It’s that time of the year when we start preparing to report payroll taxes and identify how the FY 2017 might be affected by recent tax changes. Like always, you will be required to file standard tax forms when reporting employee financial figures. Some of the things that to watch out for in the FY 2017 are:
Federal Insurance Contributions Act (FICA)
The FY January 2017 will see tax management changes in the payroll system with the new Federal Insurance Contributions Act (FICA) rules, declared by the Social Security Administration (SSA) in October 2016. FICA is made up of Social Security and Medicare taxes. In FY 2016, the Social Security tax rate was 6.2% on the first $118,500 wages paid. For the FY 2017, FICA taxable wages will witness an increase from $118,500 to $127,200, affecting millions of workers and payroll services for organizations nationwide.
The IRS, in October 2016, declared a new filing deadline for W-2 forms on January 31, 2017. The provision was a part of Protecting Americans from Tax Hikes (PATH) Act of December 2015. The employer filing of Form W-2 should now be submitted to the SSA by January 31—which is a change from the prior end-of-February guideline for paper filings and end-of-March guideline for electronic filings. Also, extensions are not automatic and are now given only for a 30-day period.
Quicker Tax Refunds for Employees
The motive behind these changes is to help tax payers get their refunds quicker. By getting W-2 forms earlier from employers, the IRS hopes to locate errors on returns more quickly, which, in turn, will accelerate the tax return process. As per the new PATH changes, some refunds will be issued later—February 15th to be exact—particularly the tax returns that involve Additional Child Tax Credit (ACTC) or Earned Income Tax Credit (EITC). Asper the law, the entire refund must be held until this date.
Affordable Care Act (ACA)
Additionally, you must also complete the Affordable Care Act (ACA) filing requirements for the FY 2017. The ACA reporting requirements and forms might vary depending on the size of your business. The Affordable Care Act, or Obamacare, requires that the employers offer health insurance coverage to full-time employees and their dependents. To comply with ACA reporting for 2017, you should:
- Determine whether your business qualifies as an Applicable Large Employer (ALE) according to the ACA and Employer Mandate.
- Ensure that correct systems are in place for accurate ACA reporting and compliance for your business.
- Check whether you have the right tools to track and document employee status, and benefits eligibility and enrollment.
- Check the reporting information page of Internal Revenue Service(IRS) for instructions and updates for Forms 1094 and1095.
- Check additional instructions with employers for Forms 1094-C and 1095-C.
With changing rules and regulations that surround payroll taxes, employers need security coming from third-party payroll providers, who make sure that all federal-mandated changes are handled automatically whether they affect tax rates, wage caps or required tax forms for IRS compliance. The FICA and W-2 changes for FY 2017 are examples of items that are handled seamlessly once they are outsourced.
For more information on how to prepare for payroll tax changes in 2017, attend this Webinar by expert speaker Dayna J. Reum, CPP, FPC, who is currently the Payroll Tax Manager at PetSmart Inc., a company which has been heavily involved in the payroll field over 15 years. You will also learn about the tools to ensure that you are aware of any current changes in the law affecting payroll.