The new tax 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 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.
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.
To stay up to date with tax, HR, and payroll news make sure to subscribe to our blog by filling out the form below!