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How the Recently Passed Tax Bill Affects Your Business

The new tax bill law passed just towards the end of last year has come with major changes to company’s payroll systems throughout the United States.

Corporate Tax Rate Decrease

The rewrite of the tax bill code has brought forth a significant tax cut for corporations. The corporate tax rate has been cut from 35%-21% which is estimated to reduce federal revenue by $1.5 trillion over the next ten years. This is a great benefit to large corporations.

Commuter Benefits Change

Both employees and employers can still contribute funds pre-tax into mass transit and parking plans. However, for the employer, transit plans are no longer considered a business deduction! Employers can still contribute to bicycle plans as well, but it will be included as income for the employees participating in this plan. This money should be included as taxable income and subject to tax withholding and payroll taxes.

Updated Tax-Withholding Tables

IRS released Notice 1036 earlier this month – addressing the new income-tax withholding tables to reflect the changes in tax rates and tax brackets brought on by the new law. It is encouraged that employers begin using these tables ASAP, but no later than Feb. 15, 2018. Employers are advised to continue using the 2017 withholding tables until they begin using the newly updated tables. Note that if you are outsourcing your Payroll, Payroll companies already take care of the adjustments for you.

These new tables have been designed to work with the Forms W-4 that workers already filed with their employers to claim withholding allowances.

Please refer to this FAQ published by the IRS that should answer any questions you might have about changes made.

W-4 Revision

In addition to the updated tax-withholding tables, the IRS is working on revising Form W-4. This revision will reflect itemized deductions, increases in child tax credit, new dependent credit and the repeal of dependent exemptions. Though this has not been issued yet, we will expect to be seeing it very soon.

Withholding Calculator Update

The IRS is working to adjust the withholding calculator to assist employees in determining their optimal withholding – this is expected to be available towards the end of February.

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.