Tax Deadlines Loom for Employers. Minimum Wages Rise in Many States
Many employers will be facing more payroll-related changes at the state level this year than they will at the federal level. That’s because the minimum wage in many states was raised January 1 and surpasses the $7.25 federal minimum, which has prevailed since 2009. Other states are planning to raise their minimum wages later in 2017 (see right-hand box).
Also, many localities have minimum wages that are higher than their states’ wages. If an employee is subject to state or local laws and the federal minimum wage laws, the employee is entitled to the higher minimum wage rate.
States that Just Raised their Minimum Wages
A number of states increased their minimum wages on January 1. Here’s a list of the hourly wages:
Alaska, from $9.75 to $9.80 (including tipped employees);
Arizona, from $8.05 to $10 (for tipped employees, from $5.05 to $7);
Arkansas, from $8 to $8.50 (tipped employees will continue to receive $2.63);
California, from $10 to $10.50 for employers with 26 employees or more (including tipped employees);
Colorado, from $8.31 to $9.30 (for tipped employees, from $5.29 to $6.28);
Connecticut, from $9.60 to $10.10 (for bartenders, from $7.82 to $8.23, and for other persons in the hotel and restaurant industry, from $6.07 to $6.38);
Florida, from $8.05 to $8.10 (for tipped employees, from $5.03 to $5.08);
Hawaii, from $8.50 to $9.25 (for tipped employees, from $7.75 to $8.50);
Maine, from $7.50 to $9 (for tipped employees, from $3.75 to $5);
Massachusetts, from $10 to $11 (for tipped employees, from $3.35 to $3.75):
Michigan, to $8.90 (for tipped employees, from $3.23 to $3.38);
Missouri, to $7.70 (for tipped employees, from $3.825 to $3.85);
Montana, to $8.15 (including tipped employees);
New Jersey, from $8.38 to $8.44 (tipped employees will continue to receive $2.13);
New York, from $9 to: (1) $11 for NYC employers with 11 or more employees, (2) $10.50 for NYC employers with 10 or fewer employees, (3) $10 per hour for Nassau, Suffolk and Westchester county employers, and (4) $9.70 per hour for employers in areas not noted above;
Ohio, from $8.10 to $8.15 (for tipped employees, from $4.05 to $4.08);
Rhode Island, change only for tipped employees from $3.39 to $3.89;
South Dakota, from $8.55 to $8.65 (for tipped employees, from $4.275 to $4.325);
Vermont, from $9.60 to $10 (for tipped employees from $4.80 to $5); and
Washington, from $9.47 to $11 (including tipped employees).
Later this Year
Minimum wage increases will take effect in Maryland, Oregon and the District of Columbia on July 1, 2017.
States that increased the amount of taxable wages subject to unemployment tax in 2017 include: Alaska, Colorado, Hawaii, Idaho, Iowa, Minnesota, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, Utah, Vermont, and Washington. The Virgin Islands also increased its taxable wage base. North Dakota and Wyoming lowered their taxable wage base.
Other state-level changes for 2017 include new ceilings for wages subject to unemployment tax.
At the federal level, the most significant change that took effect January 1 was a jump in the Social Security wage base, to $127,200 from $118,500 — the level that had been in place since 2015.
New federal tax withholding tables reflect a much smaller inflation-based adjustment. So, for example, the 25% tax bracket for single taxpayers in 2017 begins at $37,950 versus $37,650 in 2016. For employees filing joint returns with their spouses, the 25% bracket moved up to $75,900 from $75,300 last year.
ACA Information Returns
Employers received a minor reprieve on providing Affordable Care Act (ACA) information return statements to employees. It has been extended from January 31 to March 2.
Background: The ACA requires health insurance issuers, certain employers, and others that provide “minimum essential health coverage”‘ to individuals to provide information statements to covered individuals.
The IRS announced the due date for furnishing Forms 1095-B and 1095-C to recipients is extended from January 31, 2017 to March 2, 2017. The IRS decided to extend the deadline because employers, insurers and other providers of minimum essential coverage need additional time. The extension is automatic. The IRS will not grant further extensions.
However, the deadline for filing ACA information returns with the IRS will not be extended. The IRS determined that there’s no similar need for additional time for employers, insurers and other providers of minimum essential coverage to file 2016 Forms 1094-B, 1095-B, 1094-C, and 1095-C with the tax agency. So the filing deadline for these returns remains Feb. 28, 2017, if not filing electronically, or March 31, 2017, if filing electronically.
What’s Due January 31?
Also of immediate concern to employers are upcoming filing deadlines. According to the IRS, by Jan. 31 you or your payroll service provider will need to:
- File Form 941 for the fourth quarter of the previous calendar year and deposit any un-deposited income, Social Security, and Medicare taxes. You may pay these taxes with Form 941 if your total tax liability for the quarter is less than $2,500. File Form 944 for the previous calendar year instead of Form 941 if the IRS has notified you in writing to file Form 944 and pay any undeposited income, social security and Medicare taxes.
- File Form 940 to report any FUTA tax. However, if you deposited all of the FUTA tax when due, you may file by February 10.
- Furnish each employee a completed Form W-2. Furnish, “Form 1099-MISC,” to payees for nonemployee compensation. Most 1099 forms must be furnished to payees by January 31, but some can be furnished by February 15.
- File with the Social Security Administration Copy A of all 2016 paper and electronic Forms W-2 with Form W-3, “Transmittal of Wage and Tax Statements.”
- File with the IRS Copy A of all 2016 paper and electronic Forms 1099 forms that report nonemployee compensation, with Form 1096, “Annual Summary and Transmittal of U.S. Information.”
- File Form 945 to report any non-payroll federal income tax withheld. If you deposited all taxes when due, you may file by February 10.
How Does February Look?
February will greet you with a few more IRS deadlines. By February 15, for example, you’ll need to have requested a W-4 from each employee who claimed an exemption from income tax withholding last year. By the next day, any employee who didn’t submit a new W-4 for 2017 and had previously claimed exemption from withholding, should be subject to tax withholding.
And by February 28, you need to File Copy A of all paper 2016 Forms 1099, except Forms 1099-MISC reporting nonemployee compensation, with Form 1096 with the IRS. For electronically filed returns, a March 31 deadline is possible.
If you have questions or concerns about your organization’s tax filing or payroll requirements, contact your payroll or tax advisor.