W-4: What to expect in 2019

December 2017

On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act (TCJA) into law. The Tax Cuts and Jobs Act of 2017 (TCJA) made small reductions to income tax rates for most individual tax brackets and significantly reduced the income tax rate for corporations. It also provides a large new tax deduction for owners of pass-through entities and significantly increases individual alternative minimum tax (AMT) and estate tax exemptions. And it makes major changes related to the taxation of foreign income.

February 2018

In February 2018, the IRS published the new online W-4 Calculator, and it is strongly recommended that employees access the calculator to determine the correct number of withholding allowances.

  • The IRS calculator will ask a series of questions about income, marital status, anticipated deductions and eligibility for tax credits, to estimate annual taxable income and suggest the most appropriate number of withholding allowances.
  • It is recommended that all employers should begin considering reminding employees of the withholding calculator, which will help employees check their tax withholding at any point in the year, compared to their total expected full-year tax liability.

June 2018

On June 6th 2018, the IRS released a draft of the 2019 Form W-4 and instructions, some highlights include:

  • Employees are strongly encouraged, but not required, to complete a new W-4 for 2019.
  • Employers will still be able to use 2018 and prior Forms W-4 for employees that don’t complete a 2019 W-4. As a result, payroll systems will need to maintain both 2018 and 2019 withholding systems and calculations simultaneously.
  • Number of allowances Eliminated: Line 5 “Total number of allowances you’re claiming,” is eliminated.
  • New Marital Status Box – Head of Household: A third IRS withholding calculation/table will need to be added to correspond with this new marital status, in addition to the existing table for Single and Married Filing Jointly.
  • New Line 5 – Additions to Income: This new line asks employees to enter nonwage income [not subject] to withholding (such as interest of dividends).
    • Previously, employees with significant nonwage income had to convert such amounts to equivalent per-payroll additional amounts to withhold.
    • Line 5 amounts will be full-year estimates, so employer payroll systems will need to be modified to include these full-year amounts in withholding calculations.
  • New Line 6 – Itemized and Other Deductions: Line 6 prompts employees to enter estimated subtractions to include based on expected deductions (such as state and local taxes, mortgage interest, and charitable contributions).
    • Previously, employees needed to convert deductions into equivalent withholding allowances.
    • Again, amounts entered will be full-year estimated deduction totals, so payroll systems will need to include full-year amounts in withholding calculations.
  • New Line 7 – Tax Credits: This line asks employees to enter the full-year amount of any tax credits for which they expect to qualify, such as the child tax credit. As a reminder, the 2017 Tax Cuts and Jobs Act significantly expanded child and dependent tax credits.
    • Previously all tax credits were translated by employees into additional withholding allowances. With the 2019 Form W-4, full-year tax credit amounts will be directly entered into payroll systems.
    • Any tax credits should only be entered for the highest paying job in the households with multiple incomes. Taxes may be significantly under-withheld for a household if both spouses enter the full-year credit expected, resulting in a large tax amount due at year-end. Conversely, taxes may be significantly over-withheld if neither spouse enters the total tax credit amount, resulting in reduced net paychecks during the year, and a lard tax refund at year-end.
  • New Line 8 – Additional Household Income Due to Multiple Jobs: If applicable, employees will enter the [full year] income associated with any second job. Additional wage income should only be entered for the highest paying job in households with multiple incomes. There are special instructions for households with more than two incomes.
    • Employers will include these full-year amounts in withholding calculations in order to determine the appropriate tax bracket and rates for the employee.
    • Alternatively, the instructions will offer a calculation to estimate an additional tax amount to withhold per pay period, which was the solution prior to 2019.
    • Previously, employees used a Form W-4 worksheet to calculate a specific additional amount to withhold per pay period.
    • Employees will be able to utilize the online calculator.
  • Line 9 – Additional Amount, If Any, You Want Withheld From Paycheck: This line is unchanged.

As more information is released we will continue to communicate changes and what you should look for. Please contact your Payroll Specialist if you have any questions.

Worried About Retention? The Best Way to Keep Employees Is to Be Useful to Them

According to Gallup, 51% of employees are looking for a new job, and 68% of employees believe they are overqualified for the job they have. Even engaged employees are job hunting at an alarming rate—37%. Employees who change jobs cite career growth opportunities, pay and benefits, management, company culture, and job fit as reasons for doing so.

Employees surveyed said they want to do what they do best while maintaining a good work-life balance. They desire a secure and stable job that pays well and contributes to their personal wellbeing. They’re likely to leave their current employer if they can get a more flexible work schedule or a significant pay increase elsewhere.

To retain employees—especially top performers—employers often look for perks they can offer to make employment with them more attractive and to keep good employees from leaving. We believe perks are nice, and they can encourage retention, but providing an assortment of distinguishing perks won’t keep employees long-term unless those perks meet essential employee needs.

The best way to retain employees is to remember why they became your employees to begin with—they have wants and needs, and employment with you enables them to meet those wants and needs. In other words, you’re useful to them (as they are to you). When your organization ceases to be useful or becomes less useful than another employer, employees might start looking for the next best (most useful) opportunity. The more useful you can be, the more inclined employees will be to stay with you. Fortunately, meeting your respective needs can be a solid basis for long-term collaboration and shared success. Here’s how:

  • Talk to your employees about what knowledge, skills, and abilities they think would help them do their job better or make additional contributions to the organization. By involving employees in the discussions and decisions about what training they receive, you help them gain a sense of ownership over their work, their professional development, and their futures.
  • Provide coaching and training opportunities that bring value to your organization and the professional development of your employees. Yes, training may make your workers more employable elsewhere, but it also prepares them for a better future working for you. You can increase the likelihood that your employees will use the training they receive for your benefit by giving them opportunities to put what they’ve learned to immediate use and rewarding them when the new skills and extra effort pay off. Prompt application of what they’ve learned will help solidify their knowledge, while the positive reinforcement will encourage continued use of the new skills.
  • Involve employees in company initiatives that make use of their skills or teach them new ones. Not only will this help prevent their jobs from becoming too repetitive, they’ll gain valuable experience and form a connection to the organization that goes beyond their initial job duties.
  • Make work meaningful and highlight the good that your organization does. This is especially important if the typical job duties of an employee feel mundane or uninspiring. If you’re paying someone to do a job, that job is essential to the mission of your organization. And that mission has value. Make sure employees know that their work, however repetitive or unexciting, matters. Take pride in the good you all do. Show your appreciation and gratitude. Recognize workers for a job well done. People want to feel appreciated, that they’re important, and that they’re involved in valuable work. You can help fulfill these wants.
  • Encourage social interactions among workers. While money might be the primary reason people get jobs, it’s not the only reason. People tend to seek social connections and enjoy interacting with others. They like doing things with other people, and the workplace can be a great place to make friends, build community, and collaborate on a meaningful enterprise.
  • Offer bonuses when your company meets its financial goals and when employees meet their individual and team goals. Bonuses motivate employees to be more engaged and productive by rewarding them with a tangible return on their investment.
  • If feasible, offer raises to account for cost-of-living increases, job performance, and individual accomplishments. Like bonuses, raises encourage efficient and productive work by rewarding it. Of course, huge pay increases simply aren’t an option for many companies, especially small to medium-sized businesses. As much as these employers might want to pay higher salaries and wages, they don’t have the extra funds. If you’re unable to offer substantial raises or bonuses, the non-monetary rewards mentioned above become all the more useful and important.

There’s no guarantee that every hire will be the right fit and stay with your company as long as you’d like, but you can help improve retention—and cut down on its costs—by remaining useful to your employees. Your employees want to succeed in their professions as much as you do in your business. By aligning their individual success with your organizational success, you give them huge incentive to stay, improve their skills, and put those skills to good use in your organization.

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ACA Penalties Will Continue

A new round of penalty letters are expected to be sent out later this year. More than 300,000 proposed-penalty letters were sent by the IRS this summer and late last year for alleged violations of the ACA’s employer mandate in 2015. Employers can expect to see 2016 assessment letters before the end of 2018. Employers need to be prepared.

Penalties Are Proposed, Not Final

The proposed-assessment letters, called Letters 226J, are preliminary employer shared responsibility payment (ESRP) assessments, these are not final assessments. Some employers incorrectly assume that the IRS cannot be challenged, the IRS proposed assessment can and should be challenged if based on erroneous information.

Most assessments relate to errors on reporting forms, and the IRS has been willing to reduce the penalties if the employer provides an explanation to the IRS regarding the errors.

Under the ACA, employers with 50 or more full-time employees must submit Form 1094-C to the IRS, along with Form 1095-C; these forms contain information about their employees’ health coverage. Form 1095-C also is sent to full-time employees. A reporting error on one of these forms may result in a proposed penalty.

The IRS may provide the employer with a list of employees who, in the absence of being offered minimum essential coverage from the employer, received a premium tax credit. The list shows the months for which a premium tax credit was received and what codes were reported on Form 1095-C for each of these employees.

Often, employers realize that the employees on the premium tax credit list were simply assigned incorrect codes for certain months on Form 1095-C. For example, an employer may have failed to put in a code showing that an employee was not a full-time worker in a certain month. In response to the assessment letter, employers can provide correct codes for the premium tax credit listing, making a reduction in penalties more likely, they said.

The IRS is not asking for information on every one of a large employer’s full-time employees, just those on the premium tax credit list, they added.

Penalties Are Here for Now

Some believe they can ignore the assessment notices because they believe they are not subject to the penalty or that the ACA will be repealed. This is a mistake. Failing to timely respond to a notice will result in the IRS making the assessment based on the information it has. Ignoring the IRS assessment is not an effective strategy.

Employers that received an assessment notice for 2015 should look at their 2016 and 2017 reporting to see if they can expect additional notices.

The IRS continues to refine this penalty process, and it doesn’t look like the assessment letters are going away anytime soon, so being aware of them is important.



Source: https://www.shrm.org/ResourcesAndTools/legal-and-compliance/employment-law/Pages/more-ACA-penalties.aspx?utm_source

LIBN: Immigration audits on the uptick

The U.S. Citizenship and Immigration Services did a recent audit of a New York City-based construction firm’s I-9 forms that relate to the right to work in the United States.

They found that the company didn’t have forms for some workers, some forms were incomplete and some had incorrect information.

An accounting firm has since gone in to audit the forms and come up with procedures to make sure they’re done as required in the future.

“We told them we would do an I-9 remediation to fix it and develop a plan to implement that process for them to be totally up to date,” Jeff Agranoff, human resources consultant principal at Grassi & Co. in Jericho, said. “That led to terminating some employees not eligible to work in the U.S.”

Click here to read the article on LIBN.com

Tax Act Repeals the Penalties for the Individual Mandate

The employer mandate (a/k/a employer shared responsibility payment) has not been modified by the Tax Act, but the individual mandate penalty has been reduced to zero for years after 2018.  Thus, effective for years after December 31, 2018, the Tax Act effectively eliminates the individual mandate penalties.  Accordingly, beginning in 2019, the government will no longer attempt to collect the individual mandate penalties if an individual or family does not obtain healthcare coverage in 2019 and thereafter.  The elimination of the penalties does not technically remove the requirement to obtain healthcare coverage.  But without penalties there will be no enforcement and, in effect, no practical mandate to obtain coverage for 2019 and later years.


The IRS requires an employer or insurance company to report on Form 1095 whether an individual had ACA compliant coverage for the tax year.  Employer reporting on Form 1095 was not eliminated by the new Tax Act. For 2018, nothing has changed with respect to the ACA individual mandate or reporting on IRS Form 1095.  Employers that fall above the threshold of 50 full-time and full-time equivalents should still report for the 2018 year.

Definitions for Health Plans

  • Self-Funded Plan: Employer pays fixed costs (administrative fees and stop-loss premium) and claims costs incurred by covered persons and receives reimbursements if claims costs exceed levels set in the policy.
  • Fully Insured Plan: (traditional insurance plan) Company pays premiums, insurer collects premiums and pays health care claims based on policy purchased by employer.
  • Grandfathered Plan: plan in existence on March 23, 2010 that has not been changed in ways that substantially cut benefits or increase costs for consumers as long as employers notify employers that the plan is grandfathered and they have continuously covered at least one person continuously since March 23, 2010.

Notification to employees of existence of Health Marketplace:

Effective October 1, 2013.  Notify new hires within 14 days of their employment. Template available on DOL website at https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/model-notice-for-employers-who-offer-a-health-plan-to-some-or-all-employees.pdf

Waiting Periods

Can’t be more than 90 days after employee becomes eligible. Can condition eligibility on completion of specified number of hours (no more than 1,200), completion of orientation period (not more than 30 days) or attaining job-specific certification/licensure.

Comply with W-2 Reporting Requirements

Employers must report cost of health coverage on employees’ W-2 forms, beginning Jan 2012 for large employers (those filing 250 or more W-2’s), optional for anyone with fewer than 250 employees until further guidance comes from the IRS.

Affordable Care Act Annual Adjustment

On May 21, the IRS announced in Revenue Procedure 2018-34 the 2019 shared-responsibility affordability percentage. Based on the ACA’s affordability standard as adjusted for inflation, health coverage will satisfy the requirement to be affordable if the lowest-cost self-only coverage option available to employees does not exceed 9.86 percent of an employee’s household income, up from 9.56 percent in 2018.

Employers should not overlook the Affordable Care Act’s annual inflation-adjusted shit in cost-sharing limits for group health plan coverage. Steep penalties for failing to provide affordable coverage under the ACA’s shared-responsibility provisions.

An Annual Adjustment

The affordability standard is the highest percentage of household income an employee can be required to pay for monthly plan premiums, based on the least-expensive employer-sponsored plan offered that meets the ACA’s minimum essential coverage requirements.

2019 FPL Safe Harbor

Many employers use the FPL safe harbor to develop employee contributions for self-only coverage to avoid ACA penalties under Section 4980H(b).

“Using the FPL safe harbor also simplifies ACA reporting and coding of Form 1095-C,” which plan sponsors file with the IRS for each employee offered ACA-compliant health coverage, wrote Richard Stover and Leslye Laderman, consultants with Conduent HR Services, in their recent analysis.

For 2019, the maximum monthly premium contribution that meets the FPL safe harbor will be 9.86 percent of the prior year’s federal poverty level ($12,140 in most states for 2018) divided by 12, or $99.75.

Affordability Safe Harbors

Since employers don’t know their workers’ household incomes, to which the affordability threshold applies, the ACA created three safe harbors, any of which can be used in place of household income:

  • The employee’s W-2 wages—as reported in box 1—generally as of the first day of the plan year (see IRS Questions and Answers).
  • The employee’s rate of pay—hourly wage rate multiplied by 130 hours per month—as of the first day of the plan year.
  • The individual federal poverty level as of six months prior to the beginning of the plan year, since the FPL isn’t published for a given year until January.

2019 FPL Safe Harbor

  • The IRS can impose a shared-responsibility penalty when an employer with 50 or more full-time or equivalent employees—known as an applicable large employer (ALE)—”fails to offer minimum essential coverage to substantially all of its full-time employees and their dependent children during a month and at least one full-time employee receives a premium tax credit” through the ACA’s public marketplace exchange. An ALE satisfies the “substantially all” standard for any given month if it offered coverage to at least 95 percent of its full-time employees and their dependent children during that month.
  • For 2019, Stover and Laderman noted that actuaries estimate that the Section 4980H(b) penalty for failure to offer affordable, minimum-value coverage will be $3,750 per employee (or $312.50 per month), up from $3,480 (or $290 per month) in 2018.

Given the repeated failures to repeal or even improve upon the major shortcomings of the Patient Protection and Affordable Care Act (ACA), employers should continue to report on the offer of health coverage to their full-time employees.


ICE Planning Surge of I-9 Audits This Summer

Immigration and Customs Enforcement (ICE) is planning a nationwide increase of Form I-9 audits this summer. Derek Benner, head of ICE’s Homeland Security Investigations unit, told The Associated Press “That another nationwide wave of audits planned this summer would push the total ‘well over’ 5,000 by Sept 30. ICE audits peaked at 3,127 in 2013.” The agency has developed a plan to open as many as 15,000 audits a year, subject to funding and support for the plan from other areas of the administration, Benner said.

The plan also proposes changing the manner of delivery of the ICE Notice of Inspection (NOI) from in person to email or certified mail. Furthermore, after an initial review, by electronically scanning the I-9 forms for suspicious activity, the most egregious cases will be sent to regional offices for more in-depth investigation. Benner said the agency will focus both on criminal cases against employers as well deporting employees who are working in the country illegally.

What does this mean for employers? It is highly recommended for employers to consider conducting a self-audit, to minimize the potential of fines. Civil penalties for knowingly employing unauthorized immigrants can range from $539 to $21,563. In addition, Form I-9 paperwork violations carry a penalty of $216 to $2,156 per worker.

If a company is selected for an I-9 audit, a notice of inspection alerts business owners that ICE is going to audit their hiring records to determine whether or not they are in compliance with the law. Employers are then required to produce their company’s I-9s within three business days, after which ICE will conduct an inspection for compliance. If employers are not in compliance with the law, an I-9 inspection of their business will likely result in civil fines and could lay the groundwork for criminal prosecution, if they are knowingly violating the law.

If an employee submits a document that clearly looks fraudulent, or like it does not identify the correct individual, a managerial staff member should ask the employee to provide alternate documentation from the list of acceptable documents.

On the other hand, if a submitted document is hard to read, unclear, or confusing, no action may be required by the employer. The US Immigration and Customs Enforcement (ICE) guidance related to internal I-9 audits specifically states that an employer “should recognize that it may not be able to definitively determine the genuineness of Form I-9 documentation based on photocopies of the documentation. An employer should not request documentation from an employee solely because photocopies of documents are unclear.”

There aren’t always easy answers for how to handle situations that arise during internal I-9 audits. An employer must balance the risk of being found to have knowingly continued to employ someone without valid work authorization against the potential that their actions will lead to a claim of discriminatory treatment based on immigration status.

New York Sexual Harassment Training Laws

Effective October 9, 2018, all employers must adopt and distribute a sexual harassment prevention policy and provide interactive sexual harassment prevention training to all employees.

The state will be developing a model policy and a model training, so employers will not need to create their own. They will, however, need to administer both the policy and the interactive training. Employers do have the option of creating their own policy and training program, so long as it meets the requirements set by the state.

Policy Requirements:

  • Statement prohibiting sexual harassment;
  • Examples of prohibited conduct that would constitute sexual harassment;
  • Information concerning the federal and state statutory provisions concerning sexual harassment and remedies available to victims, along with a statement that there may be additional applicable local laws;
  • Standard complaint form;
  • Procedure for the timely and confidential investigation of complaints;
  • Statement informing employees of their rights of redress and all available forums for adjudicating sexual harassment complaints administratively and judicially;
  • Statement that sexual harassment is a form of employee misconduct, and that sanctions will be enforced against individuals engaging in sexual harassment and managers and supervisory personnel who knowingly allow such behavior to continue; and
  • Statement that retaliation against individuals reporting sexual harassment or who testify or assist in any proceeding is unlawful.

Interactive Training Requirements*

  • Explanation of sexual harassment;
  • Examples of conduct that would constitute unlawful sexual harassment;
  • Information concerning the federal and state statutory provisions concerning sexual harassment and remedies available to victims; and
  • Information concerning employees’ rights of redress and all available forums for adjudicating complaints.

 *The state’s definition of interactive is not yet known

No Mandatory Arbitration or Confidential Settlements

Contract provisions that require arbitration for claims of sexual harassment are prohibited. Any such provision in a contract entered into after July 11, 2018, will be null and void. The rest of the contract will remain enforceable, assuming it was drafted correctly. However, this provision of the new law may be unenforceable under the Federal Arbitration Act. Until this question is resolved, we encourage employers to operate as if contract clauses that require arbitration of sexual harassment claims will not hold up in court or to consult with legal counsel before continuing to use them.

Confidential settlement agreements with respect to claims of sexual harassment are also prohibited, unless a confidential agreement is the preference of the person who brought the claim. If the claimant does not want confidentiality, employers will not be able to include language that requires it. This provision of the law also takes effect July 11, 2018.

Protections for Non-Employees

Non-employees—such as vendors, contractors, and consultants—now have the ability to file a complaint with the Division of Human Rights if they feel they have been sexually harassed in an employer’s workplace. This expansion of the law has already taken effect.

Stop Sexual Harassment in NYC Act

The New York City Council has passed the Stop Sexual Harassment in NYC Act (the “Act”) on May 9, 2018. This included a package of bills aimed at addressing and preventing sexual harassment in the workplace.

Sexual Harassment Training

  • Effective April 1, 2019, private employers with more than 15 employees (including interns) must provide annual anti-sexual harassment ‘interactive’ training to all employees who work more than 80 hours per year. This training is required to be completed by all employees, including supervisory and managerial employees.
  • First training must be conducted within 90 days of initial hire but employees who received training from a prior employer, within the calendar year, are exempt.
  • New York City Commission on Human Rights will post a model training which employers can use, as long as employers include specific information about their internal compliant process for address sexual harassment complaints.
  • In addition to requirements under state law, the training must also include information concerning bystander intervention, including any resources explaining how to engage in bystander intervention.
  • The enacted bill requires employers to obtain from each employee a signed acknowledgment that he or she attended the training, which may be electronic, and must be maintained for at least 3 years and available for inspection by the NYCCHR.

Sexual Harassment Poster/Information Sheet

  • Effective September 6, 2018 every employer must conspicuously display (in breakrooms or other common areas employees gather) an anti-sexual harassment rights and responsibilities poster designed by the New York City Commission on Human Rights.
  • Employers must post both an English and Spanish version of the poster and should consider additional languages based on the employee population.
    • A Spanish version of the Sexual Harassment Poster must be posted even if no employees speak the Spanish language.
  • Employers must also distribute, to all new employees, an information sheet (i.e., notice) addressing the same information as the poster and which may be incorporated in an employee handbook.
  • The law also requires the City Commission to post resources about sexual harassment on its website, including an explanation about sexual harassment as a form of unlawful discrimination, specific examples of sexual harassment and retaliation, information on bystander intervention, and information about filing a complaint through the City Commission and other government agencies. If signed, this bill would take effect 90 days after signing.

Additional NYC Changes

  • Effective May 9, 2018:
    • Statute of limitations for gender-based harassment complaints made to the NYCCHR is increased from 1 year to 3 years.
    • Employers with less than 4 employees are now subject to gender-based harassment complaints under the New York City Administrative Code.
  • By August 7, 2018, NYCCHR shall post resources on its website about sexual harassment and an interactive tool describing the complain process available through NYCCHR.
  • Additional reporting and training requirements for employees of New York City agencies.


Tax Reform Update

As a result of the new tax reform law, the IRS released a new Form W-4 for 2018 along with a new withholding calculator on February 28, 2018.

While employers are not required to obtain new forms from their employees for 2018, because of the new tax law, you may want to encourage your employees to review their withholdings to be sure they are appropriate. As a reminder, the IRS recommends employees review their withholdings and submit a new W-4 at the beginning of each year or when personal circumstances change.

For additional information, please read the IRS news release IR-2018-36 at https://www.irs.gov/newsroom/updated-withholding-calculator-form-w-4-released-calculator-helps-taxpayers-review-withholding-following-new-tax-law.


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