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  • Sep 09 / 2018
What's New

California Employers Affected by Recent Fires, Storms May Be Eligible for Disaster Relief


Employers in the California counties of Lake, Mariposa, Mendocino, Napa, Orange, Riverside, San Diego, Santa Barbara, Shasta, and Siskiyou directly affected by recent fires and those in San Bernardino County directly affected by a recent storm may request up to a 60-day extension of time from the California Employment Development Department (EDD) to file state payroll reports and/or deposit state payroll taxes without penalty or interest.

Written requests for an extension must be received within 60 days of the original delinquent date of the payment or return. For more information on the current state declared disasters, including the starting date for the 60-day extension for each county, go to the EDD website.

By: American Payroll Association

  • Sep 09 / 2018
What's New

IRS Grants Transition Relief for Health Savings Account Contributions


On April 26, the IRS announced transition relief for employers that sponsored Health Savings Account (HSA) qualified plans for their employees in 2018. The maximum HSA contribution limit for individuals with a family high-deductible health plan (HDHP) remains at the original 2018 level of $6,900 instead of the Tax Cuts and Jobs Act (TCJA) level of $6,850 [Rev. Proc. 2018-27].

Why do employers need relief?

The TCJA changed the Consumer Price Index used to determine inflation adjustments, which resulted in the IRS publishing a revised procedure to account for a lower 2018 maximum HSA contribution limit for individuals with a family HDHP from $6,900 to $6,850 ($50 difference). The change was applied retroactively to January 1, 2018 (see Rev. Proc. 2018-18, 2018-10 IRB 392).

APA along with other stakeholders requested the HSA relief because of unanticipated administrative and financial burdens. The revised IRS procedure includes an explanation on how to treat excess contributions for 2018.

By: American Payroll Association

  • Sep 09 / 2018
What's New

SSA Outlines BSO Upgrades for the 2019 Filing Season and Beyond

On July 5, during the IRS’s payroll industry call, Scott Pederson, a Program Analyst in the Social Security Administration’s (SSA) Office of Electronic Services and Technology, provided an overview of some of the changes that SSA has made to its Business Services Online (BSO) suite of services for the 2019 filing season. He also outlined some of some of the changes that SSA would like to make for future years.

Pederson said that there are internal upgrades that filers may not see and others that will be more visible. One change involves the types of alerts generated by AccuWage Online. There are three types of alerts: critical errors that prevent a W-2 or W-2c wage file from being processed; errors that may not prevent a file from being processed, but should be corrected; and informational alerts. Because the number of alerts is limited to 500, some filers may not receive critical alerts. Pederson said that there will be fewer informational alerts in 2019. He also reminded listeners that the 2018 Form W-2 includes two new codes for Box 12 (Codes FF and GG) that the SSA’s systems are ready to process.

Pederson looked ahead to future BSO upgrades, which could include a new authentication and authorization system. Noting that some of the elements of BSO were designed approximately 20 years ago, he said that SSA is looking to provide a user experience that is “a lot more intuitive,” simple, and less menu-based. Pederson sought feedback from the attendees on the payroll industry call concerning the types of issues they were having with their BSO accounts. SSA will take that feedback into account as it develops the upgrades to its systems.

By: American Payroll Association

  • Sep 09 / 2018
What's New

Employers Must Use Current Standard Child Support Withholding Order

As of August 31, 2018, employers should be using only the revised version of the standard child support withholding order, Income Withholding for Support(IWO), with an expiration date of August 31, 2020. The form is required to be used in all child support cases. It must be used by state child support agencies, courts, tribes, private attorneys, and other entities when ordering or sending notices to withhold. Both the formandinstructionsare available on the APA website.

When the Office of Child Support Enforcement (OCSE) released the revised IWO in 2017, states, tribes, and others were advised to begin using it immediately. Because some entities may have needed additional time to implement use of the revised IWO, employers were directed to continue to honor previous versions of the IWO until August 31, 2018. APA’s Government Relations Task Force (GRTF) Child Support and Other Garnishments Subcommittee has been advised by OCSE’s Employer Services Team that a best practice is to return an old form to the sender.

By: American Payroll Association 8/30/2018

  • Aug 12 / 2018
What's New

IRS Releases Draft of 2019 Form W-4

APA’s July 2018 edition of Compliance TV covers the IRS’s release of a draft of the 2019 Form W-4, news on a potential increase on E-filing returns, and the announcement that New Jersey will now require paid sick leave.

Please refer to:  Compliance TV


  • Aug 12 / 2018
What's New

DOL Updates Potential FUTA Credit Reduction State and Territory for 2018

The U.S. Department of Labor (DOL) has updated its list of potential FUTA credit reduction states for 2018. While California and the Virgin Islands are both listed, the Virgin Islands might be the only state/territory subject to a FUTA credit reduction for 2018. The 2018 determination will be made after November 10, 2018 [DOL, Potential 2018 Federal Unemployment Tax Act (FUTA) Credit Reductions, rev. 7-18-18].

California and the Virgin islands were subject to a credit reduction for 2017. For 2018, the total credit reduction for California could be 2.4% and for the Virgin Islands it could be 3.7% or 2.4% if the Benefit Cost Rate (BCR) add-on is waived.

Outstanding FUA Loans

If states have outstanding Federal Unemployment Account (FUA) loans on January 1 of two consecutive years and have not paid off the balance by November 10, they are subject to a credit reduction for state payments on their Federal Unemployment Tax rate until the balance has been paid off. California paid its FUA loans earlier this year, and if it does not take out additional loans by the November 10, 2018, deadline, it will not be a credit reduction state for 2018.

Waiver of Additional Add-ons

Once a state has had outstanding FUA loans for several years, additional types of credit reduction might also be added. States may apply to the DOL for a waiver of the BCR add-on. Both California and the Virgin Islands have applied for the waiver.

By APA Staff

  • Aug 12 / 2018
What's New

Multi-State Taxation

The APA is part of the Mobile Workforce Coalition, a group that is pushing for passage of the Mobile Workforce State Income Tax Simplification Act (H.R. 1393, S. 540), a bill with bipartisan support in the House and Senate. These bills would establish a 30-day threshold before a state could impose tax on a nonresident employee’s wages. The legislation has been introduced a number of times since 2006. As part of APA’s support, it has submitted statements and urged lawmakers to vote for its passage.


Education Links:

  • Aug 05 / 2018
What's New

California Supreme Court Rejects De Minimis Doctrine for Compensable Time Claims

The CaliforniaSupreme Court determined that the federal Fair Labor Standards Act’s (FLSA’s) de minimisdoctrine does not apply to claims for unpaid wages under California’s wage and hour statutes or regulations, including Industrial Welfare Commission wage orders. The court determined that the relevant wage order and statutes do not permit application of the de minimisrule when the employer required the employee to work “off the clock” several minutes per shift [Troester v. Starbucks Corp., No. S234969 (Calif., 7-26-18)].

Federal courts have applied the de minimisdoctrine to excuse the payment of wages for small amounts of otherwise compensable time upon a showing that the time worked by an employee after regular working hours is so insignificant that it cannot be definitively measured or is administratively difficult to record (29 C.F.R. §785.47).

In the recent case, Starbucks’ timekeeping computer software required the nonmanagerial shift supervisor to clock out before performing certain store closing tasks, including initiating the software’s “close store procedure” on a separate computer terminal in the back office, which transmitted daily sales, profit and loss, and store inventory data to headquarters.

According to the state supreme court, the de minimis principle does not apply when an employer regularly requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job. It also stated that it should not be applied solely because it is difficult to keep track of time worked, especially as technological advances enable employees to track and register their work time via smartphones, tablets, or other devices.

By: APA Staff

  • May 31 / 2018
What's New

Federal Tax Reform

On December 22, 2017, President Trump signed H.R. 1, also known as the Tax Cuts and Jobs Act (TCJA), into law (Pub. L. 115-97). The TJCA, which marks the most sweeping tax changes in 30 years, will impact payroll professionals in 2018 and beyond. Most of the changes in the TJCA took effect January 1, 2018, and will remain in effect through 2025.

Tax Rates and Brackets
The TCJA retains seven tax brackets, but adjusts tax rates and taxable income levels. The tax rates are also used to determine supplemental and backup withholding rates, so those rates will also change. Here is a comparison of the 2017 and 2018 rates.


2017 Tax Rate Taxable Income 2018 Tax Rate Taxable Income
10% $0-$9,325 10% $0 – $9,525
15% $9,326 – $37,950 12% $9,526 – $38,700
25% $37,951 – $91,900 22% $38,701 – $82,500
28% $91,901 – $191,650 24% $82,501 – $157,500
33% $191,651 – $416,700 32% $157,501 – $200,000
35% $416,701 – $418,400 35% $200,001 – $500,000
39.6% $418,401+ 37% $500,000+

Married, Filing Jointly

2017 Tax Rate Taxable Income 2018 Tax Rate Taxable Income
10% $0 – $18,650 10% $0 – $19,050
15% $18,651 – $75,900 12% $19,051 – $77,400
25% $75,901 – $153,100 22% $77,401 – $165,000
28% $153,101 – $233,350 24% $165,001 – $315,000
33% $233,351 – $416,700 32% $315,001 – $400,000
35% $416,701 – $470,700 35% $400,001 – $600,000
39.6% $470,701+ 37% $600,001+

Rates for Withholding on Supplemental Wages for 2018
There is a two-tiered system for withholding income tax from supplemental wages at a flat rate:

  • Optional flat rate: 22%. Because the optional flat tax rate on supplemental wages of up to $1 million in a taxable year is tied to a section of the Internal Revenue Code that is suspended for tax years 2018 through 2025 by the TCJA (§1(i)(2)), it appeared that the withholding rate would increase to 28% (from 25%). However, the IRS has confirmed the new rate is 22% (no other percentage allowed).
  • Mandatory flat rate: 37%. The mandatory withholding rate on supplemental wages exceeding $1 million in a taxable year is tied to the highest income tax rate. For 2017, the rate was 39.6%. The TCJA lowers that rate to 37% for tax years 2018 through 2025.

Backup Withholding Rate
The backup withholding rate is tied to the fourth lowest tax rate. For 2017 the rate was 28%. The TCJA lowers that rate to 24% for tax years 2018 through 2025.

Personal Exemption Elimination and Income Tax Withholding
The TCJA eliminates the personal exemption claimed by taxpayers for themselves and their spouse and dependents for 2018-2025, and nearly doubles the standard deduction in 2018 to $24,000 for married individuals filing jointly, $18,000 for head-of-household filers, and $12,000 for all others. These amounts will be adjusted for inflation beginning in 2019. This will have a profound impact on income tax withholding. Generally, the amount of income tax withholding has been based on the number of withholding allowances an employee claims on Form W-4, Employee’s Withholding Allowance Certificate. These allowances, in large part, are based on the number of exemptions claimed by the employee. The Form W-4 also allows for withholding adjustments based on estimated itemized deductions (e.g., for state and local taxes or mortgage interest) that will be affected by this legislation.

Other Areas Important to Payroll
The TCJA also affected many other areas important to payroll professionals, including the amount of wages exempt from a federal tax levy, inflation adjustments to items in the Internal Revenue Code, and fringe benefit changes affecting employees and employers.


Education Links:

Provided by the American Payroll Association
  • Apr 09 / 2018
What's New

IRS Modifies Some 2018 COLAs

The IRS has announced changes to some of the previously announced 2018 cost-of-living adjustments (COLAs) [Rev. Proc. 2018-18, 2018-10 IRB 392]. The new COLA amounts reflect tax law changes created by the Tax Cuts and Jobs.

Foreign earned income exclusion
For 2018, the maximum foreign earned income exclusion amount under IRC §911(b)(2)(D)(i) is lowered to $103,900 ($104,100 previously). The maximum amount of the foreign housing cost exclusion is $14,546 ($14,574 previously).

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 2018, a high deductible health plan is a plan with an annual deductible of $2,300-$3,450 for individual coverage (unchanged) and $4,550-$6,850 for family coverage ($4,600-$6,850 previously).
Maximum out-of-pocket expenses now can be no more than $4,550 for individual coverage ($4,600 previously) and $8,400 for family coverage (unchanged).

Health savings accounts
The maximum annual contribution to a health savings account is reduced to $6,850 ($6,900 previously) for family coverage. The other amounts are unchanged.

Adoption assistance
For 2018, 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 lowered to $13,810 ($13,840 previously). The amount excludable from an employee’s gross income also phases out at lower amounts of the employee’s modified adjusted gross income.

Penalties for failure to file correct information returns and to provide correct payee statements
For tax years beginning in 2018 (forms filed in 2019), the penalty amounts per return under IRC §6721, failure to file correct information returns, and the penalty amounts under IRC §6722, failure to furnish correct payee statements, will remain the same However, some of the calendar year maximum penalties have been reduced.

Courtesy of APA

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