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2017 Payroll Changes and 2016 Year End Reporting Changes

Earlier W-2 filing Date

For federal social security administration, the 2016 employer copies of W-2 / 1099-MISC filing deadline is Tuesday, January 31, 2017. Most states are adopting the January 31st deadline as well.  Ohio being one of them.

1099 reporting requirements.

New due dates beginning with 2016 Information Returns:

For federal purposes, all employers are required to report any transactions paid to an individual or partnership totaling $600 or more on Form 1099 Misc, box 7. These 1099 Misc forms and the corresponding 1096 forms are required to be reported By January 31st of the year following the tax year,

All other 1099 forms are required by February 28th of the year following the tax year.


HB 5 Business updates for Municipal Withholding

Monthly filing and payment is required if there is more than $200 in any month in of the previous calendar quarter or more than $2,399 in prior year. Payments due on the 15th of the following month.

Quarterly filing and payment is required if the monthly withholding is less than $200 or the prior annual withholding is less than $2,399. Effective Sept 14, 2016, Senate Bill 172 changed the due date to the last day of the month following the end of the quarter.

Semi-monthly withholding MAY be required if annual withholding is greater than $12,000. The due date is 3 business days after the 15th and end of the month.

 

Revised Filing Deadlines:

Form 990 Exempt Organizations       May 15

Form 1065 Partnerships                    March 15

Form 1120S S Corporations              March 15

Form 1120 C Corporations                April 15

Form 1041 Trust and Estate              April 15

 

FUTA Credit Reductions

The current FUTA rate remains at 6% on the first $ 7,000 of wages paid to each employee. Those companies contributing to a state unemployment fund receive a 5.4% credit resulting in a .6% net FUTA tax rate or $42.00 per employee.

For 2016, Connecticut and Ohio repaid their outstanding federal loan advances thereby eliminating any FUTA credit reduction. In 2016, there is no Schedule A to file for Ohio wages. California and Virgin Islands have a 1.8% credit reduction.

Social Security Wage Base. The 2017 wage base will be $127,200. The employee and employer match will be 6.2%. The maximum deduction will be $7,886.40 ($127,200 x 6.2%). The 2016 wage base was $ 118,500.

Medicare Tax. As in prior years, there is no limit to the wages subject to the Medicare Tax; therefore, all covered wages are still subject to the 1.45% tax. Wages paid in excess of $200,000 will be subject to an extra 0.9% Medicare tax that will be withheld only from employees’ wages.

Additional Medicare Tax

Under a provision of the Affordable Care Act, the employee-paid portion of the Medicare FICA tax subject to a 0.9 percent Additional Medicare Tax on amounts over these threshold.

$250,000 for married taxpayers who file jointly.

$125,000 for married taxpayers who file separately.

$200,000 for single and all other taxpayers.

Additional Medicare Tax withholding applies only to employee compensation in excess of these thresholds in a calendar year. The employer-paid portion of the Medicare tax on these amounts remains at 1.45 percent.

 

Dependent Care Limits. The maximum exclusion from gross income under a dependent care program is $5,000 for an individual or a married couple filing jointly.

 

IRA Contribution Limits. The 2017 contribution limit for Simple IRAs is $12,500. The catch-up contribution for those age 50 or older by December 31, 2017, is $3,000.

401(k), 403(b) and 457 Contribution Limits. The contribution limit for these plans’ employee deferrals is $18,000. The catch-up contribution for those age 50 or older by December 31, 2017, is $6,000. Maximum contribution from all sources is $54,000 (plus the $6,000 catch-up if age 50 or older), or 100% of an employees compensation.

Health Flexible Spending Arrangements. The dollar limitation on voluntary employee salary reductions for contributions to a health flexible spending arrangement (FSA) is $2,600.   ($2,550 in 2015)

Medical Savings Accounts. A high-deductible health plan is a plan with an annual deductible of $2,250-$3,350 for individual coverage and $4,500-$6,750 for family coverage.

Contribution and Out-of-Pocket Limits 
 for Health Savings Accounts and High-Deductible Health Plans

 

For 2017

For 2016

Change

HSA contribution limit (employer + employee)

Self-only: $3,400

Family: $6,750

Self-only: $3,350

Family: $6,750

Self-only: +$50

Family: no change

HSA catch-up contributions (age 55 or older)*

$1,000

$1,000

No change**

HDHP minimum deductibles

Self-only: $1,300

Family: $2,600

Self-only: $1,300

Family: $2,600

Self-only: no change

Family: no change

HDHP maximum out-of-pocket amounts (deductibles, co-payments and other amounts, but not premiums)

Self-only: $6,550

Family: $13,100

Self-only: $6,550

Family: $13,100

Self-only: no change

Family: no change

* Catch-up contributions can be made any time during the year in which the HSA participant turns 55.

** Unlike other limits, the HSA catch-up contribution amount is not indexed; any increase would require statutory change.

 

Defined Contribution Plans

The IRS highlighted the following adjustments taking effect on Jan. 1, 2017, for 401(k), 403(b) and most 457 plans: 

Defined Contribution Plan Limits

2017

2016

Maximum employee elective deferral

$18,000

$18,000

Employee catch-up contribution (if age 50 or older by year-end)

$6,000

$6,000

Defined contribution maximum limit, all sources

$54,000

$53,000

Defined contribution maximum limit (if age 50 or older by year end); maximum contribution all sources plus catch-up

$60,000

$59,000

Employee compensation limit for calculating contributions

$270,000

$265,000

Compensation of "key employees" in a top-heavy plan

$175,000

$170,000

Compensation of "highly compensated employees" in a top-heavy plan (HCE threshold)

$120,000

$120,000

The $6,000 catch-up contribution limit for participants age 50 or older applies from the start of the year to those turning 50 at any time during the year.


Other Workplace Retirement Plans

  • For SIMPLE (savings incentive match plan for employees of small employers) retirement accounts, the maximum contribution limit remains unchanged at $12,500.

  • For simplified employee pensions (SEPs), the minimum compensation amount remains unchanged at $600.

  • For employee stock ownership plans (ESOPs), the maximum account balance in the plan subject to a five-year distribution period will increase to $1,080,000 from $1,070,000, while the dollar amount used to determine the lengthening of the five-year distribution period rises to $215,000 from $210,000.

IRAs

  • The limit on annual contributions to an IRA will stay unchanged at $5,500. The additional catch-up contribution limit for individuals ages 50 and over remains $1,000.

  • Traditional IRA deduction phase-out. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his/her spouse was covered by a retirement plan at work, the deduction may be phased out until it is eliminated, depending on filing status and income. The phase-out ranges for 2017 are:

               • For single taxpayers covered by a workplace retirement plan, the phase-out range is$62,000 to $72,000, up from $61,000 to $71,000.

               • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $99,000 to $119,000, up from $98,000 to $118,000.

                • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $186,000 and $196,000, up from $184,000 and $194,000.

                • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • Roth IRA income phase-out. The adjusted gross income (AGI) phase-out range for taxpayers making contributions to a Roth IRA will be:

                 • For singles and heads of household, the income phase-out range is $118,000 to $133,000, up from $117,000 to $132,000.

                 • For married couples filing jointly, the income phase-out ranges is $186,000 to $196,000, up from $184,000 to $194,000.

                  • For a married individual filing a separate return who makes contributions to a Roth IRA, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

2017 Retirement Savings Contribution Credit

The 2017 adjusted gross income limit for the saver's for low- and moderate-income workers will rise to $62,000 for married couples filing jointly; $46,500 for heads of household; and $31,000 for singles and married couples filing separately $30,750.

The amount of the credit is a maximum of 50 percent of an employee’s retirement plan contributions of up to $2,000 (or $4,000 for married couples filing jointly), depending on the filer's adjusted gross income (AGI) as reported on their Form 1040 or 1040A. Consequently, the maximum saver’s credit is $1,000 (or $2,000 for married couples filing jointly).

2016 Saver's Credit

Tax Credit Rate

Married, Filing Jointly

Head of Household

Single/Other Filers*

50% of contribution

AGI not more than $37,000

AGI not more than $27,750

AGI not more than $18,500

20% of contribution

$37,001 - $40,000

$27,751 - $30,000

$18,501 - $20,000

10% of contribution

$40,001 - $61,500

$30,001 - $46,125

$20,001- $30,750

0% of contribution

more than $61,500

more than $46,125

more than $30,750

*Includes married couples filing separately or qualifying widow(er)s.


2017 Income Tax Brackets

Single Filing Individual Return (other than surviving spouses and heads of households)

Tax Rate                      2017 taxable Income             2016 Taxable Income

10%                             $0 - $9,325                              $0 - $9,275

15%                             $9,326 - $37,950                     $9,276 - $37,650

25%                             $37,951 - $91,900                   $37,651 - $91,150

28%                             $91,901 - $191,650                 $91,151 - $190,150

33%                             $191,651 - $416,700               $190,151 - $413,350

35%                             $416,701 - $418,400               $413,351 - $415,050

39.6%                          $418,401 +                                      $415,051 +

 

Married Filing Jointly (and surviving spouse)

 

Tax Rate                      2017 taxable Income             2016 Taxable Income

10%                             $0 - $18,650                            $0 - $18,550

15%                             $18,651 - $75,900                   $18,551 - $75,300

25%                             $75,901 - $153,100                 $75,301 - $151,900

28%                             $153,101 - $233,350               $151,901 - $231,450

33%                             $233,351 - $416,700               $231,451 - $413,350

35%                             $416,701 - $470,700               $413,351 - $466,950

39.6%                          $470,701 +                              $466,951 +

 

Married Filing Separate Returns

Tax Rate                      2017 taxable Income             2016 Taxable Income

10%                             $0 - $9,325                              $0 - $9,275

15%                             $9,326 - $37,950                     $9,276 - $37,650

25%                             $37,951 - $76,550                   $37,651 - $75,950

28%                             $76,551 - $116,675                 $75,951 - $115,725

33%                             $116,676 - $208,350               $115,726 - $206,675

35%                             $208,351 – 235,350                $206,676 - $233,475

39.6%                          $235,351 +                              $233,476 +

 

Heads of Households

Tax Rate                      2017 taxable Income             2016 Taxable Income

10%                             $0 - $13,350                            $0 - $13,250

15%                             $13,351 - $50,800                   $13,251 - $50,400

25%                             $50,801 - $131,200                 $50,401 - $130,150

28%                             $131,201 - $212,500               $130,151 - $210,800

33%                             $212,501 - $416,700               $210,801 - $413,350

35%                             $416,701 – 444,550                $413,351 - $441,000

39.6%                          $444,551 +                              $441,001 +

 

Revenue Procedure 2016-55 also states that among other income tax adjustments for 2017:

The personal exemption remains at $4,050.

The standard deduction for single taxpayers and married taxpayers filing separately rises by $50 to $6,350.

The standard deduction for married taxpayers filing joint returns rises by $100 to $12,700.

The standard deduction for heads of household rises by $50 to $9,350

Social Security Benefit Payments Rise Marginally

Monthly Social Security and Supplemental Security Income (SSI) benefits increased just 0.3 percent in 2017. The maximum Social Security benefit for workers retiring at full retirement age in 2017 will be $2,687 per month, up from $2,639 in 2016.

HSAs vs. FSAs: Key Differences

Health savings accounts (HSAs), which help individuals save for future qualified medical expenses, must be linked to high-deductible health insurance plans. HSA accounts are employee-owned, and contributions can be made by the employer, the worker or both, using pretax dollars. Funds employees withdraw to pay for health care services are not taxed. Amounts saved in an HSA accumulate over time (there is no use-it-or-lose-it rule).

HSAs differ from health reimbursement arrangements (HRAs), which employers own and fund. Unlike money in HSAs, HRA funds revert to the organization when a worker leaves (to learn more, see the SHRM Online article "Consumer-Driven Decision: Weighing HSAs vs. HRAs.

Flexible spending accounts (FSAs), like HSAs, also allow employees to deduct pretax dollars from their paychecks to pay for eligible out-of-pocket health care expenses. FSAs do not need to be coupled with high-deductible plans, however. But participants have had to spend annual contributions by the end of the year (extended by a 2½-month grace period if the plan allows) or they forfeited the remaining funds.

As of subsequent IRS guidance, employers that offer FSA programs that do not include a grace period now have the option of allowing workers to roll over up to $500 of unused funds at the end of the plan year.



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