BOTTOMLINE IN THIS ISSUE: Annual Update on Expense Payroll Wage Bases and Tax Rates 2017 YEAR-END REPORTING

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1 Annual Update on Expense Reporting and Per Diem Rates Accountable Plans An accountable plan allowance is an arrangement whereby the employer pays an employee a fixed amount or a formulabased amount of money to be used for employment-related expenses. The employee must account for how the money is used. All or a portion of the allowance or arrangement is not subject to payroll withholding rules provided the necessary substantiation requirements are met. Internal Revenue Service (IRS) per diem rates currently available are: Mileage We will send the new 2018 rates to you when they are announced. (Effective Jan. 1, Dec. 31, 2017) 53.5 per recorded business mile 14 charitable use 17 medical or moving Lodging, Meals, and Incidentals (Effective Oct. 1, 2017) I. High/Low Method High Cost Locality $284 ($68 considered meals and incidentals) Other Cost Locality $191 ($57 considered meals and incidentals) Contact our office for a list of high cost localities or the most recently published specific locality per diems. II. Transportation Industry Rate for meals and incidentals $63 per day for continental U.S. travel $68 per day for non-u.s. travel III. Federal Per Diem Rate BOTTOMLINE 2017 YEAR-END REPORTING $144 standard rate ($51 considered meals and incidental expenditures) Non-Accountable Plans Treasury regulations require non-accountable plan allowances be treated as taxable wages subject to Federal income tax and Social Security tax withholding Payroll Wage Bases and Tax Rates Social Security First $128,400 (1) is taxable, with a 6.2% tax rate for both employee and employer. Medicare All wages are taxable, with a 1.45% tax rate for both employee and employer. Employers should withhold an additional 0.9% on wages exceeding $200,000. There is no employer match on the additional 0.9%. *Federal Unemployment For 2017, the first $7,000 is taxable, generally at 0.6%. *Minnesota Unemployment For 2017, the first $32,000 is taxable at rates depending on employment history and industry.** Wisconsin Unemployment First $14,000 is taxable at rates depending on employment history and industry.** *2018 update was not available before printing. **Established employers will receive their 2018 experiencemodified rate from respective states. Tips Tips are subject to Social Security and Medicare as well as Federal and state unemployment taxes. Sources: / / IN THIS ISSUE: PAGE 2: Form 1099 Reporting Requirements PAGE 2: Minimum Wage Laws for MN and WI PAGE 3: Retirement Plan Tax Strategies PAGE 3: W-2 Form Reporting Requirements PAGE 4: Form CRP Due to Renters Jan. 31 PAGE 4: State Annual Filing Requirement PAGE 4: ACA & Employer Reporting Requirements PAGE 5: Household Employee Withholdings PAGE 5: Fringe Benefits Provided to 2%+ shareholders PAGE 5: Employer-Provided Health Coverage (1) On November 27, the Social Security Administration (SSA) announced that the 2018 social security wage base will be $128,400, not $128,700 as previously reported.

2 FORM 1099: Reporting Requirements for Annual Information Returns IMPORTANT FILING DATE REMINDER: Form MISC is required to be filed with the IRS on or before January 31, 2018 when you are reporting non-employee compensation payments in Box 7. All other reportable payments must be filed with the IRS by February 28, All recipient copies must be furnished by January 31, Penalties for failure to file or for late filing of Annual Information Returns range from $50-$260 per information return; penalties for failure to provide Forms 1099 and 1098 to the recipients are $50-$260 per recipient; and intentional disregard of filing requirements incur a penalty of at least $530 per payee statement with no maximum penalty. Reportable payments generally include payments of at least $600 in the aggregate from a trade or business to an individual, sole proprietor, partnership, or LLC. Some typical examples are: Form 1099-MISC must be filed for aggregate payments of at least (a) $10 in royalties, (b) $600 in rents, services (including parts and materials), prizes and awards, fees, commissions, subcontract labor, other income payments and health care payments, or (c) $600 or more in attorney fees, even if the attorney does business as a corporation. Form 1099-DIV must be filed for aggregate dividends and The Federal minimum wage to be paid by covered employers is currently $7.25/hour. In cases where an employee is subject to both the state and Federal minimum wage laws, the employee is entitled to the higher of the two minimum wages. Minnesota (as of January 1, 2018) Minnesota s minimum wage for all ages is $7.87/hour if annual sales are less than $500,000. If annual 2 other distributions on stock of $10 or more. Form 1099-INT must be filed for aggregate payments of at least $10 of interest, or $600 of interest (including taxexempt interest) if paid in the trade or business of lending money or on registered notes. Form 1099-R must be filed for each distribution of at least $10 from a pension, annuity, retirement plan, Section 457 Plan, IRA, insurance contract, etc., during the year. Other annual information reporting requirements: Form Mortgage interest recipients of $600 in trade or business Form 1099-B - Broker or Barter exchanges Form 1099-S - Real estate sales Form 1099-G - Certain federal, state or local government unit payments Form 1099-PATR - Cooperatives which have paid at least $10 in patronage dividends and other distributions. For detailed information regarding Form 1099 reporting, visit If you have questions regarding Form 1099 reporting requirements or would like Redpath to prepare your forms, please contact Heather Larson at hlarson@redpathcpas.com. For Redpath and Company preparation of 1099s and 1098s, we require the following information by Jan. 18, 2018 in Microsoft Excel for over 10 recipients: Recipient s: sales are $500,000 or greater, the minimum wage is $9.65/hr. A training wage of $7.87/hr is available for new employees under the age of 20 during their first 90 consecutive days of employment and for youth workers under the age of 18. Wisconsin Wisconsin minimum wage is $7.25/ hour and $2.33/hour for tipped employees. These are reduced Name Address Social Security Number or Federal I.D. Number Total of Payments in 2017 Reason for Payment (e.g. interest, subcontract labor, nonemployee compensation, rent, etc.) Minimum Wage Law for Minnesota and Wisconsin to $5.90/hour and $2.13/hour for opportunity employees. An opportunity employee is an employee who is not yet 20 years old and who has been in employment status with a particular employer for 90 or fewer consecutive calendar days from the date of initial employment. For more information visit or

3 Retirement Plan Tax Strategies Available for 2017 There is still time to adopt an IRS qualified retirement plan as a tax planning strategy for Retirement plans are a great way to generate needed employer deductions and taxdeferred savings for the employee. Plans to consider for 2017 are: Profit sharing Money purchase pension SEP 401(k) S-corp ESOPs C-corp ESOPs Cross-tested plans. IRS Benefit Plan Dollar Limits (Adjusted for cost-of-living increases) We can assist you in the implementation of these plans. For more information, contact Christine Bentson, CPA, RPA, CEBS, at cbentson@redpathcpas.com. The benefit plan dollar limits for 2017 and 2018 are highlighted below. Deferrals to 401(k) and 403(b) plans Under age 50 Deferrals to 401(k) and 403(b) plans Age 50 or older Deferrals to SIMPLE Under age 50 Deferrals to SIMPLE Age 50 or older Annual Limit on Compensation Individual Account Limitation 2018 $18,500 $24,500 $12,500 $15,500 $275,000 $55, $18,000 $24,000 $12,500 $15,500 $270,000 $54,000 Employee W-2 Form Reporting Requirements The IRS requires more information on W-2 Forms each year. Failure to comply with IRS reporting requirements can result in the assessment of penalties for non-compliance. Following is a general list of items that must be included in various boxes on the 2017 W-2 Forms, in addition to normal wages and compensation: Disability or sick pay paid by thirdparty payers. Disability or sick pay not included in income. The value of employer paid group term life insurance in excess of $50,000 per year. The value of other employer provided life insurance is generally taxable as wages. The value of employer provided disability insurance may be taxable. Talk to your accountant to determine which rules apply. Employee deferrals to salary reduction retirement plans. (SIMPLE, 401(k), etc.) Reimbursed employee business expenses in excess of amounts substantiated. 3 Allocated tips. Amounts paid for qualified educational assistance. Amounts paid for qualified adoption expenses. The value of the personal use of an employer-provided vehicle. Employer contributions for qualified long-term care services provided through a flexible spending or similar arrangement. Employee moving expenses paid to a third party, and services an employer furnishes in kind, are not reported on Form W-2. Qualified moving expense reimbursements paid directly to an employee by an employer are reported in box 12. IRS Publication 521 is available to provide detailed information to the employee. Elective deferrals and designated Roth contributions. Dependent care plan benefits. Archer Medical Savings Account contributions. Employer contributions to Health Savings Accounts. Benefits under a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). Distributions from a non-qualified deferred compensation plan or a non-governmental Section 457(b) Plan. Yearly deferrals under Section 409A non-qualified deferred compensation plan. Income currently taxable due to a failure of a non-qualified deferred compensation plan under Section 409A. Current year vesting in non-qualified deferred compensation plans are includable in gross income unless certain requirements are satisfied. Cash and non-cash fringe benefits including benefits provided to 2% or greater shareholders (or related employees) of an S-corporation. Federal electronic reporting required when filing 250 or more Federal W-2s. Visit for information about filing your W-2s electronically. Minnesota electronic reporting. E-filing is required if you have more than 10 W-2s.

4 Form CRP due to renters Jan. 31 Owners of Minnesota residential rental property are required to file a 2017 Form CRP (Certificate of Rent Paid). The form must be signed by the landlord and given to tenants by January 31, Redpath and Company can assist in preparing these forms. Please contact Heather Larson at hlarson@redpathcpas.com before Jan. 20, 2018 for assistance. State Annual Filing Requirement Minnesota and many other states have annual filing requirements for companies registered to conduct business in their state. For states with a filing requirement, businesses need to file an annual report or renewal with the Secretary of State. This filing requirement is separate from your income tax filing. Since each state has different deadlines and registration fees, it s important to have a system to prompt filing as required throughout the year to keep your company in good standing. Minnesota s annual renewal is due by December 31, If you d like assistance with your annual filing requirements, please contact Teri Grahn, CMI, at tgrahn@redpathcpas.com or Affordable Care Act and Employer Reporting Requirements for The IRS has released final versions of forms and instructions for Form 1094-B (Transmittal of Health Coverage Information Returns), C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information returns), 1095-B (Health Coverage), and 1095-C (Employer Provided Health Insurance Offer and Coverage). Health insurance issuers or carriers must file Form 1094/1095-B for insured coverage sponsored by employers. Plan sponsors are responsible for reporting self-insured employer coverage and will instead report the information on C. Employers must file the Form 1094/1095-C forms. The reporting requirements will apply to large employers as defined in the Affordable Care Act (ACA), which are employers with at least 50 full-time equivalent employees, on average, in the preceding calendar year. The due date for providing to recipients is January 31, The due date for filing with the government is February 28, 2018 (paper filing) or April 2, 2018 (electronic filing). PLEASE NOTE: The reporting is very involved and requires extensive details regarding each employee and their health insurance coverage or non-coverage for each month of the year and in some cases will require the same detailed information on spouse or dependent coverage. We strongly encourage you to start the process of determining your filing requirements, gathering data and select a provider that will assist you with this filing. For more information, please contact Christine Bentson, CPA, RPA, CEBS, at or by at cbentson@redpathcpas.com.

5 Do you have a Household Employee? You have a household employee if you hired someone to do household work, and that worker is your employee. If you can control the work (i.e. when it is done, how it is done), then the individual would be treated as your employee. Household work can include: caretakers, cooks, housekeepers, nannies, and yard workers to name a few. See IRS Publication 926 for more examples and definitions regarding workers who are not your employees. For 2018, if you pay cash wages of $2,100 to any one household employee, then you need to withhold and pay Social Security and Medicare Taxes. Special wage rules apply for Federal Unemployment tax and requirements to report to State Unemployment tax. W-2 reporting is also required if the $2,100 in Social Security and Medicare wages is met or you withhold federal income tax from wages paid. For assistance regarding household employer rules, please contact Heather Larson at hlarson@redpathcpas.com. Fringe benefits provided to 2% or more shareholders (or related employees) of an S-Corporation Not subject to Social Security or Medicare: Health insurance Disability insurance* Non-group life insurance* Subject to Social Security or Medicare: Section 119, Excluded meals and lodging Section 79, Group term life insurance Section 120, Group legal services Personal use of employer-provided vehicles All of the above benefits are subject to applicable Federal and state withholding taxes. Please note on cafeteria plans: Partners and 2% shareholders are prohibited from participating in cafeteria plans. This includes health and HSA deductions. *Insurance premiums subject to tax for Federal and state income purposes to avoid taxation of benefits are also subject to Social Security and Medicare tax. Employer-Provided Health Coverage Informational Reporting The Patient Protection and Affordable Care Act of 2010 required employers to report the cost of coverage under an employer-sponsored group health plan beginning with 2012 W-2 Forms, but most employers met the transitional relief rules making reporting optional and not requiring them to report the costs. The most common transitional relief rule making 2012 reporting optional applies to businesses that filed fewer than 250 W-2 Forms in the prior year. To date, no further guidance has been provided. The transitional relief rules applying to 2012 W-2 forms still apply to 2017 W-2 forms employers provide to employees in January

6 Redpath and Company is 100% employee-owned (ESOP) and a leading accounting firm providing proactive, innovative, and value-driven CPA services for closely held businesses, government entities, and not-for-profit organizations. The firm started operations in 1971, and with offices located in downtown St. Paul and White Bear Lake, Minnesota, the firm ranks as one of the top CPA firms in the Twin Cities area. Bottom Line is published by Redpath and Company, Ltd. Office locations: Headquarters 55 5th Street East, Suite 1400 St. Paul, MN White Bear Parkway White Bear Lake, MN SUBSCRIBE: OUR BLOG FIND US ON: LINKEDIN FACEBOOK TWITTER The information provided in this document does not constitute legal, accounting, or financial advice and is offered as a source of information only. Those seeking specific advice should contact a professional advisor. Laws, rules, and regulations can vary widely based on the specific facts involved. Given the changing nature of laws, rules, and regulations, the information in this document is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax, or other professional advice and services. It should not be used as a substitute for consultation with professional accounting, tax, legal, or other professional advisors. Redpath and Company is not responsible for any errors or omissions, or for the results obtained from the use of this information. phone: web: contact@redpathcpas.com 2017 Redpath and Company, Ltd. All Rights Reserved.