Preliminary 2018 payroll tax changes and 2017 year end

As another calendar year end approaches, some preliminary payroll related information is outlined below:

2017

There are no W-2 nor 1099-MISC changes for 2017. It is not too late to order W-2/W-3 and other tax forms from Dynamic Systems.

We plan to have W-2/W-3 federal and state e-filing testing phases completed within the next few days, and that option will again be available for Advanced Accounting 7i users.

(Postscript:  our annual W-2/W-3 federal/state e-filing interface testing was completed successfully on Dec. 27, 2017.)

2018

Social security including OASDI rates and limits:

The new social security wage maximum for 2018 is $128,400 (not $128,700 per some initial reports). The 6.2% and 1.45% rates remain unchanged.

See:

https://www.ssa.gov/policy/docs/quickfacts/prog_highlights/index.html

FUTA:

There are no FUTA changes:  the wage limit remains at $7,000 with a net rate for most employers of 0.6%.  The quarterly deposit threshold of $500 also remains the same.

California and Virgin Islands were both expected to have increased FUTA taxes for 2017, resulting in an additional 2.1% tax increase over the normal 0.6% net rate.

SUTA:

Many states will have SUTA wage base increases.  SUTA rates typically vary based on experience.  You should have hopefully received notification of your state's new wage base and your new rate if it applies.  Those changes need to be implemented in the Advanced Accounting software after your final 2017 payrolls are processed and before your first 2018 payroll (see recommendations).

Federal income tax withholding:

The IRS initially indicated on Dec. 13, 2017 that payroll withholding guidance for the coming year would necessarily be delayed and that taxpayers would not begin to start seeing any changes until early February. In short, Congress waited far too late in the year for anyone to expect a smooth transition into the beginning of a new year. On Dec. 26 the IRS updated their prior statement to indicate basically the same thing, that guidance was forthcoming in January and that they were "encouraging" employers and payroll service providers to implement those changes in February. While there were some other reports indicating that form W-4 might change, the IRS is now clarifying that no W-4 changes are expected.

See:

https://www.irs.gov/newsroom/irs-statement-withholding-for-2018

Accordingly, end users should not yet fret about making federal tax withholding changes:  use the same tables that are already in place for your upcoming January 2018 payrolls.

State income tax withholding:

Because many state income tax withholding formulas are in part based on federal amounts withheld, we expect to see more states than usual making state withholding tax changes in 2018.  In fact, we are already aware of ten (10) states that have published withholding tax tables effective January 1, 2018, plus Washington, D.C.   Since we expect even more to follow, it is premature to put out any updated tax tables just yet so we plan to wait to update those tables and also provide any required program updates once the federal changes become fully implemented and related "guidance" is provided. Most jurisdictions have implementing language that indicate end users are to implement tax table changes "as soon as practical."   We believe the unusual current circumstances justify delaying implementing changes until all of the new rules are fully known and at a time when changes can be smoothly implemented on both a state and federal basis.  Income tax withholding is after all a game of rough estimation.  If you have, however, received a formal notification of a state income tax withholding change, see our recommendations below.

Recommendations

Remember that year end routines and payroll year end processing are different and mostly not connected: they are only connected in that your year end routine needs to be run before you will be able to process payroll checks into the new year but ONLY if your fiscal year is based on the calendar year.

Use the PR option G "Clear employees/process W-2s later option.  This MUST be done before you start processing 2018 payroll checks.  Order forms that you expect to need now.  You do not, however, need to rush and print your W-2's before your first 2018 payroll as long as you use this option.

Enter the new social security tax wage limit in SY option D either before your first 2018 payroll or by sometime in January.

Make any required SUTA changes that go into effect on January 1 based on notices you may have received from your state in SY option D before your first 2018 payroll.

Withhold federal income taxes in January 2018 based on the same tables you are currently using.

Implement state withholding income tax changes in PR option K if you have received a specific notification from your state that clearly indicate the changes are effective January 1, 2018.

Watch our year end payroll update link for more information and which will be updated for new developments:

http://www.addsuminc.com/advyearend.html