As the end of the year approaches, we want to remind you of various payroll and Form 1099 related changes. As well as other items to consider when processing your year-end forms.
Form 1099 Reporting
Forms 1099 are due to recipients by January 31, 2018. The forms are also due to the IRS by January 31, 2018, in most cases. If you would like your Smith Schafer professional to prepare Forms 1099 for you, please forward the information to our office by January 15, 2018. Information should include a completed W-9 Form for each payee (click here for a blank W-9 form), the type of payment issued to payee (i.e. rent, interest, dividends, miscellaneous services) and total amount of payments for the year (click here for a blank worksheet to assist you in gathering the required information). The IRS has increased the failure to file penalties. Penalties may be up to $530 per form, if failures are deemed to be an intentional disregard to file.
Form W-2 Reporting
The following is a list of certain fringe benefits required by the IRS to be included in employees' W-2s:
- Health insurance premiums paid for S-corporation shareholders
- Life insurance premiums paid for S-corporation shareholders
- Long-term care insurance premiums paid for S-corporation shareholders
- Disability insurance (STD & LTD) premiums paid for S-corporation shareholders
- Health insurance premiums paid for employees (see below for additional information)
- Group term life insurance in excess of $50,000
- Personal use of company owned vehicles (click here for a worksheet to assist in calculating the amount to add to an employees’ W-2)
Note: Minnesota Revenue requires electronic filing of Forms W-2 and Forms 1099 for the year 2017 if you have more than 10 forms. Submit Forms W-2 and Forms 1099 using your Minnesota e-Services online account.
Health Insurance Premiums
The Affordable Care Act includes a provision requiring employers to disclose on each employee’s annual Form W-2 the cost of employer-sponsored health coverage. For 2017, if you are an employer who issued 250 or more Forms W-2, you are required to disclose this information in box 12 with code DD. Employers with fewer than 250 employees are exempt from this disclosure requirement.
Affordable Care Act Reporting
The amount an employee can contribute to a flexible spending account (FSA) of a cafeteria plan for health expenditures is limited to $2,600 in 2017 and $2,650 in 2018.
Health Savings Accounts (HSA)
Health savings accounts may only be used in conjunction with a high deductible health insurance plan. The total amount an employee or employer can contribute to an HSA account is limited to $3,400 for single coverage and $6,750 for family coverage in 2017 and $3,450 and $6,900, respectively, for 2018. Taxpayers age 55+ can make an additional catch-up contribution of $1,000 for both 2017 and 2018. For 2017, in order for plans to qualify as high deductible plans, they must have minimum deductibles of $1,300 single coverage and $2,600 for family coverage and maximum out-of-pocket costs for single coverage of $6,550 and family coverage $13,100. The minimum deductibles and maximum out-of-pocket costs are slightly higher for 2018. In some cases, the HSA contributions amounts should be reported on the W-2 with a code W.
Federal Unemployment Tax (FUTA)
The standard FUTA rate is 6.0%; generally employers receive a credit of 5.4% when they file their Form 940. This results in a net FUTA rate for most states of 0.6%. However, some states are subject to a FUTA credit reduction if they have not repaid loans from the federal unemployment trust fund. For 2017, Minnesota is not a credit reduction state and is eligible for the full credit of 5.4%. For a full list of credit reduction states, visit the IRS website and search FUTA Credit Reduction.
The 2017 social security wage base is $127,200, but will increase to $128,700 for 2018. The employee and employer social security tax rate is unchanged at 6.2%. The Medicare tax rate is also unchanged at 1.45%
We are here to help!
If you have questions regarding your tax situation, click here to contact us. We look forward to speaking with you!