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PAYROLL TAX AND REPORTING REQUIREMENTS FOR 2017

Federal Income Tax Withholding Changes

Due to the inflation indexing provisions and other changes contained in the Internal Revenue Code, new withholding tables must be used for wages paid after December 31, 2016.

Social Security (FICA) Tax

For 2017, the employee tax rate for social security will remain unchanged at 6.2%, as well as the Medicare tax rate of 1.45%. The 2017 social security wage base limit increases to $127,200 from the $118,500 in 2016. There is no wage base limitation for Medicare.

Additional Medicare Tax

For 2017, the additional Medicare Tax will remain in effect. An employer must withhold additional Medicare Tax from wages it pays to an individual in excess of $200,000 in a calendar year, regardless of the individual’s filing status or wages paid by another employer. The additional tax rate is .9%. If you have any questions regarding this please contact us.

Federal Unemployment Tax

The federal unemployment tax rate remains at .6% for 2017.

Payroll Tax Deposits

Because of the complexity of the Federal, State and Local Tax Deposit Rules, we suggest using a professional payroll company to prepare your company’s payroll. If you have any questions regarding your specific deposit rules, please contact us.

Forms 1094 and 1095

The Affordable Care Act’s reporting requirements for healthcare plan coverage information apply to all employers with 50 or more full-time or full-time equivalent employees during the previous year. Employers of all sizes that offer employer-sponsored self-insured coverage will also need to report information to the Internal Revenue Service and to individual employees. Form 1095’s must be provided to employees by March 2, 2017 and filed with the Internal Revenue Service by February 28, 2017. If you have any questions regarding this, please contact us.

S Corporation Shareholders

Health insurance premiums paid by an S Corporation on behalf of 2% shareholder employees must be included in income for Federal purposes and reported on form W-2. Please contact us if you have any questions regarding this.

New Hire Reporting

Employers are required to submit to the Commonwealth of Pennsylvania a New Hire Report for each new employee within 20 days of the first day that the employee performs services for wages. There are several methods to report this information to the Commonwealth of Pennsylvania. Visit their website at http://www.cwds.pa.gov for more information.

Verification of Eligibility of Employment

All employers are required to obtain and keep on file a completed Form I-9 Employment Eligibility Verification for each employee upon hiring.

Form 1098

Mortgage interest of $600 or more received in the course of a trade or business from an individual must be reported to the payer on a Form 1098 by January 31, 2017. A copy must also be filed with the Internal Revenue Service by February 28, 2017.

Minimum Wage

Federal and Pennsylvania minimum hourly wage rates remain at $7.25. New Jersey minimum hourly rate increases to $8.44. For minimum wage rates for tipped employees or any other questions, please contact us.

Pension Plan Limitations

Some pension plan limitations have increased for the year 2017. If you have any questions regarding these limitations, please contact us.

Overtime Rules

The U.S. Department of Labor issues regulations regarding overtime provisions. If you have any questions regarding these provisions, please contact us.

Employee’s Personal Use of Employer Provided Vehicle

An employer must include annually the value of an employee’s personal use of a business vehicle in an employee’s gross wages. Please contact us if this applies to any of your employees or if you need more information.

Forms 1099

A Form 1099 MISC must be issued to any person or nonincorporated entity to which you have paid at least $600 in rents, services and certain other income payments. New Filing Date - Form 1099 MISC must be filed with the Internal Revenue Service on or before January 31, 2017, when you are reporting nonemployee compensation payments in Box 7. Otherwise, file by February 28, 2017. The due date for furnishing payee statements remains at January 31, 2017.

Household Employees

If you pay someone to perform household duties you may be subject to payroll reporting requirements. Please contact our office if you are not sure of the applicability of this.

This letter does not cover all issues and changes related to payroll, payroll taxes and other reporting and compliance matters. It is intended only to provide limited information that may be applicable to your business. These rules and regulations are not all encompassing and there may be specific situations that need to be addressed individually. Please contact us if you need more specific information on any of the topics addressed in this letter.

Pursuant to Treasury Regulations, any U.S. federal tax advice contained in this communication, unless otherwise stated, is not intended and cannot be used for the purpose of avoiding tax-related penalties.

 

If you have any questions regarding the above information, please contact us at (610)366-7300 or through our website at www.lencpas.com.

BEST WISHES FOR A HAPPY AND PROSPEROUS 2017!

December, 2016

Tax Alerts
Tax Briefing(s)

Tax reform discussions continue on Capitol Hill with legislation expected to be released very soon. GOP lawmakers in the House and Senate appear to be aiming for a comprehensive overhaul of the Tax Code. President Trump and Republicans in Congress have set out an ambitious schedule of passing a tax reform bill before year-end. 


Year-end tax planning can provide most taxpayers with a good way to lower a tax bill that will otherwise be waiting for them when they file their 2017 tax return in 2018. Since tax liability is primarily keyed to each calendar tax year, once December 31, 2017 passes, your 2017 tax liability for the most part – good or bad – will mostly be set in stone.


As the 2018 filing season nears, the IRS is reminding taxpayers that the Affordable Care Act (ACA) remains on the books. The ACA’s reporting requirements for individuals have not been changed by Congress. At the same time, the Trump Administration has proposed administrative changes to the ACA, which could expand health reimbursement arrangements (HRAs), the use of short-term, limited duration health insurance, and association health plans.


Holiday gifts made to customers are generally deductible as ordinary and necessary business expenses as long as the taxpayer can demonstrate that such gifts maintain or improve customer goodwill. Such gifts must bear a direct relationship to the taxpayer's business and must be made with a reasonable expectation of a financial return commensurate with the amount of the gift. However, the $25 annual limitation per recipient on deductibility is applicable to holiday gifts, unless a statutory exceptions applies.


For purposes of federal tax, employers must withhold and pay FICA taxes (7.65%) if they paid a household employee cash wages of at least $2,000 in 2016 or in 2017 ($2,100 in 2018). Employers must pay FUTA tax (6%) if they paid total cash wages of at least $1,000 in a calendar quarter to household employees. A homeowner may be an “employer” to a housekeeper; or, if enough evidence is shown, merely a recipient of services by an independent contractor or self-employed individual.


As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important federal tax reporting and filing data for individuals, businesses and other taxpayers for the month of November 2017.