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The IRS has issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. The IRS has also announced: a) the 2023 depreciation component of the mileage rate; and (b) the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate (FAVR) plan.
Background-TCJA. From 2018 through 2025, the Tax Cuts and Jobs Act suspended all miscellaneous itemized deductions subject to the 2%-of-adjusted gross income (AGI) floor under Code Sec. 67, including unreimbursed employee travel expenses. Accordingly, the business standard mileage rate for 2023 cannot be used to claim an itemized deduction for unreimbursed employee travel expenses. However, deductions for expenses that are deductible in determining AGI are not suspended [Rev Proc 2019-46, 2019-49 IRB 1301].
The TCJA also generally suspended the deduction for moving expenses from 2018 through 2025, but this suspension doesn't apply to members of the Armed Forces on active duty who move pursuant to a military order and incident to a permanent change of station to whom Code Sec. 217(g) applies.
Standard mileage rates for 2023. Effective Jan. 1, 2023, the standard mileage rates for the use of a car (including vans, pickups, and panel trucks) are:
FAVR plans. A taxpayer may use the mileage allowance method for a leased auto only if he or she uses that method (or a fixed and variable rate (FAVR) allowance method) for the entire lease period. Employers may use a FAVR allowance method to reimburse employees who supply their own cars for business (whether the cars are leased or owned).
For 2023, the standard auto cost (including trucks and vans) used to compute the FAVR allowance cannot exceed $60,800 (up from $56,100 for 2022) [Notice 2023-03, Sec. 5].
For purposes of the fleet-average valuation rule in Reg §1.61-21(d)(5)(v) and the vehicle cents-per-mile valuation rule in Reg §1.61-21(e), the maximum FMV of automobiles (including trucks and vans) first made available to employees in calendar year 2023 is $60,800 [Notice 2023-03, Sec. 6].
When the new rates are effective. Notice 2021-3 is effective for: (1) deductible transportation expenses paid or incurred on or after January 1, 2023; (2) mileage allowances or reimbursements paid to a charitable volunteer or a member of the Armed Forces to whom Code Sec. 217(g) applies: (a) on or after January 1, 2023 and (b) for transportation expenses the charitable volunteer or such member of the Armed Forces pays or incurs on or after January 1, 2023; and (3) for purposes of the maximum FMV of employer-provided automobiles for which employers may use the fleet-average valuation rule in Reg §1.61-21(d)(5)(v) or the vehicle cents-per-mile rule in Reg §1.61-21(e), automobile first made available to employees for personal use on or after January 1, 2023 [Notice 2023-03, Sec. 7].
The IRS has released a draft of its 2023 instructions for Forms W-2 and W-3.
Forms redesigned. The draft instructions advise that, beginning with the tax year 2023, forms (filed in tax year 2024), taxpayers may complete and print Copies 1, B, C, 2 (if applicable), and D (if applicable) of Forms W-2, W-2AS, W-2GU, and W-2VI on IRS.gov to provide to the respective recipient. The IRS notes that an entry made in any one of these copies will automatically populate to the other copies. However, Copy A cannot be completed online to print and file with the SSA. It is posted on IRS.gov for informational purposes only.
For 2023, Copy D for employers and the Note for Employers that was previously provided on the back of Copy D has been removed from the Forms W-2AS, W-2GU, and W-2VI to reduce the number of pages for printing purposes. There are no changes to the 2023 version of Form W-2.
Electronic filing. Currently, electronic filing is required if 250 returns of one type are filed. If final regulations are issued and effective for 2023 tax returns required to be filed in 2024,the IRS intends to post an article at IRS.gov/FormW2 explaining the change. But for now, the number remains at 250, as noted in the instructions.
Disaster tax relief. The IRS reminds taxpayers that disaster tax relief is available for those affected by recent disasters. For more information about disaster relief, go to IRS.gov/DisasterTaxRelief.
Penalties increased. For 2023, the penalties for failure to file and failure to furnish , and penalties for intentional disregard of filing and payee statement requirements, have increased due to adjustments for inflation. The higher penalty amounts apply to returns required to be filed after December 31, 2023.
The increased penalties will be:
The IRS reminds taxpayers that for the latest information about developments related to Forms W-2 and W-3 and their instructions, such as legislation enacted after they were published, go to IRS.gov/FormW2.
News cycles continue to move at a rapid pace. Payroll-related news involves many topics at the federal, state, local, and international levels involving legislation, regulations, guidance and more. There are deadlines and effective dates to track.
So, in case you missed it (ICYMI), the following is a list of some of the more important recent payroll news items you may have missed.
IRS Issues Final Versions of Publication 15 and 15-T for 2023. These highly anticipated publications contain various federal payroll tax information for employers that include withholding tax tables.
IRS Releases Final Versions of 2023 Forms W-4 and W-4R. The final versions of the forms contain no substantive changes from previously released drafts.
$1.7 Trillion Congressional Omnibus Bill Includes $12.3 Billion for IRS and $13.8 Billion for Labor Department. In additional to the notable funding increases, the 4,100 page piece of legislation includes the SECURE 2.0 Act that would require employers to automatically enroll employees in a retirement program, as well as provisions on the topics of payroll tax preparer fraud, worker classification, the work opportunity tax credit, and certain temporary work visas.
IRS Issues Final Version of Form W-4P, Publication 509, and the Second Draft of Publication 15A. The IRS has issued the final version of the 2023 Form W-4P (Withholding Certificate for Periodic Pension or Annuity Payments), the 2023 Publication 509 (Tax Calendars), and the second draft for the 2023 Publication 15 A (Employer's Supplemental Tax Guide).
Top 10 Payroll Update Stories of 2022. As another year comes to a close and another year-end for payroll professionals ramps up, let's take a look at some of the more popular payroll-related stories this year that our readers clicked on and viewed.
Alaska - Unemployment Tax Rates for 2023. The Alaska Department of Labor and Workforce Development (DLWD) has issued unemployment tax rate information for the 2023 tax year.The taxable wage base will increase from $45,200 to $47,100 in 2023.
California-Employer's Guide and Household Employer's Guide for 2023 Now Available Online. The 2023 California Employment Development Department (EDD) has announced that its Employer's Guide (DE 44) and the 2023 Household Employer's Guide (DE 8829) are now available online. All employers must electronically submit employment tax returns, wage reports, and payroll tax deposits to the EDD.
Connecticut-Withholding Tables 2023. The Connecticut Department of Revenue Services (DRS) has issued the 2023 Withholding Calculation Rules. The note at the top of the publication states that 2023 withholding calculation rules and 2023 withholding tables are unchanged from 2022.
District of Columbia-No Changes to 2023 Unemployment Tax Rate Information. The District of Columbia Department of Employment Services (DOES) has announced that unemployment tax rates will continue to be determined under Rate Table VI in 2023. Experience rates under Table VI range from 1.0% to 4.4% for positive-balanced employers and from 6.2% to 7.4% for negative-balanced employers.
Hawaii-2023 Unemployment Tax Information. The Hawaii Department of Labor and Industrial Relations (DLIR) has announced the following 2023 unemployment tax information: (1) experienced employer rates will be determined under Schedule F (Schedule D in 2022) with a 6.2% maximum tax rate (5.8% maximum tax rate in 2022), (2) new employers will have a 4.0% tax rate (up 1% from 2022), (3) the employment and training assessment rate remains at 0.01%, (4) the taxable wage base increases from $51,600 to $56,700, and (5) the maximum weekly benefit increases from $695 to $763.
Kentucky-2023 Employer Withholding Calculator Released. The Kentucky Department of Revenue (DOR) has posted the 2023 version of its Employer Withholding Tax Calculator to its website, which assists employers in computing the correct amount of state withholding tax for employees.
Montana-2023 Unemployment Tax Rate Information Has Been Released. Montana's Department of Labor and Industry, Unemployment Insurance Division, has released the state's unemployment insurance rates for 2023
New York-2023 Employee Withholding Allowance Certificate Released. The New York Department of Taxation and Finance has released its 2023 version of Form IT-2104 (Employee's Withholding Allowance Certificate), as well as updated instructions.
Rhode Island-2023 Withholding Tables Released. The Rhode Island Division of Taxation (DOT) has issued a booklet with new withholding tables that should be used beginning on January 1, 2023. Tax rates in the percentage method withholding tables will remain the same, but the range of wages in each tax rate will change. Exemption amounts will remain the same as in the 2020 tax year, but the dollar thresholds under which the exemption allowance is phased out will change.
Vermont-2023 Income Tax Withholding Tables, Charts, and Instructions. The Vermont Department of Taxes has issued the 2023 income tax withholding tables, charts and instructions. Wages, pensions, annuities, and other payments are generally subject to Vermont income tax withholding if the payments are subject to federal tax withholding and the payments are made to a Vermont resident or a nonresident of Vermont for services performed in Vermont.
On December 21, 2022, the Office of Child Support Enforcement (OCSE) published a list of answers to employer questions about new hire reporting.
Federal law states that an "employer" for new hire reporting purposes is the same as for federal income tax purposes – as defined by Code Sec. 3401(d) – and includes any governmental entity or labor organization. At a minimum, in any case where an employer is required to have an employee complete a Form W-4 (Employee Withholding Certificate), the employer must meet the New Hire reporting requirements.
Importance of a national directory. According to the OSCE's questions and answers, more than 30% of child support cases involve parents who do not live in the same state as their children. By matching this new hire data with child support case participant information at the national level, the OCSE assists states in locating parents who are living in other states.
Quarterly data outdated. The OCSE explains that quarterly wage data is often outdated when the child support office receives it. There can be as much as a six-month lag between the time the data is submitted and when it is available to the child support office. The OCSE explains that with new hire reporting, data are available within a significantly shorter time period. Because data is more current, noncustodial parents can be located more quickly, allowing child support orders to be established and/or enforced more quickly.
Secure data. The OCSE says that the security and privacy of new hire data are important issues for all those involved in this nationwide program. Federal law requires all states to establish safeguards for confidential information handled by the state agency. All state data is transmitted over secure and dedicated lines to the National Directory of New Hire (NDNH). Federal law also requires that the Secretary of Health and Human Services (HHS) establish and implement safeguards to protect the integrity and security of information in the NDNH, and restrict access to and use of the information to authorized persons and for authorized purposes.
Submitting data. New Hire reports should be sent to the State Directory of New Hire in the state where the employee works. Federal law identifies three methods for submitting New Hire information: (1) first class mail, (2) magnetic tapes, or (3) electronically. Some states also offer additional options, such as fax, email, phone, and website transmissions. The employer's state new hire contact can provide instructions on where and how to send new hire information. Federal employers report New Hire data directly to the NDNH.
Report timing. Employers sending new hire reports by magnetic tape or electronically must make two monthly transmissions not less than 12 or more than 16 days apart. The OCSE says that employers should contact the state where the new hire reports are submitted for all technical information regarding electronic reporting.
What to submit? Federal law requires employers to collect and report these seven data elements: (1) employee’s name, (2) employee's address, (3) Social Security number, (4) date of hire (the date the employee first performs services for pay), (5) employer’s name, m(6) employer's address, and (7) federal employer identification number (EIN).
Penalties. States have the option of imposing civil monetary penalties for noncompliance. Federal law mandates that if a state chooses to impose a penalty on employers for failure to report, the fine may not exceed $25 per newly hired employee. If there is a conspiracy between the employer and employee not to report, that penalty may not exceed $500 per newly hired employee. States may also impose non-monetary civil penalties under state law for noncompliance.
Multi-state employer reporting. Multi-state employers have the following two reporting options: (1) report newly hired employees to the states where they work, or (2) select one state where the employees work and report all new hires to the selected state. If the employer chooses the second option, it must register with the HHS as a multi-state employer, designate the state that it will report, submit the new hires electronically or by magnetic tape to the chosen state no more than twice a month (12 to 16 days apart). Employers can register online or download and fill out a paper form to register as a multi-state employer.
The OCSE's list contains several other questions and answers on new hire reporting.
The wage limit used in the definition of a "control employee" for a governmental employer under the commuting-only valuation rule has increased from $165,300 to $172,100 in 2023 [Office of Policy Management, Salary Table No. 2023-EX, Rates of Basic Pay for the Executive ScheduleOffice of Policy Management, Salary Table No. 2023-EX, Rates of Basic Pay for the Executive Schedule].
Under the commuting-only valuation rule, the value of a vehicle provided to an employee for commuting use is determined by multiplying each one-way commute (that is, from home to work or from work to home) by $1.50. To use this rule, the following requirements must be met:
A "control employee" for a government employer is either an elected official, or a government employee whose compensation equals or exceeds the compensation paid to a federal government employee holding an Executive Level V position. For 2023, a federal government employee holding an Executive Level V position must be paid $172,100.
The IRS had previously announced that a compensation limit of $265,000 should be used to determine whether a worker is a "control employee" for a nongovernmental employer in 2023 [Notice 2022-55].
We have listed the January payroll tax deposit deadlines for semi-weekly and monthly depositors below.
Semi-weekly depositors. Semi-weekly depositors must deposit the income tax they withheld from employee wages, and both the employee and employer share of Social Security and Medicare taxes (FICA taxes), by the end of Wednesday if the payday was on the previous Wednesday, Thursday, or Friday; or by the end of Friday if the payday was on the previous Saturday, Sunday, Monday, or Tuesday.
A due date which falls on Saturday, Sunday, or a legal holiday is postponed until the next business day. Semi-weekly depositors must have at least three business days after the end of a semiweekly period to deposit their taxes.
The January deposit deadlines for semi-weekly depositors are as follows:
Monthly depositors: Filers who have a monthly deposit frequency must deposit the tax for December by January 17th.
Tips. Employees must report tips of $20 or more earned during December to employers by January 10.
Deferred payment of employers' shared Social Security payments. If the employer deferred paying the employer share of social security tax or the railroad retirement tax equivalent in 2020, the remaining 50% of the deferred amount of the employer share of social security tax is due by January 3, 2023.
Forms W-2. Employers should furnish employees their copies of the 2022 Form W-2 by January 31, 2023. If the employee agrees to receive Form W-2 electronically, W-2s must be furnished electronically by January 31 or posted on an accessible website and the employer must notify the employee of the posting. Form W-3 and Copy A of Forms W-2 must be filed January 31, 2023.
Payors of non-employee compensation. Those who paid non-employee compensation must file and furnish Form 1099-NEC for nonemployee compensation paid in 2022 by January 31, 2023.
Forms 940, 941, 943, 944 and/or 945. The deadline for filing the fourth quarter 2022 Form 941 and/or Forms 940, 941, 943, 944 and/or 945 is January 31, unless the tax was deposited in full and on time, in which case employers have until February 10 to file the return(s). FYTA tax owed through December 2022 must be deposited by January 31, 2023.
Holidays. Monday, January 2nd (New Year's Day celebrated; January 16th (Martin Luther King Day).
A case brought against tech giant Amazon in Oregon's state Supreme Court argued the compensability of time spent by workers going through mandatory security screenings on the company's premises.
The facts. A class action of workers at an Amazon warehouse in Troutdale, Oregon, brought a case against the company, alleging that their time spent undergoing mandatory security checks at the end of their shifts should be compensable under Oregon state law.
The law. Under the Fair Labor Standards Act (FLSA) and the Portal-to-Portal Act, employers are required to pay workers at least the established minimum wage for all hours worked, which includes all time "during which an employee is necessarily required to be on the employer's premises, on duty, or at a prescribed workplace." The Portal-to-Portal Act expressly excludes from this coverage time spent "walking, riding, or traveling to and from the actual place of performance of the principal activity" of the work, or "activities with are preliminary to or postliminary to" said work.
Prior case precedent under Integrity Staffing Solutions, Inc. v. Busk, a case tried in the federal Supreme Court, established that time spent undergoing security screenings while entering or leaving the workplace is not compensable under federal law.
The ruling. The Oregon Supreme Court found that, in keeping with the Portal-to-Portal Act and federal case precedent, the security screenings were not compensable under Oregon law, as state law "aligns with federal law regarding what activities are compensable." The case is Buero v. Amazon.com Services, Inc., Or. Sup. Ct. Dkt. No. SC S069135, 12/15/2022 .
The U.S. Department of State has updated the foreign per diem rates that take effect on January 1, 2023.
Foreign Per Diem rates are established monthly by the Office of Allowances as maximum U.S. dollar rates for reimbursement of U.S. Government civilians traveling on official business in foreign areas. Lodging and M&IE (Meals & Incidental Expenses) are reported separately followed by a combined daily rate.
The meal portion is based on the costs of an average breakfast, lunch, and dinner at facilities typically used by employees at that location, including taxes, service charges, and customary tips. The M&IE rate is based on these meal costs plus an additional amount, equal to 10% of the combined lodging and meal costs, to cover incidental travel expenses.
Although the rates are the maximum tax-free reimbursement rates issued for such employees' travel, the IRS also allows employers based in the U.S. to use the per diem substantiation method based on the rate schedule for accountable business travel by employees.
Employers can pay for business meals, lodging, and incidental expenses of employees traveling on business, up to the allowable amounts, without generating additional US federal taxable income for the employees.
Year-end processing poses a number of challenges to payroll administrators, accountants, business owners, and employers of all types. Checkpoint Payroll has put together this series of articles aimed at guiding you through the trials of the year-end processing season.
A high percentage of American workers have protection against income loss through employers' sick leave plans, sickness and accident insurance (usually referred to as third-party sick pay or disability pay) or both. This article provides an overview of how an employer should deal with employer-provided sick leave that is financed through an employer's regular payroll account. Generally, sick pay includes both short and long-term benefits and is often expressed as a percentage of the employee's regular wages.
A definite plan. Third Party Sick Pay (also referred to as disability) is any amount paid under a plan for an employee's temporary absence from work due to injury, illness, or disability. Sick Pay includes both short and long-term benefits and is often expressed as a percentage of the employee's regular wages.
A definite plan or system is a plan or system established by an employer under which sick pay is available to employees generally or to a class or classes of employees. A definite plan or system does not exist if the benefits are provided on a discretionary or occasional basis in accordance with merely a good intention to aid particular employees in time of need.
Characteristics indicating the existence of a definite plan or system include:
Reporting third-party sick pay. Third-party sick pay is reported on Form 8922, Third-Party Sick Pay Recap , if the liability for the employer's portion of FICA taxes has been transferred between the employer and the employer's third party. Whether the third party or the employer reports the sick pay on Form 8922 depends on the entity that is filing Forms W-2 reporting the sick pay paid to individual employees.
Sick pay reported on Form W-2. Third-party sick pay is shown on the Form W-2 for the employee as follows:
Any employee that received disability pay during the calendar year needs to report the pay, with the amount provided by the policy.
Latest date to report payments. Third Party Sick Pay insurers have until January 15, 2023 to notify employers of any disability benefits paid to employees during 2022, although the information might be obtained sooner by specifically requesting it from the provider. If you are notified about disability payments after reporting your last payroll of the year, please contact your payroll specialist immediately. If provided after December 27, 2022, a Form W-2c may be issued. If provided after January 15, 2023, a Form W-2c may be issued and late submission fees will apply.
On December 23, 2022, President Biden released a statement stating that he would sign the Consolidated Appropriations Act of 2023 (CAA) into law as soon as it reaches his desk. The more than 4,000-page piece of legislation was introduced in the U.S. Senate on December 20, 2022. The Senate approved the bill on December 22, 2022 with some Republican support. The U.S. House of Representatives approved the CAA 2023 on December 23, 2022 and sent the massive spending bill to Biden's desk for his signature.
The CAA 2023 contains a number of payroll and employer-related provisions. The following are some of the more important provisions to note.
IRS funding. In addition to the more than $12 billion in funding for the IRS, the 4,100 page bill also provides special funding transfer authority and direct hire authority to address the backlog of returns and correspondence.
As of December 14, 2022, the IRS had 770,000 unprocessed Forms 941 (Employer's Quarterly Federal Tax Return). There is also a total of 347,000 unprocessed Forms 941-X (Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund), some of which cannot be processed until the related Forms 941 are processed.
Of the funding, $5.4 billion will go to enforcement efforts and essential personnel (same as fiscal year 2022) and $4.1 billion for operations support (same as fiscal year 2022).
DOL funding. The more than $13 billion in funding for the DOL is an increase of $652 million above the fiscal year 2022 enacted level and includes $10.5 billion for the Employment and Training Administration ($545 million more than fiscal year 2022). Of that amount, some $3.1 billion is for the operation of the DOL's unemployment insurance program ($284 million more from fiscal year 2022), with a contingency fund to help states if there is a spike in unemployment claims.
For tax year 2022, four states (California, Connecticut, Illinois, and New York) and the U.S. Virgin Islands are FUTA tax credit reduction states. This means that employers pay more in federal unemployment taxes in these jurisdictions due to outstanding federal unemployment loans these states took due to high unemployment and were unable to repay before the deadline to avoid the credit reduction.
The DOL's Wage and Hour Division (WHD) is set to receive $260 million in funding ($9 million above the fiscal year 2022 amount). One of the WHD's functions is to conduct investigations into Fair Labor Standards Act (FLSA) violations by employers.
Consideration for payroll tax preparer fraud. One provision in the bill requires the IRS to issue notices to employers of any address change request and to give special consideration to offers in compromise for taxpayers who have been victims of payroll tax preparer fraud.
Importance of worker classification. The bill also appears to place a degree of importance on the IRS's SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding) worker classification program, saying that the IRS must directly Congressional Committees before making any staffing reduction or reallocations within the SS-8 processing program.
Reduce processing backlog for WOTC. The bill includes $2.5 million in funding to continue efforts to reduce the processing backlog for the work opportunity tax credit program (WOTC) and to help states modernize information technology for processing certification requests. The bill adds processing requests for remote workers may best be accomplished in the state where the workers reside and not where the employer is located.
Work visas. Another section of the bill calls for the DOL to take all necessary steps to ensure prompt processing of H-2B applications and provide a report within 180 days of enactment of the legislation detailing the percentage of applications requesting temporary labor certifications under the H-2B visa classification that are not issued a final decision by the DOL by the employer's original anticipated start date of work.
The typical annual H-2B cap is 66,000, however, there were nearly 65,000 additional H-2B visas made available as of October 1, 2022. The bill also modifies a provision related to H-1B visa fees, used by U.S. employers to hire foreign workers in areas of specialized knowledge or technical expertise. There is also a 65,000 cap on these visas.
SECURE Act 2.0 retirement plan provisions. There are a number of employer-related retirement plan provisions in the CAA 2023, including expanding automatic enrollment in retirement plans, modifying the credit for small employer pension plan startup costs, a higher retirement plan catch-up limit, the treatment of student loan payments as elective deferrals for the purpose of matching contributions, starter Code Sec 401(k) plans for employers with no retirement plan, and improving coverage for part-time workers. See What Employers Need to Know About SECURE 2.0 Provisions in $1.7 Trillion Spending Bill (12/22/2022) for more on the other provisions.
Another 365 days have nearly passed since January 1, 2022 and a New Year is nearly upon us. Music platforms like Spotify reflect on the listening habits of users for the past year and create a playlist of that user's top songs for the year. For 2022, Checkpoint Payroll Update took a look at some of the payroll-related stories that users viewed the most and compiled a list of the 10 news items that stood out. The list is as follows:
Alabama—Unemployment Tax Schedule A in Effect for 2023
A spokesperson for the Alabama Department of Labor has informed Checkpoint Payroll Update that the unemployment tax rate schedule for experienced employers will be determined under Schedule A in 2023 (Schedule C in 2022). Rates range from 0.20% to 5.40% (0.05% to 6.10% in 2022). Experienced employers also pay a 0.06% employment security assessment. The new employer tax rate will continue to be 2.7% in 2023. The taxable wage base will remain $8,000 next year.
Arizona—Amount of Earnings Subject to Garnishment Has Been Reduced
In November 2022, Arizona voters approved Proposition 209, which decreased the portion of a debtor's weekly disposable earnings that is subject to debt collection actions (other than support payments) to the lesser of 10% of disposable earnings, or 60 times the highest applicable federal, state or local minimum wage. Previously, the amount of disposable earnings that was subject to debt collection actions was less than 25% of disposable earnings or 30 times the federal minimum wage. The ballot measure was to become effective on December 5, 2022. However, a temporary restraining order blocked the proposition from becoming an effective. The Maricopa County Superior Court ruled on December 22, 2022, that Proposition 209 should take effect, without guidance or restriction from the Court. Further, the court found nothing in the language of the legislation to be "facially unconstitutional" [Arizona Creditors Bar Association v. State of Arizona, Dkt. No. CV 2022-015921, 12/20/2022].
Arizona—2023 Unemployment Tax Rate Information
The Arizona Department of Employment Security (DES) has informed Checkpoint Payroll Update that unemployment tax rates for experienced employers in the 2023 tax year will range from 0.07% to 18.78% (0.08% to 20.93% in 2022). The new employer rate will remain at 2.0%. The taxable wage base will increase to $8,000 for 2023 pursuant to L. 2021, S1828.
California—EDD Offers Disaster Relief for Humboldt County Earthquake Victims
The California Employment Development Department (EDD) has announced that employers in Humboldt County directly affected by the December 2022 earthquake may request up to a 2-month extension of time from the EDD to file their state payroll reports and/or deposit payroll taxes without penalty or interest. A written request for extension must be received within two months from the original delinquent date of the payment or return [Emergency and Disaster Assistance for Employers, California EDD, 12/27/2022].
California—Employer's Guide and Household Employer's Guide for 2023 Now Available Online
The 2023 California Employment Development Department (EDD) has announced that its Employer’s Guide (DE 44) and the 2023 Household Employer’s Guide (DE 8829) are now available online. All employers must electronically submit employment tax returns, wage reports, and payroll tax deposits to the EDD. Employers can file, pay, and manage their employer payroll tax account online. Employers and third-party administrators can elect to electronically receive and respond to EDD unemployment notices using SIDES.
Colorado—Executive Order Issued Declaring Voter Approved Income Tax Rate Reduction
Colorado Governor Jared Polis signed Executive Order D 2022 048 (Proclamation, Declaration of Vote on Proposition 121 - State Income Tax Rate Reduction) to issue a proclamation declaring the official vote of ballot measures referred to voters at the November 8, 2022, general election and subsequently canvassed by the secretary of state on December 12, 2022. The measure was previously reported in Payroll Update, 11/10/2022. Voters approved a measure that reduces the income tax rate from 4.55% to 4.40%. Under Article V, Section 1(4)(a) of the Colorado Constitution, all such measures become the law or a part of the constitution when approved by a majority of the votes cast and take effect from and after the date of the official declaration of the vote by proclamation of the governor, but not later than 30 days after the vote has been canvassed [Executive Order D 2022 048, Colorado Governor's Office, 12/27/2022].
Colorado—Updated General Guidance on Wage Withholding Requirements for Employers
The Colorado Department of Revenue has updated general guidance on Colorado wage withholding requirements for employers. The annual interest rates for delinquent payments increased from 6% to 8% at the regular rate and 3% to 5% at the discounted rate, which is allowed if the employer pays the tax in full prior to or within 30 days of the issuance of a notice of deficiency. Requirements are discussed with regard to: who must withhold; wages subject to withholding; collection and remittance; Form W-2 wage and tax statements; and electronic Form W-2 specifications [Colorado Wage Withholding Tax Guide, Colo. Dept. Rev., 12/01/2022].
Connecticut—Website on FUTA Credit Reduction Status Added
The Connecticut Department of Labor (DOL) has added a page to its website discussing the state's FUTA credit reduction status. The page provides such information as the effect of borrowing from the Trust Fund on an employer's federal tax rate, and how the state reduced state tax to mitigate federal increases. Public Act 22-118 creates a temporary reduction of 0.2% in the state’s new employer and fund solvency tax rates for calendar year 2023 only. The webpage notes that the DOL projects that Connecticut will continue to have an outstanding loan balance through 2025, therefore, interest will continue to accrue through September 2026.
Connecticut—Two Withholding Publications Updated
The Connecticut Department of Revenue Services (DRS) has updated two publications. The Tax Guide For Payers of Nonpayroll Amounts contains the withholding requirements for payers of nonpayroll amounts, effective January 1, 2023. The due date for filing information returns with DRS is January 31, 2023 (Connecticut Informational Publication No. 2023(8), 12/22/2022). The publication regarding electronic filing and payment has been updated. All taxpayers registered for withholding tax must file the returns electronically and must pay the related taxes by electronic funds transfer (EFT). Withholding tax filers and payers may use myconneCT to file and pay electronically. Payments for withholding tax may be made via ACH credit or credit card (through myconneCT). The publication modifies and supersedes IP 2021(5) (Connecticut Informational Publication No. 2022(6), 12/22/2022).
Illinois—2023 Withholding Tables Released
The Illinois Department of Revenue (DOR) has issued new withholding tables that go into effect on Jan. 1, 2023. The personal exemption allowance will increase from $2,425 to $2,625 in 2023. The income tax rate will remain at 4.95% [Booklet IL-700-T, Illinois Withholding Tax Tables, Effective January 1, 2023].
Massachusetts—2023 Unemployment Tax Information
The Massachusetts Department of Labor and Workforce Development (DLWD) has announced that unemployment rates for experienced employers will continue to be determined under rate Schedule A in 2023. Rates range from 0.56% to 8.62% (0.94% to 14.37% in 2022, Schedule E). The new employer rate for non-construction employers is 1.45% in 2023 (2.42% in 2022). The new employer rate for construction employers is 5.55% in 2023 (6.72% in 2022). The taxable wage base remains at $15,000 in 2023 [Mass.gov website, Learn about unemployment insurance (UI) contributions].
Minnesota—Revised Fact Sheets Have Been Issued
The Minnesota Department of Revenue has revised several of its Tax Fact Sheets. These include: (1) new employer guide, that explains the Minnesota income tax withholding and other tax responsibilities of a new employer (Minnesota Withholding Tax Fact Sheet No. 10, 12/27/2022); (2) the Tax Fact Sheet explaining the requirement for surety deposits for non-Minnesota construction contractors (Minnesota Withholding Tax Fact Sheet No. 12, 12/22/2022); (3) the Tax Fact Sheet covering the state's income tax withholding responsibilities as they relate to agricultural workers (Minnesota Withholding Tax Fact Sheet No. 3, 12/22/2022); (4) the Tax Fact Sheet explaining the Minnesota income tax withholding responsibilities as they relate to vendors at fairs and special events (Minnesota Withholding Tax Fact Sheet No. 4, 12/23/2022); (5) the Tax Fact Sheet explaining the Minnesota income tax withholding responsibilities as they relate to officers of a corporation, such as withholding requirements for officers; registering for withholding tax; withholding tax from wages; and how to pay and file (Minnesota Withholding Tax Fact Sheet No. 6, 12/22/2022); (6) the Tax Fact Sheet explaining the withholding tax responsibilities as they relate to household employees (Minnesota Withholding Tax Fact Sheet No. 7, 12/22/2022); (7) the Tax Fact Sheet explaining the Minnesota income tax withholding responsibilities as they relate to nonresident entertainers, entertainment entities, and promoters (Minnesota Withholding Tax Fact Sheet No. 11, 12/22/2022); (8) the Tax Fact sheet that explains the income tax withholding responsibilities as they relate to the classification of independent contractors (Minnesota Withholding Tax Fact Sheet No. 8, 12/22/2022); (9) The Tax Fact Sheet that explains how contractors and subcontractors must submit to the DOR a contractor affidavit to receive a certificate of compliance that the contractor or subcontractor has fulfilled the requirement of the Minnesota withholding tax laws (Minnesota Withholding Tax Fact Sheet No. 13, 12/22/2022); (10) the Tax Fact Sheet explaining the responsibilities for the withholding tax registration and filing requirements of third-party bulk filers (Minnesota Withholding Tax Fact Sheet No. 5, 12/22/2022); (11) the Tax Fact Sheet explaining what income is taxed by Minnesota if the taxpayer is a nonresident (Minnesota Individual Income Tax Fact Sheet No. 3, 12/23/2022); (12) the Tax Fact Sheet explaining the Minnesota income tax withholding responsibilities as they relate to classification of wages, employees, and exceptions, including such topics and who is an employee and withholding income tax from wages (Minnesota Withholding Tax Fact Sheet No. 9, 12/22/2022); (13) the Fax Fact Sheet explaining preparer's paper-filing fee requirement (Minnesota Individual Income Tax Fact Sheet No. 17, 12/23/2022); and (14) the Tax Fact Sheet explaining the Minnesota law for employee income tax withholding and reciprocity agreements with Michigan and North Dakota (Minnesota Withholding Tax Fact Sheet No. 20, 12/22/2022).
Minnesota—Electronic Filing of Information Returns
The Minnesota Department of Revenue made changes to submitting federal Forms W-2 and 1099 electronically through its e-Services system. These changes affect customers sending this information through either the Manual method or Simple File method. With regards to the Manual method, the Department now requires more details about Forms W-2 and 1099, including the number of: Forms 1099-MISC, Forms 1099-NEC, Forms 1099-R, and Forms W-2G. The Department now also requires the taxable amounts listed on these forms and the Minnesota tax withheld. With regards to the Simple File method, the Department added and moved required rows for the Simple File format. This includes adding: Column C for ID Type (Social Security Number, Individual Taxpayer Identification Number, or Federal Employer Identification Number); Column N for Form 1099-NEC, Box 1; Column O for Form 1099-NEC, Box 5; Column P for Form 1099-R, Box 2a; Column Q for Form 1099-R, Box 14; Column R for Form W-2G, Box 1; Column S for Form W-2G, Box 15; and Column T for Form W-2G, Box 2 [Updates to electronic W-2 and 1099 submissions, Minn. Dept. Rev., 12/22/2022; Minnesota Withholding Tax Fact Sheet No. 2, 12/22/2022; Minnesota Withholding Tax Fact Sheet No. 2a, 12/22/2022].
New Hampshire—First Quarter 2023 Unemployment Tax Rates Unchanged
Unemployment tax rates for New Hampshire employers remained unchanged for the first quarter of 2023. This means that unemployment tax rates for experienced employers continue to range from 0.1% to 2.7% for positive-rated employers and from 4.3% to 8.5% for negative-rated employers. The new employer tax rate remains at 2.7%.For the first quarter of 2023, the fund balance reduction continues to be 0.5%. The inverse rate surcharge for negative rated employers continues to be 1.0% in the first quarter of 2023. Employers can view their current and prior quarter tax rates on the state's Webtax System.
New Jersey—Family Leave Insurance-Taxable Wage Base Increasing in 2023
The New Jersey Family Leave program is financed 100% by worker payroll deductions. Employers do not contribute to the program. For 2023, workers contribute 0.06% on the first $156,800 (wage cap) in covered wages earned during this calendar year. The maximum worker contribution for 2023 is $94.08.
New Mexico—2023 Unemployment Tax Rate Information Released
A spokesperson for the New Mexico Department of Workforce Solutions (DWS) has provided to Thomson Reuters some 2023 unemployment tax information. In 2023, the rates for experienced employers will continue to range from 0.33% to 6.4%. However, the new employer rates will not be available until the DWS website until January 1, 2023. The taxable wage base for 2023 will be $30,100 ($28,700 in 2022). DWS noted that the reserve factor will not be available on its website until January 1, 2023, but the employer will be able to locate the reserve factor on their 2023 tax rate notice before that date.
North Carolina—2023 Unemployment Tax Rate Information Has Been Released
The North Carolina Employment Security Division, has released the 2023 unemployment tax rates. The taxable wage base for 2023 will be $29,600 ($28,000 in 2022). The tax rate for new employers remains unchanged at 1%. Unemployment tax rates for experienced employers continue to range from 0.06% to 5.76% in 2023. The final date to protest an unemployment tax rate is May 1, 2023.
North Carolina—Power of Attorney and Declaration of Representative Form May be Submitted Electronically
The North Carolina Department of Revenue (DOR) will now accept the filing of Form GEN-58 electronically. By filing form Form GEN-58 (Power of Attorney), the taxpayer grants authority to an individual to represent the taxpayer before the DOR and to receive and inspect confidential tax information, which may include federal tax information. However, it notes granting someone a power of attorney does not relieve any taxpayer obligations. While the form may be filed electronically, it can still be submitted by mailing or faxing the paper version of the form. Electronic signatures require a valid email address for every taxpayer and representative listed on the Power of Attorney, without valid email addresses the form cannot be processed.
Ohio—State Taxation Department Release 2023 School District Tax Rates
The Ohio Department of Taxation has released the 2023 school district tax rates. Effective January 1, 2023, Wauseon is listed as a new school district in Fulton County with a 1.75% tax rate. Wilmington in the Clinton and Greene Counties and is listed as a district with an expired 1.0% tax rate, effective January 1, 2023. For tax rate changes, Arlington in Hancock County has a 1.75% district tax rate next year. Also, Cloverleaf in Median will have a 1.0% district tax rate in 2023. The following school districts have renewed tax rates for 2023: Bluffton (Allen, Handcock Counties, 0.50%), St. Marys (Auglaize County, 1.0%), West Liberty-Salem (Champaign and Logan Counties, 1.75%), Ayersbille (Defiance County, 1.0%), Evergreen (Fulton and Lucas Counties, 1.50%), Newark (Licking County, 1.0%), Cardington-Lincoln (Morrow and Marion Counties, 0.75%), Pandora-Gilboa (Putnam and Allen Counties, 1.75%), Gibonsburg (Sandusky and Wood Counties, 1.0%), and Chippewa (Wayne County, 1.0%).
Oregon—Unemployment Wage Base Increases in 2023
A spokesperson with the Oregon Employment Department has confirmed with Thomson Reuters that the unemployment taxable wage base will increase from $47,700 to $50,900 for 2023.
Oregon—2023 Withholding Tables Released
The Oregon Department of Revenue (DOR) has issued new wage bracket withholding tables that are effective January 1, 2023. The tables may only be used if the employee claims the same number of allowances on a federal Form W-4 (prior to 2020) and for state purposes. The federal Form W-4 was revised for 2020 and no longer uses withholding allowances. If the Oregon and federal allowances differ, instructions are provided in the 2023 Withholding Tax Formulas. The 2023 withholding tables reflect the increased federal tax subtraction to $7,050 and changes to the inflation-adjusted amounts (such as exemption credit and standard deduction). Employees may notice a change in the amount of Oregon tax withheld. Employees that wish to adjust for underwithholding or overwithholding may be referred to the Oregon online withholding calculator and the Oregon Form OR-W-4 [Oregon Withholding Tax Tables, Effective Jan. 1, 2023].
Oregon—2023 Withholding Tax Formulas Released
The Oregon Department of Revenue (DOR) has released its withholding tax formulas that will become effective January 1, 2023, including new computer withholding tax formulas. The DOR notes that the 2023 withholding tables can only be used if the employee claims the same number of allowances for federal and Oregon purposes. If an employee's Oregon allowances are different from federal, the employer should refer to the instructions in the Oregon Withholding Tax Formulas. The standard deduction for a taxpayer with a single filing status will increase from $2,420 to $2,605 for 2023. The standard deduction for a married taxpayer will increase from $4,840 to $5,210. The maximum amount of federal withholding allowed increased to $7,800, from $7,250. Employers must withhold income tax at a rate of 8% of employee wages if an employee has not provided a withholding statement or exception certificate. The new publication also provides an update regarding the Oregon W-4 regarding changes resulting from the federal Tax Cuts and Jobs Act (TCJA), and frequently asked questions about the withholding computer formula [Oregon Withholding Tax Formulas effective January 1, 2023].
Vermont—Voluntary Paid Family and Medical Leave Program Launched
Vermont Governor Phil Scott announced that the state has contracted with Hartford to administer the state's voluntary paid family and medical leave (PFML) program, the Vermont Family and Medical Leave Insurance Plan (VT-FMLI), that will provide paid family leave insurance by 2025. Similar to the voluntary PFML available in New Hampshire, the VT-FMLI will provide 60% of wage replacement for six weeks for qualifying events beginning July 2023 for enrolled employees. Qualified events include: (1) the birth, adoption of a child or foster care placement, and to care for the newly placed child within one year of placement; (2) caring for the employee’s spouse, child, stepchild, foster child, ward who lives with the employee, parent or parent of the employee’s spouse who has a serious health condition; (3) a serious health condition that makes the employee unable to perform the essential functions of their job; or (4) any qualifying exigency arising out of the fact that the employee’s spouse, child, or parent is a covered military member on "covered active duty," or to care for a covered service-member with a serious injury or illness. In 2024, private and non-State public employers with two or more employees will have the ability to select from a number of plan design options that allow them to best support the needs of their employees and their business. Beginning in 2025, individuals who work for Vermont employers that do not offer VT-FMLI, self-employed Vermonters, and employers with one employee can purchase coverage through the VT-FMLI individual purchasing pool, which will be insured by The Hartford.
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