Every tax year seems to bring changes, small and large, that businesses must stay apprised of. Being proactive and informed is one of the best strategies for payroll tax filing compliance.
It pays to be well-prepared when it comes to payroll taxes. Some of the new changes businesses need to be aware of involve deadlines, tax credits, and W-2 forms. This is not a comprehensive list of changes and updates, however, and every HR professional should stay on top of this information by checking for the latest updates at IRS.gov.
Filing Deadlines Tightened for Corporations
The recent change to filing deadlines means that flow-through entity return deadlines are now due before investor return deadlines. For partnerships and S-corporations operating on a calendar year this means they will have a new deadline of March 15. For calendar year-based C-Corporations the updated deadline has been moved from March 15 to April 15.
For businesses that provide health benefits, the new deadline for proof of insurance coverage, Form 1095, was January 31. In addition, new deadlines of February 28 by mail and March 31 for e-file, have been set for Forms 1094-B and 1095-A, B and C.
R&D Tax Credit Eligibility Has Been Expanded
Until recently, the development of internal use software had not been eligible for the government's research and development (R&D) tax credit. That is no longer the case.
Now, certain businesses including software, manufacturing, aerospace subcontracting, and biotech, can qualify for the R&D tax credit providing that they employ engineers, scientists or product development personnel.
The research and development (R&D) tax credit has been permanently extended by Congress and is retroactive to January 1, 2015. The R&D credit extension, which is part of the PATH Act of 2015, was signed into law on December 18, 2016. This extension not only makes the credit permanent, but allows for an expansion of how the R&D credit benefits can be used by qualifying small businesses.
In an article in CFO.com, Moss Adams partner Tom Sanger, noted that,
“...small businesses, now defined as having an average of less than $50 million in gross revenue over the prior three years, will be able to offset (the alternative minimum tax ) AMT with R&D credits generated after Jan. 1, 2016.”
“This provision opens up the credit to small corporations subject to the AMT, as well as pass-through entities (where the credits flow through to shareholders),” Sanger adds. “In the past, these credits were suspended and carried forward for up to 20 years until they were no longer subject to the AMT.”
IRS Renews Alert for W-2 Phishing Scheme
According to the IRS website, the IRS has once again renewed an alert for payroll and human resource professionals to warn them of a phishing scheme designed to trick them into giving out payroll data. They issued an urgent alert February 2, 2017 to all employers stating that "the Form W-2 email phishing scam has evolved beyond the corporate world and is spreading to other sectors, including school districts, tribal organizations and nonprofits."
In addition, it appears that the W-2 scammers are coupling their efforts to steal employee W-2 information with an older scheme involving wire transfers that is victimizing some organizations twice.
“This is one of the most dangerous email phishing scams we’ve seen in a long time. It can result in the large-scale theft of sensitive data that criminals can use to commit various crimes, including filing fraudulent tax returns. We need everyone’s help to turn the tide against this scheme,’’ said IRS Commissioner John Koskinen.
From the IRS website, here’s how the scam works:
"Cybercriminals use various spoofing techniques to disguise an email to make it appear as if it is from an organization executive. The email is sent to an employee in the payroll or human resources departments, requesting a list of all employees and their Forms W-2. This scam is sometimes referred to as business email compromise (BEC) or business email spoofing (BES)."
Guidance on W-2 De Minimis Error Safe Harbor
On January 4, 2017, the IRS issued Notice 2017-09 which provides guidance for the handling of Forms W-2 and 1099 corrections when amounts reported are incorrect by no more than $100, or $25 in the case of tax withheld. The Notice also applies to information returns filed and/or furnished after December 31, 2016 which includes 2016 Forms W-2.
The safe harbor does not apply to a failure to file or furnish information, even if the payee statement or information return would report dollar amounts of $100 or less or $25 in cases of tax withheld. In addition, a payor that intentionally misreports an amount on an information return or payee statement can be penalized, even if the amount would otherwise qualify as de minimis.
The PATH Act provision does not affect the requirement to pay and report employment taxes using Form 941. As a result, errors that might result in tax underpayments will still require that the additional tax be paid and reported, even if the amounts for individual payees are below the de minimis amounts.
According to a post in the Journal of Accountancy,
"The IRS announced that it intends to issue regulations that adopt the rules in this notice. To the extent that the regulations are consistent with the notice, they will be effective for information returns required to be filed and payee statements that must be furnished after Dec. 31, 2016, which is also the effective date of the rules in the notice."
Getting the Help You Need With Payroll Tax Filing Compliance
An updated payroll compliance strategy will help your organization meet its obligations, while providing accuracy and timeliness. So take time to understand the laws, prioritize employee and manager salary changes, and maintain accurate record keeping.
Another key step in maintaining HR compliance and increasing your company's cost-effectiveness is to consider outsourcing. A professional payroll management and workforce solutions provider such as Accuchex can offer much-needed help with Human Resources needs and questions.
Reliability, full-service options, and reputation are the hallmarks of a quality HR management service provider. Get your Free Download: California Labor Law guide to help you make an informed decision or call Accuchex Payroll Management Services at 877-422-2824.