Employment tax compliance: Year-end hot topics The Dbriefs Global Mobility, Talent, and Rewards series

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Beverly McKenzie
6 years ago
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Deloitte Tax LLP Nick Broomhead, Senior Manager, Deloitte Tax LLP

1 Employment tax compliance: Year-end hot topics The Dbriefs Global Mobility, Talent, and Rewards series Martin Rule, Senior Manager, Deloitte Tax LLP Nick Broomhead, Senior Manager, Deloitte Tax LLP Kevin Shimkus, Managing Director, Deloitte Tax LLP October 4, 2017

2 Agenda Why we care: employment tax risk in context 2017 key developments Typical compliance challenges and how to handle them Developing your end of year work plan Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 2

3 Poll question # 1 What is your reason for attending this Dbriefs webcast? I am concerned about employment tax exposure I want to confirm we are keeping up to date I am new in the current role I want to confirm my team is doing the right thing I have an interest in this area and want to learn more Other Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 3

5 Employment tax risk in context The impact of non-compliance in the enterprise Reputational risk Financial risk Operational risk Compliance risk Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 5

6 Employment tax penalties A reminder for 2017 returns Late information statements $50 $260 per return ($3.2M max) Intentional disregard $530 (no limitation) Incorrect returns 20% penalty for incorrect withholding Up to 100% of under withheld tax Late deposits 1 5 days 2% 6 15 days 5% 15+ days 10% Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 6

8 2017 updates new publications and guidance Harvey, Irma, Jose and Maria IRC Sec. 139 key requirements Notice leave sharing plans The impact of disaster relief payments Notice leave based donation payments Notice employee benefits Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 8

9 2017 updates New publications and guidance Equity deposits Transaction and settlement dates Effective on 09/05/2017, SEC Regulations require settlement within two days of transaction (T+2) Therefore deposit due date should be made within one day of T+2. FICA refunds New guidance for obtaining employee consents (Rev. Proc ) Effective for consents requested on or after June 5, 2017 Consents must indicate that employee cannot authorize claim for refund of overpaid Additional Medicare Tax Updates to key forms USCIS revises Form I-9 (effective September 17, 2017) Update to Forms 940 and 941 Schedule R (effective for 2018) Dept of Treasury proposed regulations If made final, regulations would allow voluntary use of truncated taxpayer identification numbers on Forms W-2, Wage and Tax Statement, required to be furnished to employees after December 31, 2018 (REG ) Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 9

10 2017 updates New publications and guidance Key rates and limits Item Adoption assistance programs 13,570 Qualified Transportation Benefit (Commuting) 255 Qualified Transportation Benefit (Parking) 255 Medical savings account limit (Individual) 3,400 3,450 Medical savings account limit (Family) 6,750 6,900 Medical Savings account (catch-up 55 and Older) 1,000 1,000 Automobile Business Standard Mileage 53.5 Foreign Income Exclusion 102,100 Health FSA 2,600 Retirement Plan Limits (401(k) and 403(b) 18,000 Retirement Plan Limits (401(k) and 403(b) Catch-up 50 and Older 6,000 Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 10

11 Where can you find more information? IRS website, specifically the electronic reading room Health Savings Account (HSA) generally published in May of the previous tax year Retirement plan COLA adjustments Other inflation adjusted items generally published in October or November of previous tax year Per Diem Rates per-diem-highlights SIFL Rates Social Security Wage Base Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 11

12 2017 updates new publications and guidance What legislation is in the pipeline? Streamlining of tax code Tax reform Healthcare Repeal and replacement of the affordable care Act Business travelers Workers & contractors H.R mobile workforce State Income Tax Simplification Act of 2017 & S. 540: mobile workforce State Income Tax simplification Act of 2017 S New GIG Act of 2017 Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 12

13 Poll Question # 2 What are the top 3 issues that have caused you significant problems at yearend? Expatriate compensation (i.e. tax payments, expenses etc.) Fringe benefits valuation and timing of wage inclusion Incentive compensation timing, wage inclusion and employment tax deposits Multi-state withholding and reporting Employment tax compliance related to mergers and acquisitions Don t know/not applicable Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 13

15 Compliance approach to common payroll complexities Merger and acquisition issues Stock purchase If entity continues operations and is not merged into another entity, employer continues to report and remit under its own FEIN Types of mergers and acquisitions Asset acquisition Typically, assets and employees are acquired Successor/predecessor relationship may exist if employees are acquired immediately after the assets are acquired Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 15

16 Compliance approach to common payroll complexities Merger and acquisition issues Wage base carry-forward Closing state and local accounts and/or filing final returns 941 Schedule D Mergers and acquisitions often create additional federal and state employment tax compliance requirements W-2 reporting in asset purchase situations (Rev. Proc ) Registration for tax accounts in new states and locals Data entry or import of new employee records policies, process and systems integration/harmonization Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 16

17 Compliance approach to common payroll complexities Merger and acquisition issues cont. When life is simple When life is not so simple Form 941 Q1 ER Form 941 Q1 ER Form 941 Q1 Form 941 Q2 Form 941 Q3 Form 941 Q4 ER Form 941 Q2 Predecessor Form 941 Q3 Predecessor Form 941 Q4 ER Form 941 Q2 Form W-3 Form W-3 Total 941 wages less than W-2 totals Form W-3 Total W-2 less than 941 wage totals Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 17

18 Compliance approach to common payroll complexities Merger and acquisition issues cont. The SSA and IRS have an agreement to exchange employment tax data IRS CAWR Unit and SSA reconciliation process The SSA shares Form W-2 data with the IRS and the IRS shares Form 941, 943, 944 (Form 94X) and Schedule H data with the SSA Combined Annual Wage Reporting (CAWR) Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 18

19 Poll Question # 3 Has your organization participated in a merger or acquisition in the last three years? Yes No Don t know/not applicable Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 19

20 Compliance approach to common payroll complexities Complex fringe benefits Meals Equity based compensation Travel Life insurance Awards and prizes Employer provided automobiles Club memberships Season tickets/ skybox Relocation Employer provided aircraft Education assistance Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 20

21 Compliance approach to common payroll complexities Forms 1099 things to watch out for: Missing information and errors may result in: Backup withholding liabilities Harsh information statement penalties Form 1099-MISC Compliance Reportable payments to attorneys Reportable payments to healthcare service providers Missing TINs Incorrect name and TIN combinations Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 21

22 Poll Question # 4 In the last three years has your organization been selected for either a federal or state employment tax audit? Yes No Don t know/not applicable Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 22

23 Compliance approach to common payroll complexities Special payments Nonqualified deferred compensation 409A Constructive receipt Special timing rule Equity-oriented compensation Qualified stock option plans ESOP ISO Nonqualified stock option plans 1 Payments to former spouse of employee 2 3 Wages paid after death 4 Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 23

24 Developing a year-end work plan Update payroll calendar: Identify cutoff dates for last 2017 pay cycle Include end of year adjustment cycles Prepare for new year payroll Prepare work plan to: Identify year-end team members both inside and outside the payroll department List specific tasks with sequence priority List responsibility for each team member Provide due dates for each task Monitor status of each task Prepare year-end employee communication Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 24

26 Join us October 25 at 2 p.m. ET as our Tax Reform series presents: US tax reform: What businesses and individual taxpayers should know Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 26

27 Eligible viewers may now download CPE certificates. Click the CPE icon in the dock at the bottom of your screen. CPE Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 27

This webcast has been approved for 1 (General) recertification credit hour toward PHR, SPHR and GPHR recertification through the HR Certification Institute.

28 This webcast has been approved for 1 (General) recertification credit hour toward PHR, SPHR and GPHR recertification through the HR Certification Institute. To obtain the program ID, click on the HRCI link in the Downloads and Links window and submit your request. The use of this seal is not an endorsement by the HR Certification Institute of the quality of the program. It means that this program has met the HR Certification Institute's criteria to be preapproved for recertification credit. Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 28

29 Contact information Grace Melton Partner Deloitte Tax LLP Martin Rule Senior Manager Deloitte Tax LLP Connect with me on LinkedIn Connect with me on LinkedIn Kevin Shimkus Managing Director Deloitte Tax LLP Nick Broomhead Senior Manager Deloitte Tax LLP Connect with me on LinkedIn Connect with me on LinkedIn Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 29

30 Where can you find more information? IRS website, specifically the electronic reading room Health Savings Account (HSA) generally published in May of the previous tax year Retirement plan COLA adjustments Other inflation adjusted items generally published in October or November of previous tax year Per Diem Rates per-diem-highlights SIFL Rates Social Security Wage Base Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 30

31 This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation. Copyright 2017 Deloitte Development LLC. All rights reserved. Employment tax compliance year-end hot topics 31

32 About Deloitte Deloitte refers to Deloitte Tax LLP, a subsidiary of Deloitte LLP. Please see to learn more about our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright 2017 Deloitte Development LLC. All rights reserved.

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