New Payroll and Information Considerations
January 24, 2017
To our Clients and Friends:
As we start a new year, there are new payroll and information considerations that apply to 2016 returns filed in 2017, or payroll after December 31, 2016. We have compiled a new memorandum for you to use throughout the new year. We hope that the enclosed memorandum will answer some of the frequently asked questions. Of special note are the following:
Income Tax Withholding on Non-payroll Payments
Income Tax Withholding on non-payroll payments made during 2016 must be reported on Form 945, Annual Return of Withheld Federal Income Tax. The return is due January 31, 2017. If you made deposits on time in full payment of the taxes of the year, you may file the return by February 10, 2017. Examples of non-payroll withholding include backup withholding, gambling winnings, pensions and annuities.
Affordable Care Act
The IRS extended the due date for certain forms pertaining to the Affordable Care Act. The deadline for reporting health insurance coverage to employees on Form 1095-C and 1095-B has been extended from January 31, 2017 to March 2, 2017. The IRS did not extend the due date for filing the associated forms with the IRS. Those forms are due February 28, 2017 if filing on paper or March 31, 2017 if filing electronically. Late filers are subject to penalties.
Personal property is taxable in the state of Oregon based on the property that is located in the county as of January 1, 2017. A personal property tax return must be filed with the county by March 15, 2017. There is no longer an extension available for filing a personal property tax return.
The limits on 401(k) and related plan employee deferrals remains at $18,000 for 2017. Likewise, the catch-up contribution amount remains unchanged at $6,000. The IRS did adjust the annual additions limit for defined contribution plans to $54,000 in 2017 and the annual compensation limit for 401(k) plans has increased to $270,000.
2017 Social Security, Medicare and Federal Unemployment taxes for household employees are typically paid on the Form 1040 Schedule H, unless the taxpayer is already filing form 941 for an unincorporated business. You must complete Form W-2, Wage and Tax Statement for each household employee and give copies B, C and 2 to your employee by January 31, 2017. The due date for filing the W-2 and W-3 with the Social Security Administration is January 31, 2017. Oregon requires a Form OA-Domestic be filed by January 31, 2017. Oregon also requires that ALL W-2s be electronically filed with the state.
For household employees in 2017, if you pay cash wages of $2,000 or more to one household employee, you need to report and pay Social Security and Medicare taxes. In you pay cash wages of $1,000 or more in any one calendar quarter, you need to pay unemployment taxes. There are exceptions to both of these rules, so please contact us for more information.
Employers are still required to report information for all new hires to a state agency within 20 days of the date of hire. Oregon new-hire reports can be submitted online, via fax or mail. Visit http://www.oregonchildsupport.gov/employers/pages/reporting.aspx for more information/. Washington new-hires must also be reported within 20 days. Visit https://www.dshs.wa.gov/esa/division-child-support/new-hire-reporting for more information on Washington reporting. Employers doing business in more than one state may register with the National New Hire Reporting Program and report all new hires. The National New Hire Reporting Program can be located at https://ocsp.acf.hhs.gov/OCSE/.
The IRS and the Oregon Department of Revenue no longer require an employer to submit Forms W-4. The forms are still subject to review by the IRS. When requested by the IRS, you must make the original Form W-4 available for IRS inspection.
Increased Minimum Wage
The 2016 Oregon legislature passed a bill increasing Oregon’s minimum wage. Wages are set to increase annually on July 1. The applicable minimum wage varies between employers located within an urban growth boundary, nonurban counties and the rest of the state. As of January 1, 2017 the minimum wage is 9.75, 9.50 and 9.75 an hour, respectively. On July 1, 2017 the minimum wages will increase to $11.25, $10.00 and $10.25. Visit https://www.oregon.gov/boli/WHD/OMW/Pages/Minimum-Wage-Rate-Summary.aspx for more information.
Should you have any questions regarding any of the information presented, please contact your Geffen Mesher representative.
2017 Payroll and Electronic Returns Update
Effective January 1, 2017, a revised Circular E (Publication 15) should be used for federal withholding on compensation paid to employees. You can print this publication off of the website after it has been updated for 2017. You can find the publication at https://www.irs.gov/uac/about-publication-15.
|Social Security Maximum|
Wages above $200,000 are subject to an additional 0.9% of withholding. The additional 0.9% tax should apply on the first payroll when the employee’s wages exceed $200,000 and continue throughout the remainder of the year. The additional Medicare tax is only imposed on the employee. The additional Medicare tax is in addition to, and not instead of, the 1.45% Medicare tax that all wage earners pay. There is no additional employer paid Medicare tax.
The Federal Unemployment Tax (FUTA) remains unchanged for 2017. FUTA is 0.6% on the base compensation up to $7,000 for 2017.
The due date for filing 2016 forms W-2 and W-3 with the Social Security Administration is January 31, 2017.
If your business had ten or more employees on a typical day during 2016, and those employees earned tips, you are required to file Form 8027 (Employer’s Annual Information Return of Tip Income and Allocated Tips). If you file Form 8027 on paper, the due date is February 28, 2017. For electronic filers the due date is March 31, 2017.
Please contact us for information regarding guidelines for reporting and withholding on taxable non-cash fringe benefits. Examples of non-cash fringe benefits include, but are not limited to: health insurance for S-corporation shareholder employees, moving expenses, unreimbursed personal auto usage, and the value of employer provided group term life insurance above $50,000 of coverage.
Oregon will modify the Oregon Withholding Tax Tables effective January 1, 2017. The tables are now available at http://www.oregon.gov/DOR/programs/businesses/Pages/payroll-updates.aspx.
The TriMet Transit District tax rate will increase to .7437% in 2017.
The Lane Transit District Excise tax will increase to 0.72% in 2017.
Oregon’s unemployment base compensation will be $38,400 for 2017. The base tax rate for new employers will be 2.6%.
The 2017 calendar year Workers’ Benefit Fund (WBF) Assessment Rate is 2.8 cents per hour or part of an hour worked by each employee. Half of the assessment, or 1.4 cents per hour, may be withheld from the employee.
Oregon W-2s and 1099-MISC, with box 7 income, are now required to be filed electronically via iWire. For 2017 Form W-2s, the iWire service has been updated to allow an easier upload process. Please visit http://www.oregon.gov/DOR/programs/businesses/Pages/iwire.aspxfor more information on uploading W-2s to iWire.
The transmitted due date for all Oregon W-2s and 1099-MISC, with income reported in box 7, is January 31, 2017. All other 1099-MISC, 1099-R, 1099-G and W-2G are due on March 31, 2017.
Oregon offers free electronic filing of the quarterly wage reports via OTTER (Oregon Tax Employer Reporting) or SETRON (Secure Tax Reporting Online). OTTER requires a software download and is compatible with Windows based computer systems. SETRON can be used on either a PC or a Mac computer. For assistance with either system, call (503) 947-1544. Additional information regarding both systems can be found at http://www.oregon.gov/EMPLOY/Businesses/Tax/Pages/OTTER.aspx and http://www.oregon.gov/EMPLOY/Businesses/Tax/Pages/SETRON.aspx.
Payroll Deposit Rules
The Internal Revenue Service has developed rules for the timing of payroll tax deposits. The taxes included in calculating the deposit are federal withholding and employer and employee Social Security and Medicare taxes. All employers fall into one of the following four groups:
- Semi-weekly depositor – this applies when the lookback period (the twelve months ending June 30th of the prior year) deposits exceed $50,000. For paydays landing on Wednesday, Thursday or Friday, the deposit is due the following Wednesday. For paydays on Saturday, Sunday, Monday or Tuesday, the deposit is due the following Friday.
- Monthly depositor – this applies when the lookback period deposits were $50,000 or less. The deposits are due on the 15th of the following month.
- Deposit exceeds $100,000 on any day – The deposit is due by the next business day. If this happens, the employer is considered a semi-weekly depositor for the remainder of the calendar year and the following year.
- $2,500 rule – If the employer has less than a $2,500 tax liability during a quarter, the deposit is due with the quarterly return.
The Internal Revenue Service requires that all payroll taxes must be deposited electronically, unless the $2,500 rule above applies. The payments must be made via an electronic funds transfer (EFT). This is typically done by using the Electronic Federal Tax Payment System (EFTPS). For more information on EFTPS, visit the EFTPS website at https://www.eftps.gov/eftps/.
Separate deposits are required for non-payroll (Form 945) liabilities. Generally the deposit rules for payroll taxes (noted above) also apply to non-payroll taxes. These taxes are also required to be paid electronically, unless the $2,500 rule applies. See the instructions for Form 945 for details.
You are required to pay your Oregon combined payroll and corporate excise or income taxes electronically if you are required to pay your Federal taxes electronically. Payment can be made via the Oregon Revenue Online website at https://revenueonline.dor.oregon.gov/tap/_/.
Pension Withholding Rules
The law requires that a lump-sum distribution from a retirement plan are subject to 20% withholding, if the distribution was eligible to be rolled over into another qualified plan or IRA. The recipient of the distribution may elect additional withholding, but no less than 20%. If the entire distribution was rolled-over to another qualified plan or IRA, then there should be no withholding. This rule does not apply to distributions from IRAs. See IRS Publication 15-A for additional information and exceptions to this rule.
Under Oregon law, a plan beneficiary may elect not to have state tax withheld on their lump-sum distribution. An election indicating no tax is to be withheld must be made with the plan administrator.
All those engaged in a trade or business, including sole-proprietors, partnerships, trusts and non-profit organizations, must file information returns for 2016 for certain types of payments made to others in the course of trade or business. Examples include payments to partnerships or individuals for rent, interest, services rendered and debt forgiveness.
The forms need to be mailed so that the recipient receives the form no later than January 31, 2017. The IRS copy needs to be filed on or before January 31, 2017 if you are reporting nonemployee compensation in box 7 of the 1099-MISC. All other information returns need to be filed by February 28, 2017 if you file on paper, or by March 31, 2017 if you file electronically.
If you file 250 or more information returns, you are required to file informational returns electronically. Electronic filing is done through the Filing Information Returns Electronically System (FIRE System). In order to file electronically, you must have software that can produce your return in the proper format. See IRS publication 1220 for additional information for filing returns electronically.
Payments to a corporation are generally not required to be reported unless the payment meets one of the following exceptions:
- Medical and health care payments
- Withheld federal income tax or foreign taxes
- Barter exchange transactions
- Broker and barter transactions for an S-Corporation
- Substitute payments in lieu of dividends and tax-exempt interest
- Acquisitions or abandonments of secured property
- Cancellation of debt
- Payments of attorney’s fees and gross proceeds paid to attorneys of more than $600
- Fish purchases for cash
- Credits and interest for qualified tax credits bonds reported on Form 1097-BTC and 1099-INT
- Merchant Card and third-party network payments (Form 1099-K)
- Federal Executive Agency payments for services
There are additional requirements for filing a mortgage interest statement (Form 1098) for 2016. In addition to what was required in prior years, the Form 1098 must include the property address or description, the mortgage balance as of the beginning of the tax year (January 1, 2016), and the mortgage origination date.
Penalties may be assessed at a rate of up to $520 per return if you fail to file timely, you fail to file with all the necessary information or you file with incorrect information.
Use Form W-9 to request a taxpayer identification number in order to issue a correct information return. The form can be found at https://www.irs.gov/pub/irs-pdf/fw9.pdf.
Geffen Mesher & Company, P.C. is a corporation. Please note that you do not need to send us a 1099-MISC.
The 2017 standard mileage rate for business use of vehicle is 53.5 cents per mile, regardless of the miles driven.
The government simplified per diem reimbursement rates effective October 1, 2016 are as follows:
High-cost localities $282 ($214 for lodging and $68 for meals and incidental expenses)
Low-cost localities $189 ($132 for lodging and $57 for meals and incidental expenses)
Rates for specific locations in the continental US can be found at the CONUS website: https://www.gsa.gov/portal/content/104877
The IRS extended the due date for certain forms pertaining to the Affordable Care Act. The deadline for reporting health insurance coverage to employees on Form 1095-C and 1095-B has been extended from January 31, 2017 to March 2, 2017.
The IRS did not extend the due date for filing Forms 1094 and 1095 with the IRS. Those forms are due February 28, 2017 if filing on paper or March 31, 2017 if filing electronically. Late filers are subject to penalties.