paid in accordance with Rev. Proc. 2002-41 (2002-23 IRB 1098).

  • Nov 21 / 2018
What's New

Social Security Wage Base Increases to $132,900 for 2019

The Social Security Administration (SSA) announced on Thursday, October 11, 2018, that the 2019 social security wage base will be $132,900, which is an increase of $4,500 from $128,400 in 2018 (view the SSA Fact Sheet). As in prior years, there is no limit to the wages subject to the Medicare tax; therefore all covered wages are still subject to the 1.45% tax. As in 2018, wages paid in excess of $200,000 in 2019 will be subject to an extra 0.9% Medicare tax that will be withheld only from employees’ wages. Employers will not pay the extra tax.

The FICA tax rate, which is the combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2019 up to the social security wage base. The maximum social security tax employees and employers will each pay in 2019 is $8,239.80, an increase of $279.00 from $7,960.80 in 2018.

The social security wage base for self-employed individuals in 2019 will also be $132,900. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate will be 15.3% (combined social security tax rate of 12.4% and Medicare tax rate of 2.9%) up to the social security wage base. In 2019, the maximum social security tax for a self-employed individual will be $16,479.60.

FICA coverage threshold for domestic, election workers

The threshold for coverage under social security and Medicare for domestic employees (i.e., the “Nanny tax”) will be $2,100 in 2019, unchanged from 2018; the coverage threshold for election workers will be $1,800 in 2019, unchanged from 2018.

  • Nov 21 / 2018
What's New

401(k), 403(b), 457(b) Pre-Tax Contribution Limit Increases to $19,000 for 2019

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 2019 [IRS Notice 2018-83, 11-1-18]. The notice is available on the APA website at https://www.americanpayroll.org/compliance/compliance-overview/annual-irs-annoucements.

IRC §415, which provides for dollar limits on benefits and contributions under qualified retirement plans, also requires that the IRS annually adjust these limits for cost-of-living changes. The IRC also requires various other amounts to be adjusted at the same time and in the same manner as these dollar limits.

  • The limitation on the exclusion for elective deferrals under §402(g)(1) (e.g., §401(k) and §403(b) plans) increases to $19,000 (from $18,500).
  • The limit on annual additions to defined contribution plans under §415(c)(1)(A) increases to $56,000 (from $55,000).
  • The limit on the annual benefit under a defined benefit plan contained in §415(b)(1)(A) increases to $225,000 (from $220,000).
  • The annual compensation limit under §401(a)(17), §404(l), §408(k)(3)(C), and §408(k)(6)(D)(ii) increases to $280,000 (from $275,000).
  • The compensation amount under §408(p)(2)(E) regarding elective deferrals to SIMPLE retirement accounts increases to $13,000 (from $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) increases to $19,000 (from $18,500).
  • The limitation under §416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan increases to $180,000 (from $175,000).
  • 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) increases to $125,000 (from $120,000).
  • The compensation amount under §408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
  • The compensation amount under Treas. Reg. §1.61-21(f)(5)(i), concerning the definition of “control employee” for fringe benefit valuation purposes, remains unchanged at $110,000. The compensation amount under §1.61-21(f)(5)(iii) increases to $225,000 (from $220,000).
  • The limit on annual contributions to an Individual Retirement Arrangement, which last increased in 2013, increases to $6,000 (from $5,500). The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
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