2018 Tax Form Updates

Transcription

1 2018 Tax Form Updates

2 Overview of 2018 Changes Effective Dates W-4 and A-4 Forms Availability When to file a new form Completing the forms TCJA Tax Cuts and Jobs Act Tax Myths Tax Rates What changed, and what didn t!

3 When 2018 Changes are Effective While changes are technically effective 01/01/18, the IRS is encouraging employers to implement the new tax tables as soon as possible, but no later than February 15, Federal forms may or may not be available by then. You may continue using 2017 forms until the 2018 forms are available.

4 Claiming Exempt from Withholding Federal New W-4 Form must be filled out every year by February 15 If forms are unavailable, have employees fill out a new 2017 form, and sign and date it in Do not cross out 2017! Then have them fill out a 2018 one when they are available. State New A-4 Form must be filled out every year No date is specified, so follow the federal deadline of Feb 15 th forms are already available

5 Completing the Form Claiming Exempt Complete ONLY lines 1,2,3,4 and 7. Lines 5 & 6 are left blank. Sign and Date. Remind employees there is a possible penalty of $500 for perjury if they claim exempt when not eligible. Single or Married Or Married but withhold at higher Single Rate If not claiming exempt: Number of allowances from worksheets Additional amount Federal Default Withholding is Single with zero allowances. Arizona Default Withholding is 2.7%.

6 W-4 Form

7 Explanation of Allowances The higher the number of allowances, the less tax withheld. The lower the number of allowances, the more tax withheld. For each allowance claimed, a certain dollar amount is exempted from the tax calculation. For 2018, that amount is $ on a biweekly Payroll. So if claiming 3 allowances, $ is subtracted from taxable pay before calculating tax withholding. $ x 3 = $478.80

8 Want to Know a Secret? When a married couple calculates how many allowances they are entitled to, they should SHARE the resulting number of allowances! If they calculate 5 allowances, choices are: Spouse A claims 5; Spouse B claims 0 Spouse A claims 4; Spouse B claims 1 Spouse A claims 3; Spouse B claims 2 If they both claim 5, they will probably not have enough tax withheld, and will have to pay when filing taxes!

9 Tips on Tax Forms An employer must implement changes no later than the beginning of the pay period ending on or after 30 days from receipt of valid form. An employee may always claim fewer allowances than on the worksheet, but may NOT claim more. An employee must complete a new form within 10 days if the number of allowances he is entitled to decreases. An EIC Notice must be given to any employee with no federal tax withheld. This requirement is met if you use W-2 s with the notice printed on the back, or on a separate page. Safest to give notice to all employees. If an employer receives a lock-in letter from the IRS, they must withhold at the rate on the letter regardless of any new forms the employee submits.

10 Information on Forms Federal Form W-4 can be found at Arizona Form A-4 can be found at Employees must use their full legal name. Employees should not change any language on the form. Errors should be crossed through and all changes should be initialed. By law, HR and Payroll employees must NOT give tax advice! Refer employee to PUB 505.

11 Questions on W-4 or A-4 Forms?

12 More on the TCJA What should Employers be aware of?

13 TCJA Overview TCJA Tax Cuts and Jobs Act Lower rate brackets Effective for all wages paid after 12/31/17 Removes personal allowances when filing taxes Increases standard allowance when filing taxes The number and complexity of changes makes creating accurate tax tables and a new W-4 form more difficult!

14 Tax Myths & Misunderstandings Many, including some banks and mortgage companies, don t understand the difference between gross pay and taxable income. Gross pay is an employee's regular pay including allowances, overtime, commissions, bonuses, and any other amounts, before any deductions are made. Taxable income is gross pay minus pretax items, including certain retirement benefits, and tax deferred items. People believe that all of their income is taxed at a rate determined by their total income for the year.

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

16 What does this mean? $23,000 Salary Before Single * Earnings Range Dollars Tax Rate Tax First 6,500 6,500 0% 0.00 Next 9,325 9,325 10% ,326 37,950 7,175 15% 1, Total 23, % 2, $23,000 Salary Now Single * Earnings Range Dollars Tax Rate Tax First 12,000 12,000 0% 0.00 Next 9,525 9,525 10% ,526 38,700 1,475 12% Total 23, % 1, *Oversimplified Does not take into account personal allowances.

17 What does this mean? $70,000 Salary Before Single * Earnings Range Dollars Tax Rate Tax First 6,500 6,500 0% 0.00 Next 9,325 9,325 10% ,326 37,950 28,625 15% 4, ,951 91,900 25,550 25% 6, Total 70, % 11, $70,000 Salary Now Single * Earnings Range Dollars Tax Rate Tax First 12,000 12,000 0% 0.00 Next 9,525 9,525 10% ,526 38,700 29,175 12% 3, ,701 82,500 19,300 22% 4, Total 70, % 8, *Oversimplified Does not take into account personal allowances.

18 TCJA Changes affecting HR Moving Expenses are now taxable Paid to employee Paid to third party, like moving company Military Moves are exempt Qualified Bicycle Commuting Reimbursement Now taxable to employee Employee Achievement Awards Defines excludable tangible personal property Can NOT be cash, cash equivalent, gift cards, coupons, or certificates, vacations, meals, lodging, tickets, stock, bonds

19 What Didn t Change These are still exempt from taxation, in spite of earlier reports they would not be: Employment Achievement Awards (IRC 74) Qualified Tuition Reductions (IRC 117(d)) Educational Assistance Programs (IRC 127) Dependent Care Assistance Programs (IRC 129) Adoption Assistance Programs (IRC 137) Archer Medical Savings Accounts (IRC 220) Work Opportunity Tax Credit (WOTC) remains Tax Credit for ER FICA paid on cash tips remains with small change

20 Affordable Care Act (ACA) The TCJA does NOT change the obligation of applicable large employers to offer ACA-compliant insurance to their full-time employees and to report on the offer. It DOES effectively eliminate the individual mandate by reducing the penalty for not obtaining health insurance to $0 beginning in tax years after December 31, 2018.

21 Check with your business tax professional to stay current with the changing rules! Thank you for your time and attention!