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, 2019. The forms are also due to the IRS by January 31, 2019, in most cases. If you are interested in having a Smith Schafer professional to prepare Forms 1099 for you, please forward the information to our office by January 15, 2019. Information should include a completed W-9 Form for each payee (for a blank W-9 form click here), the type of payment issued to payee (i.e. rent, interest, dividends, miscellaneous services) and total amount of payments for the year
Note: The IRS has increased the failure to file penalties. Penalties may be up to $550 per form if failures are deemed to be an intentional disregard to file.
Form W-2 Reporting
The following is a list of fringe benefits required by the IRS to be included in employees' W-2s:
Health and Dental 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)
Certain transportation, commuting and parking benefits (changed for 2018)
It is required to electronically file of Forms W-2 and Forms 1099 for the year 2018, 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 2018, 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.
The amount an employee can contribute to a flexible spending account (FSA) of a cafeteria plan for health expenditures is limited to $2,650 in 2018 and $2,700 in 2019.
The maximum contribution amount an employee can make is $5,000 per year. Employers offering this benefit as part of their cafeteria plans need to be aware that there is additional reporting required on the employee W-2.
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 $3,450 for single coverage and $6,900 for family coverage in 2018 and $3,500 and $7,000, respectively, for 2019. Taxpayers age 55+ can make an additional catch-up contribution of $1,000 for both 2018 and 2019. For 2018, in order for plans to qualify as high deductible plans, they must have minimum deductibles of $1,350 single coverage and $2,700 for family coverage and maximum out-of-pocket costs for single coverage of $6,650 and family coverage $13,300. The minimum deductibles for 2019 are unchanged, but the maximum out-of-pocket costs have increased to $6,750 for single coverage and $13,500 for family coverage. In some cases, the HSA contributions amounts should be reported on the W-2 with a code W.
If you provide company autos to owners or employees, who also use the vehicle for personal use, a value needs to be added to the employee W-2.
Transportation, Commuting & Parking Benefits
The Tax Cuts and Jobs Act passed on December 22, 2017 made some changes to the treatment and destructibility related to certain transportation, commuting and parking benefits. Contact a Smith Schafer professional to determine what, if any, additional information will be needed for reporting.
Federal Unemployment Tax (FUTA)
The standard FUTA (Federal Unemployment Tax) 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 2018 social security wage base is $128,700, but will increase to $132,900 for 2019. The employee and employer social security tax rate is unchanged at 6.2%. The Medicare tax rate is also unchanged at 1.45%
If you have questions regarding your tax situation, click here to contact us. We appreciate your continued business and look forward to serving you in the coming year.