A subscriber told me in an e-mail today, “Year-end is killing me this year.”
Many payroll professionals at year-end do not get the opportunity to reflect on the previous 12 months in a meaningful way until after the push to complete year-end filings and make adjustments for the coming year.
By the time payroll professionals can surface and breathe a little, they are so deep into the new year that many forget much of what occurred the year before.
So, as a former payroll professional and long-time observer of all things payroll, allow me to reflect on 2016 for you.
The year started with a bang, as federal law changes passed in late December 2015 affected many employers and payroll professionals on Jan. 1.
One highlight was for employers that provided tax-free public transportation benefits to workers. Again, these employers had to adjust tax-free amounts at the last-minute to account for an increase passed under the law that applied to all of 2015. Lovely.
The good news was that the legislation made permanent the increase, or parity with the parking-exclusion amount. So unless Congress changes the exemption, which could occur as part of a tax reform program, the yo-yo effect of the past seven years has ended for transportation fringe benefits.
Part of the same legislation changed the due dates for sending Forms W-2 to the Social Security Administration to just one day—Jan. 31. The change, which starts in 2017 with 2016 W-2s, created a domino effect because many states that have income tax laws not only moved up the due date for W-2 (or state equivalent) submissions for 2016 but also the annual reconciliation due date to Jan. 31.
Unfortunately, federal legislation to standardize state taxation of mobile workers across states remained stalled for the last session of Congress.
Speaking of Forms W-2, events during the year showed how vulnerable payroll systems were to data breaches and other system compromises. Soon after year-end and before the public knew of the e-mail hacking surrounding the presidential election, many payroll professionals fell prey to a devious e-mail phishing scam involving their organizations’ Forms W-2 for 2015 (filed in 2016). Responding, they thought, to inquiries from senior corporate leadership, e-mails with private and confidential employee W-2 information were sent directly to the bad guys.
And despite their best efforts, at least one large payroll service provider in 2016 had a system-compromise issue involving clients that failed in applying secure password access to data.
Last year was the first for employers to file newly developed forms under the Affordable Care Act. The Internal Revenue Service delayed and delayed again the due dates for sending the complicated forms to the agency. While many in payroll did not have the opportunity to oversee the filing of the forms, which primarily were benefit forms, a number of payroll-related reports and data points needed to be used for accurate reporting to keep applicable large employers compliant with the requirement to offer health insurance to employees. (We’ll see how this process goes in 2017, with the new administration and Congress gearing up to rescind parts of the ACA. For now, all requirements remain in place for 2016 reporting.)
In May, the final Labor Department rule that was to dramatically raise the salary threshold used by employers to exempt certain workers from overtime was released with a Dec. 1 implementation date. State governments and some representatives from industry sued, and a federal district court in Texas halted the implementation days before it was to take effect. The fate of the rule soon will be in the hands of the Trump administration.
While some efforts by the Obama administration to change federal wage and hour requirements were stalled in 2016, many states and localities worked to increase minimum wage rates, pass required paid-leave ordinances and even benefit requirements, such as commuter benefits in the District of Columbia and other jurisdictions. For the first time a state, Oregon, passed required minimum wage rates based on regions within the state. New York followed suit.
Those efforts were juxtaposed by efforts in several states that banned localities from implementing similar requirements on employers that were more favorable than the state requirements.
Determining the status of workers continued to be a big focus not just for the Labor Department, but for states as business models under the on-demand gig-economy were affirmed and denied in courts and still face scrutiny.
The relatively strong economy in the U.S. meant that only employers in California and the Virgin Islands had to pay extra in Federal Unemployment Tax Act in 2016, down significantly from 21 jurisdictions in 2011.
Regarding wage payments and wage deductions, 2016 saw the implementation of employer requirements to honor out-of-country child-support orders, a special portal for employers to use to report child-support information directly to states and the start of a movement by state representatives to standardize garnishment processes across the country.
These are just the highlights, but it seems clear this has been an interesting and active year for payroll, and my colleagues at Bloomberg BNA plan to continue tracking developments in what may be an even more compelling 2017.
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