Here is a roundup of payroll issues recently covered:
This week, the IRS released long-awaited guidance on federal income tax withholding under the new tax law (Pub. L. 115-97), which was signed Dec. 22.
Withholding allowance amounts were retained by the IRS in employer withholding calculations for 2018, the agency said Jan. 11 in a news release. The optional supplemental wage withholding rate was set at 22 percent and the amount of additional wages to be added to tax calculations per pay period to nonresident aliens tripled.
Employers should start using the 2018 withholding tables as soon as possible, but not later than Feb. 15, the agency said in the release (IR-2018-05). Employers were reminded to use the 2017 withholding tables until they implement the new withholding tables, the agency said.
Notice 1036, Early Release Copies of the 2018 Percentage Method Tables for Income Tax Withholding, is “the first in a series of steps that the IRS will take to help improve the accuracy of withholding following major changes made by the new tax law,” the agency said. The new tax law changed tax rates and eliminated personal exemptions, which had been the basis of withholding allowances.
The IRS said it was revising Form W-4, Employee’s Withholding Allowance Certificate, along with the online employee withholding calculator to reflect the new tax law, such as changes in available itemized deductions, increases in the child tax credit, the new dependent credit, and the repeal of dependent exemptions. For now, employers may use the 2017 Forms W-4already filed by employees in conjunction with the tax law, the agency said Dec. 26.
The IRS also published a list of frequently asked questions related to the 2018 withholding tables.
Last week, on Jan. 5, the Labor Department announced plans to update enforcement policies to use the same test used by four federal appeals courts to determine whether interns and students are employees under federal law.
The four federal appeals courts used a primary-beneficiary test to determine whether interns are employees under the Fair Labor Standards Act, rejecting the six-part test that the department had used to determine the worker status of interns and students. The primary-beneficiary test focuses on what an intern receives for engaging in the internship and gives courts flexibility to examine the economic reality between the intern and the employer.
Missouri employers are to use a newly released 2018 state income tax withholding formula until further notice, the Missouri Revenue Department said Jan. 9. The department, which adjusted the flat rate on Jan. 10, expects to provide an Employer’s Tax Guide and withholding tables updated in accordance with finalized IRS guidance by February, it said.
The District of Columbia released its unemployment-taxable wage base and tax rates for 2018.
By Jazlyn Williams
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