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Payroll Management Guide
  • New York City expands paid sick leave law to cover certain crime victims
  • Senate issues its tax bill; House bill marked up; payroll items included
  • Minnesota to hold seminar on employment tax issues
Unemployment Insurance Reports with Social Security
  • Alaska change in EB period
  • Minnesota taxable wage base
  • Maximum weekly benefit amount


Payroll Management Guide

New York City expands paid sick leave law to cover certain crime victims

On November 6, New York City Mayor Bill de Blasio signed legislation that expands current paid leave protections to domestic violence, sexual assault, stalking, and trafficking survivors. Approved by the City Council on October 17, Int. 1313-A expands the Earned Sick Time Act to permit victims of family offense matters, such as disorderly conduct and harassment, sexual offenses (such as sexual misconduct, forcible touching and sexual abuse), stalking, and human trafficking to use earned "safe" hours in connection with that abuse. It also changes the name of the Act to the "Earned Sick and Safe Time Act."

Under the previously named "Earned Sick Time Act," employees of employers with five or more employees earn sick time of up to five days (40 hours), which can be used for various health-related purposes of the employees or their families. The Act, however, did not provide any protection for victims of domestic violence, sexual offenses, stalking, and other such offenses.

Int. 1313-A amends the Act to make earned sick time hours available for employees to obtain services from a domestic violence shelter or rape crisis center; participate in safety planning, temporarily or permanently relocate; to meet with an attorney or other social service provider to obtain information and advice; or take other actions to ensure their own or a family member's safety. The new law will make the nearly three million New Yorkers eligible for paid leave to attend to immediate safety needs without fear of penalty or loss of income, the Mayor's office observed. "No New Yorker should ever have to decide between their safety and a paycheck," Mayor de Blasio said in a release.

Int. 1313-A is effective 180 days after becoming law, except that where employees are covered by a valid collective bargaining agreement in effect on that date, it takes effect on the date the agreement terminates. (City of New York, Office of the Mayor, Press Release, November 6, 2017, http://www1.nyc.gov/office-of-the-mayor/news/716-17/paid-safe-leave-new-york-city-expands-paid-leave-domestic-violence-sexual-assault-stalking; New York City Council, Intro 1313-A, http://hr.cch.com/ELD/NYC-Int1313A.pdf.)

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Senate issues its tax bill; House bill marked up; payroll items included

The Senate Finance committee has released its version of the tax bill, the Tax Cuts and Jobs Act. The Senate bill will now go through mark up. Meanwhile the House has marked up its version of the Tax Cuts and Jobs Act, H.R 1. Next, the bill will be voted on the by the House. The payroll provisions of each is highlighted below.

Tax rate decreases

House version. The current seven tax brackets would be consolidated and simplified into four brackets: 12%, 25%, 35%, and 39.6%, in addition to an effective fifth bracket at zero percent in the form of the enhanced standard deduction. For example for married taxpayers filing jointly, the 25% bracket threshold would be $90,000, the 35% bracket threshold would be $260,000, and the 39.6% bracket threshold would be $1 million. The tax rates would be indexed for inflation and would generally be effective for tax years beginning after 2017.

Senate version. There would be seven tax brackets in effect for 2018 as follows: 10%, 12%, 22.5%, 25%, 32.5% 35%, and 38.5%. For example, for marrieds filing jointly the rates would be: Not over $19,050-10% of the taxable income. Over $19,050 but not over $77,400-$1,905 plus 12% of the excess over $19,050. Over $77,400 but not over $120,000-$8,907 plus 22.5% of the excess over $77,400. Over $120,000 but not over $290,000-$18,492 plus 25% of the excess over $120,000. Over $290,000 but not over $390,000-$60,992 plus 32.5% of the excess over $290,000. Over $390,000 but not over $1,000,000-$93,492 plus 35% of the excess over $390,000. Over $1,000,000- $306,992 plus 38.5% of the excess over $1,000,000, effective for taxable years beginning after December 31, 2017.

Standard deductions increased

House version. The standard deductions would be increased to $24,400 for joint filers (and surviving spouses) and $12,200 for individual filers. Single filers with at least one qualifying child could claim a standard deduction of $18,300. The amounts would be adjusted for inflation after 2019. For example, the standard deduction for joint filers would be $24,400 in 2018, effective for tax years beginning after 2017.

Senate version. The basic standard deductions would be increased for individuals across all filing statuses. Under the proposal, the amount of the standard deduction would be increased to $24,000 for married individuals filing a joint return, $18,000 for head-of-household filers, and $12,000 for all other taxpayers. The amount of the standard deduction would be indexed for inflation for taxable years beginning after December 31, 2018. The additional standard deduction for the elderly and the blind would not be changed, effective for taxable years beginning after December 31, 2017.

Personal exemptions repealed

House version. The deduction for personal exemptions and the personal exemption phase-out would be repealed, effective for tax years beginning after 2017. The 2018 annual personal exemption amount is currently scheduled to increase to $4,150.

Senate version. The deduction for personal exemptions would be repealed. effective for taxable years beginning after December 31, 2017. The 2018 annual personal exemption amount is currently scheduled to increase to $4,150.

Employer-provided education repealed

House version. Currently, employer-provided education assistance is excluded from income. The exclusion is limited to $5,250 per year and applies to both graduate and undergraduate courses. The education assistance must be part of a written plan of the employer that does not discriminate in favor of highly compensated employees. The deduction for qualified tuition and related expenses would be repealed. The exclusion for qualified tuition reduction programs and the exclusion for employer-provided education assistance programs would be repealed. The repeals would be effective for amounts paid or incurred after 2017.

Senate version. No provision.

Charitable mileage rate

House version. The current 14 cent-per-mile flat rate would changed to be a rate which takes into account the variable cost of operating an automobile, effective for amounts paid or incurred after 2017.

Senate version. No provision.

Medical savings accounts

House version. Now an individual may claim an above-the-line deduction for contributions to an Archer Medical Savings Account (MSA) and exclude from income employer contributions to an MSA. In general, Archer MSAs may be set up by an individual working for a small employer and who participates in the employer's high-deductible health plan. The total amount of monthly contributions to an Archer MSA may not exceed one-twelfth of 65% of the annual deductible for an individual with a self-only plan and one-twelfth of 75% of the annual deductible for an individual with family coverage. Distributions from the accounts used to pay qualified medical expenses are not taxable. Archer MSA balances may be rolled over on a tax-free basis to another Archer MSA or to a Health Savings Account (HSA). Under the provision, no deduction would be allowed for contributions to an Archer MSA, and employer contributions to an Archer MSA would not be excluded from income. Existing Archer MSA balances, however, could continue to be rolled over on a tax-free basis to an HSA. The provision would be effective for tax years beginning after 2017.

Senate version. No provision.

Employer-provided housing

House version. The exclusion for housing provided for the convenience of the employer and for employees of educational institutions would be limited to $50,000 ($25,000 for a married individual filing a joint return) and would phase out for highly compensated individuals (income of $120,000 for 2017, as adjusted for inflation) at a rate of one dollar for every two dollars of adjusted gross income earned by the individual beyond the statutory threshold of being highly compensated. The exclusion also would be limited to one residence, effective for tax years beginning after 2017.

Senate version. No provision.

Employee achievement awards

House version. Currently, employee achievement awards are excluded from employees' income. To qualify for the tax exclusion, an employee achievement award must be given in recognition of the employee's length of service or safety achievement at a ceremony that is a meaningful presentation. Furthermore, the conditions and circumstances cannot suggest a significant likelihood that the payment is disguised compensation. The employee is taxed to the extent that the cost (or value, if greater) of the award exceeds the employer's deduction for the award. The employer's deduction for employee achievement awards for any employee in any year cannot exceed $1,600 for qualified plan awards, and $400 otherwise. A qualified plan award is an employee achievement award that is part of an established written program of the employer, which does not discriminate in favor of highly compensated employees. In addition, the average award (not counting those of nominal value) may not exceed $400. The provision would repeal the exclusion for employee achievement awards, so that such awards would constitute taxable compensation to the recipient. The provision also would repeal the restrictions on employer deductions for such awards, effective for tax years beginning after 2017.

Senate version. No provision.

Dependent care assistance

House version. The value of employer-provided dependent care assistance programs are excluded from employees' income up to a limit of $5,000 per year ($2,500 for married filing separately) to help pay for work-related expenses of caring for a child under the age of 13 or spouses or other dependents who are physically or mentally unable to care for themselves. Work-related expenses are those that help an individual work or look for work. Dependent care assistance programs must be part of a written plan of the employer that does not discriminate in favor of highly compensated employees. The exclusion for dependent care assistance programs would be repealed, effective for tax years beginning after 2017.

Senate version. No provision.

Moving expenses reimbursements repealed

House version. Under current law, qualified moving expense reimbursements provided by an employer to an employee are excluded from the employee's income. Qualified moving expenses are payments received by an individual from an employer as a payment for or reimbursement of expenses by an employee that would be deductible as moving expenses under Code Sec. 217 if directly paid or incurred by the individual. The exclusion for qualified moving expense reimbursements would be repealed, effective for tax years beginning after 2017. However, the current law on moving expenses would be retained for member of the Armed Services on active duty.

Senate version. The exclusion from gross income and wages for qualified would be repealed for moving expense reimbursements, effective for taxable years beginning after December 31, 2017. In addition, the bill would generally repeal the deduction for moving expenses. However, the rules providing for exclusions of amounts attributable to in-kind moving and storage expenses (and reimbursements or allowances for these expenses) for members of the Armed Forces of the United States (or their spouse or dependents) would not be repealed, effective for taxable years beginning after December 31, 2017.

Fringe benefits

House version. No deduction would be allowed for entertainment, amusement or recreation activities, facilities, or membership dues relating to such activities or other social purposes. In addition, no deduction would be allowed for transportation fringe benefits, benefits in the form of on-premises gyms and other athletic facilities, or for amenities provided to an employee that are primarily personal in nature and that involve property or services not directly related to the employer's trade or business, except to the extent that such benefits are treated as taxable compensation to an employee (or includible in gross income of a recipient who is not an employee). The 50% limitation under current law also would apply only to expenses for food or beverages and to qualifying business meals under the provision, with no deduction allowed for other entertainment expenses. Furthermore, no deduction would be allowed for reimbursed entertainment expenses paid as part of a reimbursement arrangement that involves a tax-indifferent party such as a foreign person or an entity exempt from tax. The provision would be effective for amounts paid or incurred after 2017. The provision could affect what fringe benefits employers offer to employees.

Senate version. No deductions would be allowed for (1) an activity generally considered to be entertainment, amusement or recreation, (2) membership dues for any club organized for business, pleasure, recreation or other social purposes, or (3) a facility or portion used in connection with any of the above items. The proposal would repeal the present-law exception to the deduction disallowance for entertainment, amusement, or recreation that is directly related to (or, in certain cases, associated with) the active conduct of the taxpayer's trade or business (and the related rule applying a 50% limit to such deductions). While taxpayers would still be able to deduct 50% of the food and beverage expenses associated with operating their trade or business (e.g., meals consumed by employees on work travel), the proposal expands the 50% limitation to expenses of the employer associated with providing food and beverages to employees through an eating facility that meets requirements for de minimis fringes. In addition, the proposal would disallow a deduction for expenses associated with providing any qualified transportation fringe to employees of the taxpayer, and except as necessary for ensuring the safety of an employee, any expense incurred for providing transportation (or any payment or reimbursement) for commuting between the employee's residence and place of employment effective to amounts paid or incurred after December 31, 2017.

Fringe benefits tax exempt entities

House version. Tax-exempt entities are situated similarly to taxable entities with regard to providing their employees with transportation fringe benefits, and on-premises gyms and other athletic facilities, as such benefits pass from the employer to the employee free of tax at both levels. Employers subject to federal income tax may deduct the costs of such benefits, with tax-exempt entities not needing to deduct the costs of such benefits, and their employees may exclude the values of such benefits from their taxable incomes. Tax-exempt entities would be taxed on the values of providing their employees with transportation fringe benefits, and on-premises gyms and other athletic facilities, by treating the funds used to pay for such benefits as unrelated business taxable income, thus subjecting the values of those employee benefits to a tax equal to the corporate tax rate, effective for amounts paid or incurred after 2017.

Senate version. No provision.

Employer-provided child care

House version. The credit for employer-provided child care would be repealed, effective for tax years beginning after 2017.

Senate version. No provision.

Work Opportunity Tax Credit

House version. Currently, an employer may claim a Work Opportunity Tax Credit (WOTC) credit equal to 40% of qualified first-year wages of employees belonging to certain targeted groups. Such qualified wages are subject to various limits between $6,000 and $24,000, varying by the specific targeted group. The WOTC would be repealed, effective for wages paid or incurred to individuals who begin work after 2017.

Senate version. No provision.

Tip credit modified

House version. An employer may claim an income tax credit equal to its share of FICA taxes attributable to tips received from customers in connection with the provision of food or beverages if tipping is customary for that employer's customers. The credit is available only to the extent such tips exceed the amount of tips that the employer uses to meet the minimum wage requirements for the employee under the Fair Labor Standards Act, as it was on January 1, 2007, namely $5.15 per hour. An employer may not claim a deduction for any amount taken into account in determining the credit. The credit would be modified to reflect the current minimum wage so that it is available with regard to tips reported only above the current minimum wage rather than tips above $5.15 per hour. Additionally, all restaurants claiming the credit would be required to report to the IRS tip allocations among tipped employees (allocations at no less than 10% of gross receipts per tipped employee rather than 8%), which is a reporting requirement now required only of restaurants with at least ten employees effective for tips received for services performed after 2017.

Senate version. No provisions

Pension plan contributions

House version. No provision.

Senate version. There would be a single aggregate limit to contributions for an employee in a governmental Code Sec. 457(b) plan and elective deferrals for the same employee under a Code Sec. 401(k) plan or a Code Sec. 403(b) plan of the same employer. Thus, the limit for governmental Code Sec. 457(b) plans is coordinated with the limit for Code Sec. 401(k)and 403(b) plans in the same manner as the limits are coordinated under present law for elective deferrals to Code Sec. 401(k)and Code Sec. 403(b) plans.

The proposal repeals the special rules allowing additional elective deferrals and catch-up contributions under Code Sec. 403(b) plans and governmental Code Sec. 457(b) plans. Thus, the same limits apply to elective deferrals and catch-up contributions under Code Sec. 401(k) plans, Code Sec. 403(b)plans and governmental Code Sec. 457(b) plans.

The proposal repeals the special rule allowing employer contributions to Code Sec. 403(b) plans for up to five years after termination of employment.

The proposal also revises application of the limit on aggregate contributions to a qualified defined contribution plan or a Code Sec. 403(b) plan (that is, the lesser of (1) $54,000 (for 2017) and (2) the employee's compensation). The amount is scheduled to increase to $55,000 for 2018. As revised, a single aggregate limit applies to contributions for an employee to any defined contribution plans, any Code Sec. 403(b) plans, and any governmental Code Sec. 457(b) plans maintained by the same employer, including any members of a controlled group or affiliated service group, effective for plan years and taxable years beginning after December 31, 2017.

Catch-up contributions

House version. No provision.

Senate version. An employee would not be able to make catch-up contributions for a year if the employee received wages of $500,000 or more for the preceding year, is effective for plan years and taxable years beginning after December 31, 2017.

Nonqualified deferred compensation

House version. No provision.

Senate version. Any compensation deferred under a nonqualified deferred compensation plan would be includible in the gross income of the service provider when there is no substantial risk of forfeiture of the service provider's rights to such compensation. For this purpose, the rights of a service provider to compensation are treated as subject to a substantial risk of forfeiture only if the rights are conditioned on the future performance of substantial services by any individual.

A condition related to a purpose of the compensation other than the future performance of substantial services (such as a condition based on achieving a specified performance goal or a condition intended in whole or in part to defer taxation) would not create a substantial risk of forfeiture, regardless of whether the possibility of forfeiture is substantial. In addition, a covenant not to compete would not create a substantial risk of forfeiture. The provision would apply without regard to the method of accounting of the service provider. Because of the definition of substantial risk of forfeiture, a taxpayer using either the cash method of accounting or the accrual method of accounting could be required to include deferred compensation in income earlier than the method of accounting would otherwise require.

Nothing under the provision will be construed to prevent the inclusion of amounts in income under any other income tax provision or any other rule of law earlier than the time provided in the proposal. Any amount included in income would not be required to be included in income under any other income tax provision or any other rule of law later than the time provided under the proposal.

Nonqualified deferred compensation. For purposes of the provision, the term "nonqualified deferred compensation plan" means any plan that provides for the deferral of compensation, other than a qualified employer plan, a bona fide vacation leave, sick leave, compensatory time, disability pay or death benefit plan, and any other plan or arrangement designated by the Secretary of the Treasury consistent with the purposes of the proposal. The Secretary will not provide an exception for severance plans, bona fide or otherwise, in regulations or other guidance. A qualified employer plan for this purpose would mean a qualified retirement plan, a tax-deferred annuity plan, a simplified employee pension plan, a simple retirement account plan, an eligible deferred compensation plan of a state or local government employer, or a plan established before June 25, 1959, and funded only by employee contributions.

In addition, a nonqualified deferred compensation plan would specifically include any plan that provides a right to compensation based on the value of, or the appreciation in value of, a specified number of equity units of the service recipient. Such a compensation right would not fail to provide for the deferral of compensation merely because the compensation is to be paid in cash or by the transfer of equity. The provision applies to all stock options and SARs (and similar arrangements involving noncorporate entities), regardless of how the exercise price compares to the value of the related stock on the date the option or SAR is granted. It is intended that no exceptions would be provided in regulations or other administrative guidance. Also, statutory options would not be considered nonqualified deferred compensation for purposes of the proposal. An exception would be provided for that portion of a plan consisting of a transfer of property described in Code Sec. 83 (other than nonstatutory stock options), or a trust to which Code Sec. 402(b) applies, or relating to statutory options under Code Sec. 422 or Code Sec. 423 for which there is no disqualifying disposition.

A plan would include any agreement or arrangement, including an agreement or arrangement that includes one person. In addition, references to deferred compensation would be treated as including references to income (whether actual or notional) attributable to deferred compensation or income. However, compensation would not be treated as deferred for purposes of the proposal if the service provider receives payment of the compensation not later than two and one-half months after the end of the service recipient's or service provider's taxable year, whichever is later, during which the right to the payment of such compensation is no longer subject to a substantial risk of forfeiture (within the meaning of the proposal).

Additional rules. The Secretary of Treasury would be required issue such regulations as may be necessary or appropriate to carry out the purposes of the provision, including regulations disregarding a substantial risk of forfeiture in cases where necessary to carry out the purposes of the proposal. Except as provided by the Secretary, rules similar to the controlled group rules for qualified retirement plans would apply. The present-law general rules for nonqualified deferred compensation and the present-law rules for nonqualified deferred compensation from certain tax indifferent parties would be repealed.

In addition, the present-law rules for eligible and ineligible deferred compensation plans of tax-exempt employers and for ineligible deferred compensation plans of state and local governments would not apply with respect to deferred amounts attributable to services performed after December 31, 2017. In addition, the proposal would apply income tax reporting and withholding, as applicable, to amounts required to be included in gross income of employees and other service providers, including nonresident aliens subject to U.S. taxation.

The provision would generally apply to amounts attributable to services performed after December 31, 2017. In the case of any deferred compensation amount to which the provision does not otherwise apply solely by reason of the fact that the amount is attributable to services performed before January 1, 2018, to the extent such amount is not includible in gross income in a taxable year beginning before 2027, such amount would be includible in income in the later of (1) the last taxable year before 2027, or (2) the taxable year in which there is no substantial risk of forfeiture of the rights to such compensation (determined in the same manner as determined under the proposal). Earnings on deferred amounts attributable to services performed before January 1, 2018, would be subject to the proposal only to the extent that the amounts to which the earnings are attributable are subject to the proposal.

The Secretary directed to issue guidance, no later than 120 days after enactment, providing a limited period of time during which a nonqualified deferred compensation arrangement attributable to services performed on or before December 31, 2017, may, without violating the general rules for nonqualified deferred compensation, be amended to conform the date of distribution to the service provider to the date amounts are required to be included in income under the proposal. If the service provider taxpayer is also a service recipient and maintains one or more nonqualified deferred compensation arrangements for its service providers under which any amount is attributable to services performed on or before December 31, 2017, the guidance would be to permit any such arrangement to be amended to conform the dates of distribution under that arrangement to the date amounts are required to be included in the income of the taxpayer. An amendment to a nonqualified deferred compensation arrangement made pursuant to the guidance would not be treated as a material modification of the arrangement for purposes of the general rules for nonqualified deferred compensation.

Bicycle reimbursement repealed

Senate version. The exclusion from gross income and wages for qualified bicycle commuting reimbursements would be repealed, for taxable years beginning after December 31, 2017.

House version. No provision.

Independent contractor reporting

Senate version. The proposal provides a safe harbor under which, for all Code purposes (and notwithstanding any Code provision to the contrary), if certain requirements are met with respect to service performed by a service provider, with respect to such service: (1) the service provider would not be treated as an employee, (2) the service recipient would not be treated as an employer, (3) a payor would not be treated as an employer, and (4) the compensation paid or received for the service would not be treated as paid or received with respect to employment.

A service provider would be any qualified person who performs service for another person, and a qualified person would be any natural person or any entity if any of the services performed for another person are performed by one or more natural persons who directly own interests in such entity. The service recipient would be the person for whom the service provider performs service. A payor would be a person (including the service recipient) that pays the service provider for performing the service, or any marketplace platform which is any person who operates a digital website or mobile application that facilitates the provision of goods or services by providers to recipients, who enters into an agreement with each provider that such provider will not be treated as an employee with respect to such goods and services, who provides standards and mechanisms for settling such transactions, and guarantees each service provider of payment for transactions.

The provision would not apply to any service provided by a service provider to a service recipient or payor if the service provider owns any interest in the service recipient or payor, with the exception of a service recipient or payor, the stock of which is regularly traded on an established securities market.

Notwithstanding Section 530 of the Revenue Act of 1979, the Secretary would be directed to issue regulations to carry out the provision. Nothing is to be construed as limiting the ability or right of a service provider, service recipient, or payor to apply any other Code provision, Section 530, or any common law rules for determining whether an individual is an employee, or as establishing a prerequisite for the application of any of those areas of law.

Service provider requirements. For this treatment to apply to service, in connection with performing the service, the service provider generally must (1) incur expenses which are deductible as trade or business expenses and a significant portion of which are reimbursed; (2) agree to perform the service for a particular amount of time, to achieve a specific result, or to complete a specific task; (3) have a significant investment in assets or training applicable to the service performed, not be required to perform services exclusively for the service recipient, have not performed substantially the same services for the service recipient or payor as an employee during the one-year period ending with the date of commencement of services under a contract meeting the requirements described below, or not be compensated on a basis which is tied primarily to the number of hours actually worked. Alternatively, in the case of a service provider engaged in the trade or business of selling (or soliciting the sale of) goods or services, the service provider must be compensated primarily on a commission basis, and substantially all the compensation for the service must be directly related to sales of goods or services rather than to the number of hours worked. In addition, any service provider must have a principal place of business, must not primarily provide the service in the service recipient's place of business, must pay a fair market rent for use of the service recipient's place of business, or must provide the service primarily using equipment supplied by the service provider.

Contract and reporting requirements. The service performed by the service provider would have to be pursuant to a written contract between the service provider and the service recipient (or the payor, if applicable) that meets certain requirements. First, the contract would have to include the service provider's name, taxpayer identification number, and address; a statement that the service provider will not be treated as an employee for purposes of the Code with respect to the service provided pursuant to the contract; a statement that the service recipient (or the payor) will, consistent with Code requirements, withhold on and report to the IRS the compensation payable pursuant to the contract; a statement that the service provider is responsible for the payment of federal, State, and local taxes, including self-employment taxes, on compensation payable pursuant to the contract; and a statement that the contract is intended to be a contract meeting the applicable requirements. The contract would not fail to meet these requirements merely because the service provider's name, taxpayer identification number, and address are collected at the time of payment for the services and not in advance, or because the contract provides for an agent of the service recipient or payor to fulfill the responsibilities of the service recipient or payor.

Second, the term of the contract generally must not exceed two years. However, a contract can be renewed in writing one or more times if the term of each renewal does not exceed two years and if the required information in the contract is updated in connection with the renewal. Third, the contract or renewal must be signed, including electronically, by both the service recipient or payor and the service provider no later than the date on which aggregate payments made by the service recipient to the service provider exceed $1000.

If, for a taxable year, the service recipient or payor fails to meet the reporting requirements applicable with respect to any service provider ("applicable" reporting requirements), the safe harbor would not apply for purposes of making any determination with respect to the tax liability of the service recipient or payor with respect to such service provider for the year (unless the failure is due to reasonable cause and not willful neglect).

Prospective application of reclassification. In the case of a determination by the IRS that a service recipient or a payor should have treated a service provider as an employee, if certain requirements are met, the determination will not be effective earlier than the "notice date." In order for this rule to apply, the service recipient or payor must have entered into a written contract with the service provider that meets the requirements described above, for all relevant taxable years the service recipient or the payor must have satisfied the applicable withholding and reporting requirements with respect to the service provider (unless the failure to satisfy the requirements is due to reasonable cause and not willful neglect), the service recipient or payor must have collected and paid over all applicable employment taxes for all relevant taxable years with respect to the service provider (unless the failure to satisfy the requirements is due to reasonable cause and not willful neglect), and the service recipient or the payor must demonstrate a reasonable basis for determining that the service provider is not an employee under the safe harbor and that the determination was made in good faith.

Similarly, with respect to the service provider, a determination that the service provider should have been treated as an employee will not be effective earlier than the notice date if the service provider entered into a written contract with the service recipient or payor that meets the requirements described above, for all relevant taxable years the service provider satisfied applicable income tax and self-employment tax return requirements with respect to the service recipient or payor (unless the failure to satisfy the requirements is due to reasonable cause and not willful neglect), and the service provider demonstrates a reasonable basis for determining that the service provider is not an employee under the safe harbor and that the determination was made in good faith.

For this purpose, the "notice date" will be the 30th day after the earlier of (1) the date on which the first letter of proposed deficiency that allows the service provider, service recipient, or payor an opportunity for administrative review in the IRS Office of Appeals is sent, (2) the date on which a deficiency notice is sent, or (3) the date on which a notice of determination that a service provider is an employee is sent.

Withholding requirements. Income tax withholding for compensation paid pursuant to a contract between a service provider and a service recipient (or payer) that meets the requirements would be required. A payment of such compensation would be treated as a payment of wages by an employer to an employee. However, the amount required to be withheld would be five percent of the compensation and only on compensation up to $20,000.

Reporting requirements. The proposal would increase the reporting threshold for two categories of reportable payments from aggregate payments of $600 or more to $1000 or more. The first category would be payments of fixed or determinable income or compensation not including payments for goods or certain enumerated types of payments subject to other reporting requirements. The second category would be payments for services received from any service recipient engaged in a trade or business paying for such services.

Effective date worker classification The provision would be generally effective for services performed after December 31, 2017, and amounts paid for such services after such date. However, a contract, and a service recipient or payor, will not be treated as failing to meet the requirements under the proposal with respect to compensation paid to a service provider before 180 days after the date of enactment of the proposal.

Effective date reporting requirements. The provision would apply to payments made after December 31, 2018.

House version. No provision.

        (Read Intelliconnect) »

Minnesota to hold seminar on employment tax issues

The Minnesota Business Tax Education Partnership is holding a seminar in Bloomington, Minnesota for employers and their representatives who are interested in information on state and federal employment taxes and other employer responsibilities. The seminar will be presented by experts from the Minnesota Department of Revenue, Minnesota Unemployment Insurance Program, the United States Department of Labor, and Minnesota Workers' Compensation Insurers Association.
  • Worker status (independent contractor vs employee)
  • Employment Tax basics (withholding, depositing and reporting)
  • Unemployment Insurance (tax rates, wage reporting, benefit account issues)
  • Federal Labor Standards (wage and hour)
  • Workers' Compensation Insurance (requirements)
When and where is the seminar? The seminar will take place Wednesday, December 13, 2017 Time: 8:30 a.m. to 3:30 p.m. Location: Bloomington WorkForce Center, 4220 West Old Shakopee Road, Suite 100, Bloomington, MN 55437. Fee: No fee Register: Advanced registration is required. http://www.uimn.org/employers/help-and-support/educational-seminars/seminar-schedule.jsp (Minnesota Department of Revenue Communication November 14, 2017.)

        (Read Intelliconnect) »

Unemployment Insurance Reports with Social Security

Alaska change in EB period

The following change has occurred in Alaska since the publication of the last notice regarding the state's EB status: Based on data released by the Bureau of Labor Statistics on October 20, 2017, Alaska's three-month average seasonally adjusted total unemployment rate was 7.1%, which exceeds 110% of the corresponding rate in the second preceding year. This caused Alaska to be triggered "`on" to an EB period beginning November 5, 2017. The state will remain in an EB period for a minimum of 13 weeks.

Information for claimants. The duration of benefits payable in the EB Program, and the terms and conditions on which they are payable, are governed by the Federal-State Extended Unemployment Compensation Act of 1970 and the operating instructions issued to the states by the U.S. Department of Labor. In the case of a state beginning an EB period, the State Workforce Agency will furnish a written notice of potential entitlement to each individual who has exhausted all rights to regular benefits and is potentially eligible for EB.

Individuals who believe they may be entitled to EB, or who wish to inquire about their rights under the program, should contact their State Workforce Agency.

For further information, contact the U.S. Department of Labor, Employment and Training Administration, Office of Unemployment Insurance, Room S-4524, Attn: Anatoli Sznoluch, 200 Constitution Avenue N.W., Washington, DC 20210, telephone number (202) 693-3176 (this is not a toll-free number) or by email to Sznoluch.Anatoli@dol.gov (82 Fed. Reg. 51299, 11/3/2017; Alaska ¶1935).

        (Read Intelliconnect) »

Minnesota taxable wage base

Minnesota's taxable wage base for 2018 will remain $32,000 (DES Communication, Minn. ¶1205).

        (Read Intelliconnect) »

Maximum weekly benefit amount

The maximum weekly benefit amount in Minnesota effective October 29, 2017, is $693 (DEED Communication, Minn. ¶1910).

        (Read Intelliconnect) »




Payroll Resources from Wolters Kluwer
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Payroll and Unemployment Insurance NetNews is a current summary of federal and state employment laws and regulations, compliance issues, and other topics related to proper handling of day to day workplace matters. This timely information comes from the Payroll Management Guide and Unemployment Insurance Reporter with Social Security.

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