On December 18, 2015, President Obama signed into law two bills that will affect employers: “The Consolidated Appropriations Act of 2016,” commonly referred to as the “Omnibus Appropriations” bill, and “The Protecting Americans from Tax Hikes Act of 2015” (PATH Act), commonly referred to as the “tax extenders” bill.
A number of the tax provisions in the recently passed legislation will have direct implications for employer payroll, benefits, and tax strategies. Most notably, unlike last year’s one-year extension, the Act provides an extension of over 50 separate tax benefits that expired on December 31, 2014 on either a two-year, five-year, or permanent basis. Below is a summary of selected provisions of interest to employers.
- Delay of Excise Tax on High-Cost, Employer-Sponsored Health Coverage – delays for two years the 40% Excise Tax on high-cost, employer-provided health care plans, the so-called “Cadillac tax” (Section 4980I of the Internal Revenue Code). This Excise Tax now takes effect after 2019. The tax was also modified to make it deductible, and a study of the benchmark for the “age and gender” adjustment was established.
- Accelerated Forms W-2 Filings – requires Forms W-2, W-3, and returns or statements to report non-employee compensation (i.e., Forms 1099) to be filed on or before January 31, following the taxable year, beginning with tax year 2016 (i.e., Forms W-2 and 1099 filed in 2017).
- Truncated Social Security Numbers on Forms W-2 – authorizes the IRS to promulgate a regulation to permit employee Social Security Numbers to be truncated on Forms W-2 (e.g., XXX-XX-9999). The provision is effective immediately; however, the IRS must first issue regulations, most likely making the provision effective in 2016 (for Forms W-2 filed in 2017).
- Parity for Employer-Provided Mass Transit and Parking – extended permanently the maximum monthly exclusion amount for transit passes and vanpooling benefits in order to match the exclusion allowed for qualified parking benefits. In 2015, the monthly maximum is $250 for combined transit pass and vanpooling benefits and $250 for parking benefits excluded from federal income tax withholding, FICA taxes, and FUTA. In 2016, these monthly maximums are increased to $255. For bicycle commuting reimbursements, the 2015 and 2016 maximum monthly amount excluded is $20. The retroactive nature of this change may require action by employers in the closing days of 2015 to re-compute benefits as nontaxable, prior to closing out the year and issuing Forms W-2.
After similar parity legislation was enacted on December 19, 2014, the IRS published Notice2015-2 to provide guidance related to the Tax Increase Prevention Act of 2014 (Pub. L. 113-295), which retroactively increased the monthly transit benefit exclusion under § 132 of the Internal Revenue Code from $130 to $250 for calendar year 2014. The notice provided that employers may not retroactively increase the transit benefit for 2014, but permitted employers that had made excess transit benefits over $130 per month (up to $250) in 2014 to adjust the employee’s taxable wages on Form W-2.
The notice also outlined procedures to address the retroactive application of the increased exclusion for 2014, including a special administrative procedure in which employers were permitted to apply all changes in the excludable amount for transit benefits provided in all quarters of 2014 to the Form 941, Employer’s Quarterly Federal Tax Return, for the fourth quarter of 2014. Notice 2015-2 does not address the present legislation, but the IRS may issue similar guidance in the coming weeks.
- Safe Harbor for de Minimis Errors on Forms W-2 – If any single dollar amount reported on a Form W-2 differs from the correct amount by less than $100, and any single amount reported for tax withheld on a Form W-2 differs from the correct amount by less than $25, then no correction will be required, and no accuracy penalty will apply for failure to furnish a correct payee statement. However, if an employee requests a corrected Form W-2, then a Form W-2C must be provided and must be filed with the Social Security Administration. The IRS is directed to issue regulations to implement this section, which is effective for returns required to be filed, and payee statements required to be provided, after December 31, 2016.
- Indian Employment Tax Credit – extends through December 31, 2016, the credit for the first $20,000 of qualified wages paid to each qualified employee who works on an Indian reservation.
- Wage Credit for Employees Who Are Active-Duty Members of the Uniformed Services –expands the current credit from 20% of eligible differential wage payments per qualified employee to 100% of differential wage payments made to employees called to active duty. The credit is also expanded to allow businesses of all sizes to claim the tax credit (previously limited to eligible small businesses of fewer than 50 employees). This credit was extendedpermanently.
- Empowerment Zone Tax Incentives – extends through December 31, 2016, employment credits for businesses and employers that hire employees who reside and work in an empowerment zone (among other tax incentives). Additionally, a modification was made to the enterprise zone facility bonds. The change would ease the 35% in-zone employment requirement to permit employees residing in any empowerment zone, enterprise community, or qualified low-income community to be used for calculation purposes.
ADP Compliance Resources
ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located atwww.adp.com/regulatorynews.
ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded.
If you have any questions regarding our services, please call 855-466-0790.
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Updated December 21, 2015
Usually, profits you earn are taxable. However, if you sell your home, you may not have to pay taxes on the money you gain. Here are ten tips to keep in mind if you sell your home this year.
- Exclusion of Gain. You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least two out of the five years before the date of sale.
- Exceptions May Apply. There are exceptions to the ownership, use and other rules. One exception applies to persons with a disability. Another applies to certain members of the military. That rule includes certain government and Peace Corps workers. For more on this topic, see Publication 523, Selling Your Home.
- Exclusion Limit. The most gain you can exclude from tax is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.
- May Not Need to Report Sale. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
- When You Must Report the Sale. You must report the sale on your tax return if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale, you should review the Questions and Answers on the Net Investment Income Tax on IRS.gov.
- Exclusion Frequency Limit. Generally, you may exclude the gain from the sale of your main home only once every two years. Some exceptions may apply to this rule.
- Only a Main Home Qualifies. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.
- First-time Homebuyer Credit. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules, see Publication 523.
- Home Sold at a Loss. If you sell your main home at a loss, you can’t deduct the loss on your tax return.
- Report Your Address Change. After you sell your home and move, update your address with the IRS. To do this, file Form 8822, Change of Address. Mail it to the address listed on the form’s instructions. If you purchase health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan.
Additional IRS Resources:
IRS YouTube Videos:
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July 20, 2016 Español
For purposes of the Affordable Care Act, an employer’s size is determined by the number of its employees. Employer benefits, opportunities and requirements are dependent upon the employer’s size and the applicable rules. If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an ALE for the current calendar year. However, there is an exception for seasonal workers.
If you have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, your organization is an ALE. Here’s the exception: If your workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and the employees in excess of 50 during that period were seasonal workers, your organization is not considered an ALE. For this purpose, a seasonal worker is an employee who performs labor or services on a seasonal basis.
The terms seasonal worker and seasonal employee are both used in the employer shared responsibility provisions, but in two different contexts. Only the term seasonal worker is relevant for determining whether an employer is an applicable large employer subject to the employer shared responsibility provisions. For information on the difference between a seasonal worker and a seasonal employee under the employer shared responsibility provisions see our Questions and Answers page.
See the Determining if an Employer is an Applicable Large Employer page on IRS.gov/aca for details about counting full-time and full-time equivalent employees. You can also see our Health Care Law: Highlights for Applicable Large Employers video on the IRS YouTube channel’s Health Care playlist.
Creating Your Five-Year Growth Plan Featured
Any business with aspirations for continued growth should take the time to create a five-year plan that can serve as a blueprint for building a strong, scalable business. The potential benefits of such a plan are wide-ranging--not just for what it can provide, but also for what it can help prevent. As Tony Peressini, CEO of GreenDrop, LLC, warns, "If you're not constantly looking to grow and adjust your plans according to the current business climate, you will most likely become stagnant."
A five-year growth plan is part of a larger strategic initiative that all organizations should undertake, advises Christopher A. Szpryngel, acting dean of the Malcolm Baldridge School of Business at Post University. A strategic plan acts as a roadmap for the future direction of a company. It involves setting organizational and departmental goals, describing the company's mission and vision, and measuring success and progress over time. The role of the five-year growth plan within that overall strategic plan is to "illustrate the organization's planned growth for each year, identifying what areas are expected to grow and at what rate," he explains.
Creating an effective five-year growth plan is not a solo project. "Plans created in isolation stand less chance of being adopted easily," notes David Clayton, executive chairman of SDL, a provider of global content management and language solutions. While owners and CEOs generally have a strong sense of the direction in which they'd like to take their companies, involving direct reports in developing the plan provides owners and CEOs with the value of different perspectives, and it promotes a greater sense of ownership throughout the organization when it comes to executing the plan.
The areas of focus in a five-year plan may vary depending on the nature of the business, the industry in which it competes, and its goals, but the key is to concentrate on issues related to scalability. "If we define scalability as continuing to maintain or increase profits while increasing revenues, then it's important to watch expenses," Szpryngel says. Two important areas are cost-of-goods-sold (including labor, materials, billable hours, overhead, etc.) and supply chain management.
Szpryngel suggests starting with a SWOT (strengths, weaknesses, opportunities, threats) analysis to determine where the company is today and its most important challenges and opportunities for growth. Next comes a market analysis to identify your target customers and determine how best to reach and convert them. That's followed by a competitive analysis: Who is your competition? What are their strengths and weaknesses? How much market share do they control, and how much can you take from them? Finally, you need resource assessment to determine whether you have the human capital resources and required skills to accommodate additional growth.
The outline of a typical five-year plan should look something like this:
- Executive summary
- Company profile
- Growth goals
- Market analysis
- Customer analysis
- Products/services marketing plan
- Operations plan
- Leadership team
- Financial projections
- Key performance indicators (KPIs)
Your five-year plan should be updated continuously because it is a dynamic document, Clayton stresses. "Change is constant, and plans need to be updated whenever things change. Although on the surface it might seem this could lead to mass confusion, the reverse is actually true. Frequently updating your plan based on current conditions and assumptions provides more order and predictability," he says.