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November 21 - 25 Compliance Updates: Must Pass Legislation May Bump Pension Bill from Lame Duck Consideration

Nov 29, 2022 6:04:36 AM
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Must Pass Legislation May Bump Pension Bill from Lame Duck Consideration

By Jeff Carlson

Funding the government to avert a shutdown before the end of the calendar year is must-pass legislation for Congress as the clock runs down on a lame duck session and lawmakers must choose where to focus its attention. A measure to increase retirement security may not make it given the time crunch.

The SECURE Act 2.0 is under consideration for action as negotiators work out which provisions to include in a measure that has bipartisan support but has been given only a 40 percent chance of passage during the lame duck session, according to J. Mark Iwry, the head of national retirement policy during the Obama-Biden administration who’s now a non-resident senior fellow at the Brookings Institution. Congress, Iwry added, “has a lot of other priorities during the lame duck; … Secure 2.0 is not one of the top three or four things on the minds of most members of Congress.”

Temporary funding to keep the government open expires on December 16 and lawmakers must decide whether to pass another extension or submit an omnibus spending bill which would cover government agencies for Fiscal Year 2023. The House has passed six appropriations bills versus none for the Senate. An omnibus bill is likely the last vehicle this year to move additional legislation which could include business tax breaks and a retirement security bill if members can reach agreement before the end of the year.

In addition to a spending bill, Congress must approve the National Defense Authorization Act, or NDAA, the annual must-pass legislation that sets the policy agenda and authorizes funding for the Department of Defense. Other possible add-ons include further aid to Ukraine and hurricane recovery assistance.

Lawmakers are also facing the possibility of running into the debt limit which is expected to occur around the third quarter in 2023. They must decide whether to address it during the lame duck session or wait until the new Congress is sworn in.

IRS Releases Draft 2023 Instructions for W-2s/W-3 and 1099 Series and Other Items

The IRS has released a number of draft instructions and one draft publication: (1) 2023 General Instructions for Forms W-2 and W-3; (2) 2023 General Instructions for Certain Information Returns; (3) 2022 Instructions for Form 8941 (Credit for Small Employer Health Insurance Premiums); and (4) 2023 Publication 926 (Household Employer's Tax Guide).

Electronic filing of wage statements and information returns. The 2023 versions of the draft General Instructions for W-2 and W-3 and Information Returns both note that the Taxpayer First Act of 2019 authorized the Department of the Treasury and the IRS to issue regulations reducing the current 250 electronic filing return requirement. However, until final regulations are issued, the electronic filing threshold remains at 250.

Draft — 2023 General Instructions for Forms W-2 and W-3.

Background. An employer must file Forms W -2 (Wage and Tax Statement) if it has one or more employees to whom payments were made (including non cash payments) for the employees' services in the employer's trade or business during the tax year. Any employer required to file Forms W -2 must also file Form W -3 (Transmittal of Wage and Tax Statements) to transmit Copy A of Forms W -2 to the Social Security Administration (SSA). Even employers with only one household employee must file Form W -3 to transmit Copy A of Form W -2. The due date is January 31.

What's New? The draft 2023 instructions note a redesign of Form W-2. Copies of 1, B, C, 2 (if applicable), and D of Forms W-2, W-2AS, W-2GU, and W-2VI may be completed and printed online to be furnished to recipients. Entries made to any copy will update all copies automatically. Copy A cannot be completed online to print and file with the SSA and is posted on IRS.gov for informational purposes only. 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.

Observation: During the November 3 IRS payroll industry call, the IRS addressed the recently released draft 2023 W-2 forms. In their second round of drafts, the W-2 form included the Copy D (Employer's Record) copy, however, the IRS stated that in the final version of the 2023 Form W-2, it will most likely be eliminated. The draft instructions would confirm their intent to do so. 

The phone number for assistance in e-filing for businesses located in the Virgin Islands has changed. These taxpayers should contact the SSA's Employer Services Liaison Officer (ESLO) for the U.S. Virgin Islands, call 212-264-4402.

Draft — 2023 General Instructions for Certain Information Returns.

Background. Beginning with the 2020 tax year, persons engaged in a trade or business must file Form 1099-NEC (Nonemployee Compensation) for each person to whom they have made certain payments during the year (e.g., at least $600 for services performed by someone who is not the person's employee). Additionally, backup withholding and nonqualified deferred compensation payments includible in gross income that do not meet Code Sec. 409A requirements are reported on Form 1099-NEC.. Forms 1099-NEC on paper or electronically as well as the copy to be furnished to recipients are due January 31.

What's New? The 2023 draft instructions note the Information Reporting Intake System (IRIS), the IRS's new online portal for Forms 1099 is available after December 31, 2022. 

Observation: The IRS previously announced that IRIS will launch January 9, 2023. 

Draft — 2022 Instructions for Form 8941 (Credit for Small Employer Health Insurance Premiums).

Background. Code Sec. 45R, which was added by the 2010 Patient Protection and Affordable Care Act, provides a sliding scale income tax credit to small employers with fewer than 25 full-time equivalent employees (FTEs). To qualify for the credit, an employer must pay at least 50% of the cost of health care coverage for its workers at the premium rate for an employee who has single coverage (as opposed to family coverage). 

Draft changes. One of the three requirements for a small employer to be eligible for the tax credit is the average annual wage paid per FTE. The draft notes that for 2022, the average annual wage paid per FTE must be less than $58,000 (increased from $56,000 in 2021). Line 3 of Form 8941 is where an eligible small employer should enter the average annual wages paid for the tax year (from Worksheet 3, line 3), which must be a multiple of $1,000. The draft also notes that if an eligible small employer had more than 10 FTEs and average annual wages of more than $28,000 (increased from $27,000 in 2021), the FTE and average annual wage limitations will separately reduce the employer's credit. This may reduce the employer's credit to zero even if the employer had fewer than 25 FTEs and average annual wages of less than $58,000. The table that provides the average premiums needed to figure adjusted amounts on Worksheet 4 has been updated. 

Observation: The IRS released a 2022 draft version of Form 8941 in September.

Draft — 2023 Publication 926 (Household Employer's Tax Guide).

Background. Publication 926 may help a taxpayer determine whether he or she has household employees and is liable for federal employment taxes (i.e., Social Security, Medicare, FUTA, and federal income tax withholding). It also provides guidance on recordkeeping requirements.

What's new? The draft 2023 Publication 926 notes the COVID-19 pandemic related credit for qualified sick and family leave wages is limited to leave taken after March 31, 2020 and before October 1, 2021. It also notes the Social Security taxable wage base for 2023 ($160,200) and the qualified parking exclusion and commuter transportation benefit for 2023 ($300).

Draft changes. Table 1 of the draft 2023 Publication 926 explains that an individual will need to withhold and pay Social Security and Medicare taxes if cash wages of $2,600 or more are paid in 2023 to any one household employee. One should not count wages paid to one's spouse, child under the age of 21, parent, or any employee under the age of 18 at any time in 2023.

2023 Version of Form W-3 Contains No Substantial Changes

The IRS has issued a revised version of  Form W-3(Transmittal of Wage and Tax Statements) for the 2023 tax year.

A Form W-3 transmittal should be completed only when filing paper Copy A of Form(s) W-2 (Wage and Tax Statement). The IRS explains that the form should not be filed alone and it should be sent even if only one paper Form W-2 is being filed. The IRS says to make a copy of Form W-3 and keep it with Copy D (For Employer) of Form(s) W-2 for recordkeeping purposes. The IRS recommends retaining copies of Forms W-3 for four years.

The Social Security Administration (SSA) strongly suggests employers report Form W-3 and Forms W-2 Copy A electronically, instead of on paper. The SSA provides two free e-filing options on its Business Services Online (BSO) website: (1) W-2 Online (use fill-in forms to create, save, print, and submit up to 50 Forms W-2 at a time to the SSA); and (2) File Upload (upload wage files using payroll or tax software that formats the files according to the SSA’s Specifications for Filing Forms W-2 Electronically).

Note: Filers of 250 or more Forms W-2s must file the forms electronically. However, the Taxpayer First Act of 2019 (P.L. 116-25) authorizes the Treasury and IRS to issue regulations that reduce the 250-return electronic filing requirement. The IRS has stated that until final regulations are issued, the threshold will remain at 250 returns.

The deadline for W-2 Online fill-in forms or file uploads for the 2023 tax year is January 31, 2024.

There are no substantial changes to the 2023 version of Form W-3, when compared to the tax year 2022 version.

IRS Releases Form for Credit for Social Security and Medicare Employer Paid Taxes on Tips for 2022

The IRS has released the 2022 version of Form 8846 (Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips).

Background. Certain food and beverage establishments use Form 8846 to claim a credit for Social Security and Medicare taxes paid or incurred by the employer on certain employees' tips. The credit is part of the general business credit. An employer can claim or elect not to claim the credit any time within three years from the due date of the employer's return on either its original return or on an amended return. 

Who should file? An employer should file Form 8846 if it meets both of the following two conditions:

  • The employer had employees who received tips from customers for providing, delivering, or serving food or beverages for consumption if tipping of employees for delivering or serving food or beverages is customary.
  • During the tax year, the employer paid or incurred employer Social Security and Medicare taxes on those tips.

Figuring the credit. Generally, the credit equals the amount of employer Social Security and Medicare taxes paid or incurred by the employer on tips received by the employee.

The federal minimum wage rate is $7.25 per hour. However, employers still compute the business tax credit using the minimum wage rate in effect on Jan. 1, 2007 (i.e., $5.15 per hour) [Rev Rul 2012-18, 2012-26 IRB].

However, employers cannot claim the credit for taxes on any tips that are used to meet the federal minimum wage rate of $7.25 an hour. Therefore, the amount of tips for any month that are used to figure the credit must be reduced by the amount by which the wages that would have been payable during that month at $5.15 per hour exceed the wages (excluding tips) paid by the employer during that month. 

Example: An employee worked 100 hours and received $450 in tips for October 2022. The worker received $375 in wages (excluding tips) at the rate of $3.75 an hour. If the employee had been paid $5.15 an hour, the employee would have received wages, excluding tips, of $515. For credit purposes, the $450 in tips is reduced by $140 (the difference between $515 and $375), and only $310 of the employee's tips for October 2022 is taken into account.

A 0.9% Additional Medicare Tax applies to Medicare wages and tips. However, Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. Thus, there is no effect on the credit for employer social security and Medicare taxes on certain employee tips.

IRS Releases 2022 Employer's Annual Federal Tax Return and Instructions

The IRS has released the 2022 versions of Form 944 (Employer’s Annual Federal Tax Return) and its instructions

Background. The Form 944 (Employer’s Annual Federal Tax Return) is designed so the smallest employers (those with an annual liability for Social Security, Medicare, and withheld federal income taxes is $1,000 or less) will file and pay these taxes only once a year instead of every quarter.

Changes to Form 944. There are a number of changes Form 944 related to COVID-19 tax credits:

  • COVID-19 leave tax credits: The form clarifies that: (1) Line 4a is used to report taxable qualified sick and family leave wages paid in 2022 for leave taken after March 31, 2021, and before October 1, 2021; and (2) Lines 4a(i) and 4a(ii) are sued only to report taxable qualified sick and family leave wages paid in 2022 for leave taken after March 31, 2020, and before April 1, 2021. Lines 8d, 10f, 19, and 22 have been updated to clarify that the reported qualified leave information relates to leave taken after March 31, 2021, and before October 1, 2021.
  • Employee retention credit: A number of lines have been relabeled as "Reserved for future use" that pertain to the Employee Retention Credit (ERC). Previously, Line 8c and Line 10e were used to report the non refundable portion and refundable portion of the ERC respectively. Lines 17 and 18 were used to report qualified wages for the ERC and qualified health plan expenses for the ERC. Lines 25 and 26 were previously used to report ERC information for recovery startup businesses. 
  • Form 7200 (Advance Payment of Employer Credits Due to COVID-19). Lines 10i and 10j are now labeled "Reserved for future use." These lines were used to report total advances received from Form 7200 and total deposits and refundable credits minus these advances. Form 7200 cannot be filed after January 31, 2022. 

Changes to Form 944 instructions. The instructions note the expiration of: (1) COVID-19 qualified sick and family leave tax credits; (2) Employee Retention Credit; (3) COBRA premium subsidy credit; and (4) advance payment of COVID-19 credits. 

Notice 2021-65 effect on deposit schedule. Employers who became semiweekly depositors for 2022 under the $100,000 Next-Day Deposit Rule solely due to relief provided in Notice 2021-65, 2021-51 IRB 880 regarding the early termination of the ERC for the fourth quarter of 2021, may be converted back to a monthly depositor by contacting the IRS. Taxpayers may continue to deposit as a monthly depositor, but may receive a system-generated failure-to-deposit (FTD) penalty notice after Form 944 is filed. Taxpayers should contact the IRS and request abatement of the FTD penalty and may ask to be converted back to a monthly depositor.

New employers. New employers are eligible to file Form 944 if they meet the eligibility requirements. New employers filing Form SS-4 (Application for Employer Identification Number) must complete line 12 of the form indicating the highest number of employees expected in the next 12 months and must check the box on line 14 to indicate whether they expect to have $1,000 or less in employment tax liability for the current calendar year.

Due date. For the 2022 tax year, Form 944 must be filed by January 31, 2023. However, if the employer made deposits on time in pull payments of the taxes due for the year, the return due date is February 10, 2023.

Electronic filing. Form 944 may be filed electronically. However, if the form is filed on paper, an employer should not also file electronically. If filed on paper, the IRS will treat a Form 944 as filed on time if the envelope contains sufficient postage and is postmarked by the U.S. Postal Service on or before the due date of the return.

DOL Seeking Home Healthcare Workers Who Were Misclassified and May be Owed Back Wages and Damages

The U.S. Department of Labor (DOL) is reaching out in an attempt to locate home healthcare workers employed from April 2020 through March 2022 by Salim, Inc., operating as A Plus Personal Home Care. The DOL's Wage and Hour Division reached a $1.13 million settlement with the company, representing back wages and damages. These workers may be entitled to a part of the damage.

The WHD conducted an investigation, and determined the employers failed to pay healthcare workers appropriate overtime wages. This occurred because the employees had been misclassified as independent contractors. Investigators found that the employer had given workers the option to be paid at a lower hourly rate as employees, or to be considered to be independent contractors but paid at a higher hourly rate. This violation of the Fair Labor Standards Act (FLSA). 

Note: Recently, the DOL proposed regulations on worker classification under the FLSA. The proposed regulations seek to rescind current regulations that use two core factors (the nature and degree of control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment) to determine worker status. The proposed regulations would use the totality of the circumstances and multiple factors to determine worker classification, similar to the approach that courts have historically used. 

WHD Assistant District Director Susan Rondon commented that: "Too often, home healthcare workers are denied all of their hard-earned wages in an industry where employers misclassifying employees as independent contractors is a common violation. We are determined to locate A Plus Personal Home Care employees who were denied overtime illegally and see that they receive the wages they're owed."

Home healthcare workers who believe they may be owed back overtime wages should use the division's online Workers Owed Wages search tool, or call the division's Baltimore District Office at (410) 962-6211.

IRS Releases Draft Publication 51 (Circular A) Agricultural Employer's Tax Guide

The IRS has issued a November 16, 2022 draft version of  Publication 51 (Circular A) Agricultural Employer's Tax Guide , which clarifies filing obligations for employers of agricultural workers (farmworkers).

It includes information such employers need to comply with the laws for agricultural labor, including relating to Social Security and Medicare taxes, FUTA tax, and withheld federal income tax (employment taxes). Agricultural employers report Social Security and Medicare taxes and withheld federal income tax on Form 943 (Employer's Annual Federal Tax Return for Agricultural Employees) and report FUTA tax on Form 940 (Employer's Annual Federal Unemployment (FUTA) Tax Return).

What's New.The revised publication includes a few updates:

  • Social Security and Medicare tax for 2023. The publication notes the Social Security and Medicare tax rates for 2023. The Social Security tax rate on taxable wages is 6.2% each for the employer and employee or 12.4% for both. Qualified sick leave wages and qualified family leave wages paid in 2023 for leave taken after March 31, 2020, and before April 1, 2021, aren't subject to the employer share of Social Security tax; therefore, the tax rate on these wages is 6.2%. The Social Security wage base limit is $160,200. The Medicare tax rate will be 1.45% each for the employee and employer, unchanged from 2022, with no wage base limit.
  • Qualified small business payroll tax credit for increasing research activities. For 2023, the Inflation Reduction Act increases the credit a qualified small business makes as a payroll tax credit for research activities to $500,000 (currently, $250,000). Currently, a $250,000 research credit may be taken against the employer's share of Social Security. Under the Act, an additional $250,000 may be taken against the employer's share of Medicare tax. Form 8974 is used to determine the amount of the credit that can be used in the current quarter. The amount from Form 8974, line 12 or, if applicable, line 17, is reported on Form 943.
  • Three publications to be discontinued after 2023. The instructions explains that after 2023, Publication 51 and the following two publications will be discontinued by the IRS: Publication 80 (Federal Tax Guide for Employers in the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands) and Publication 179 (Guía Contributiva Federal para Patronos Puertorriqueños). Instead, information specific to agricultural employers and employers in the U.S. territories will be included in Publication 15 (Circular E; Employer Tax Guide), beginning with the 2024 tax year version.

In addition, the publication contains important reminders for agricultural employers to be aware of, including withholding on supplemental wages, outsourcing payroll duties, and aggregate Form 943 filers. 

Federal Employment Tax Deadlines for December

We have listed the December 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 December deposit deadlines for semi-weekly depositors are as follows: 

  • December 2 - deposit the taxes for payments made November 26-29
  • December 7 - deposit the taxes for payments made November 30 - December 2
  • December 9- deposit the taxes for payments made December 3-6
  • December 14 - deposit the taxes for payments made December 7-9
  • December 16 - deposit the taxes for payments made December 10-13
  • December 21- deposit the taxes for payments made December 14-16
  • December 23 - deposit the taxes for payments made December 17-20
  • December 29 - deposit the taxes for payments made December 21-23
  • December 30 - deposit the taxes for payments made December 24-27

Monthly depositors: Filers who have a monthly deposit frequency must deposit the tax for November by December 15.

Tips. Employees must report tips of $20 or more earned during November to employers by December 12.

Holidays. Monday, December 26 is when Christmas Day will be celebrated (if the holiday falls on a Sunday, the following Monday will be treated as a holiday). 

Krispy Kreme Agrees to Pay More Than $1.1 Million for Overtime Violations Following Labor Department Investigation

The U.S. Department of Labor (DOL) has announced that the Krispy Kreme Doughnut Corp. has agreed to pay more than $1.1 million in back wages and liquidated damages to over 500 workers to resolve Fair Labor Standards Act (FLSA) overtime violations in multiple locations.

Overtime. Unless exempt, employees covered by the FLSA must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. There is no limit in the FLSA on the number of hours employees aged 16 and older may work in any workweek. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime is worked on such days.

Regular rate of pay. When computing overtime pay, the regular rate of pay includes all remuneration for employment except certain payments excluded by the FLSA itself. Payments which are not part of the regular rate include pay for expenses incurred on the employer's behalf, premium payments for overtime work or the true premiums paid for work on Saturdays, Sundays, and holidays, discretionary bonuses, gifts and payments in the nature of gifts on special occasions, and payments for occasional periods when no work is performed due to vacation, holidays, or illness.

Investigation finds multiple overtime violations. The DOL's Wage and Hour Division (WHD) first opened an investigation at a Krispy Kreme location in Louisville, Kentucky regarding an issue with calculating overtime pay where the company failed to include monthly bonuses in the regular rate of pay for some employees. By doing this, the employer paid overtime at lower rates than the FLSA requires. The WHD determined more violations and discovered that these errors were widespread and systematic. The probe was expanded to include all of the company's 242 locations nationwide.

What the WHD said. Principal Deputy Wage and Hour Administrator Jessica Looman explained that, "Overtime and minimum wage violations are common violations found in food service industry investigations."

Investigation results. Krispy Kreme agreed to pay 516 workers $1,187,757 in back wages and liquidated damages to resolve the overtime violations in the multiple company locations. On November 7, 2022, the DOL filed a complaint listing the violations and a consent order defining the settlement in the U.S. District Court for the Western District of Kentucky.

State Payroll Tax News

Arizona—State Revenue Department Updates Tax Year 2022 Form W-2/1099 E-Services

The Arizona Department of Revenue (ADOR) has updated its e-services webpage for Forms W-2 and 1099 for the 2022 tax year. Employers and payers have the ability to electronically submit Arizona Form A1-R (or Arizona Form A1-APR), Forms W-2, W-2c, W-2G, and Forms 1099-MISC, 1099-DIV, and 1099-R. The due date for these submissions is January 31, 2023. The Form W-2 and 1099 information for tax year 2022 includes business rules, Form W-2 layouts, Form W-2C layouts, and Form W-2G and 1099 layouts. ADOR does not accept Form 1099-NEC electronically, however, Form 1099-NEC is only submitted if Arizona tax is withheld. Forms 1099-NEC, when required, must be submitted as a.txt file on Optical Media (as defined in Publication 701) or by a paper document.

Arkansas—State Rescinds Department of Human Services' Policy That Includes Income Tax Withholding Measure

On November 18, 2022, the Arkansas Department of Human Services, Division of Children and Family Services rescinded its educational leave and educational assistance policy, which includes a measure providing for withholding of income and Social Security tax, for individual income and tax purposes. The agency adopts the rescission as of December 1, 2022. 

Arkansas—Withholding Certificates Updated for 2023

The Arkansas Department of Finance and Administration (DFA) has issued a 2023 version of its Form AR4EC (Employee’s Withholding Exemption Certificate). The form may be used for withholding on all types of income, including pensions and annuities. Employees may claim additional amounts of withholding tax if desired, which tends to apply most frequently when there is income other than wages. The form also shows the low income tax rate qualifying wage ranges for next year. Form AR4P (Employee’s Withholding Certificate For Pensions and Annuity Payments) has been revised. In general, the first $6,000 per year of a pension distribution or qualified traditional IRA distribution may be tax exempt. Also, qualified distributions from a Roth IRA are nontaxable and, therefore, not subject to withholding. The form may be used to request no state income tax be withheld from pension or annuity payments. Earlier, the DFA also issued the 2023 version of Form AR4ECSP (Employee's Special Withholding Exemption Certificate). Employees file this form with their employer to exempt earnings from state income tax withholding. Employers should keep these forms with their records. 

Arkansas—State Finance Department Issues Updated Employee's Special Withholding Exemption Certificate

The Arkansas Department of Finance and Administration has issued an updated version of Form AR4ECSP (Employee’s Special Withholding Exemption Certificate). The date of the current version is November 16, 2022. The short form requests employees file it with their employer to exempt earnings from Arkansas state income tax withholding. Employers should keep the form for their records. Aside from certain personal information, the form mainly asks the filer to check a box certifying that they qualify for the exemption in one of five filing statuses and income levels.

California—Mountain View's Adopted Wage Theft Ordinance Takes Effect in 2023

On September 13, 2022, the Mountain View City Council adopted a Wage Theft Ordinance that will take effect on January 1, 2023. This ordinance applies to all businesses in the City of Mountain View which are required to have a business license and requires a completed Wage Theft Affidavit to be submitted at the same time the application for a business license or business license renewal is submitted to the tax administrator. Employers with no employees shall be exempt from compliance. Wage theft includes failure to pay overtime, minimum wage violations, unauthorized deductions in pay, or not being paid at all. The City's webpage says that submitting a completed Wage Theft Ordinance Affidavit by December 31, 2022 is encouraged, however, because the ordinance takes effect on January 1, 2023, employers may submit a completed affidavit between January 1, 2023 and January 15, 2023.

California—2023 Unemployment Rates Again Determined Under Highest Schedule F+

The California Employment Development Department (EDD) has announced that unemployment tax rates will again be determined under the state's highest Schedule F+ in 2023. Schedule F+ contains an additional 15% percent emergency surcharge, rounded to the nearest tenth. Rate range from 1.5% percent to 6.2%. Employers have paid unemployment taxes under Schedule F+ for several years. California is also a FUTA credit reduction state for the 2022 tax year, which means employers pay FUTA tax at a higher rate this year. These additional taxes are due with federal Form 940 by January 31, 2023. The 2023 new employer rate and wage base for unemployment tax purposes also remain unchanged next year at 3.4% and $7,000, respectively. In addition, the Employment Training Tax (ETT) continues to be 0.1% in 2023. 

California—Consumer Privacy Rights Act Enforcement to Begin in 2023

On January 1, 2023, the California Privacy Protection Agency (CPPA) is supposed to start enforcing the California Privacy Rights Act (CPRA), which amended the California Consumer Privacy Act (CCPA). The CPPA has a webpage with a list of frequently asked questions on the CPRA and CCPA. In November of 2020, California voters approved Proposition 24, the CPRA, which amended the CCPA and added new privacy protections that begin on January 1, 2023. The CCPA applies to certain for-profit employers that are doing business in California and collecting the personal information of California residents. 

California—San Mateo County Establishes $16.50 Per Hour Minimum Wage Next Spring

The San Mateo County Board of Supervisors voted to increase the minimum wage to $16.50 an hour in unincorporated areas including North Fair Oaks and its Middlefield Road business corridor and agricultural land stretching from Pacifica to Pescadero, beginning on April 1, 2023. The Board's meeting and vote took place on November 15, 2022. The minimum wage in unincorporated communities in the County would then increase at the same pace as the state minimum wage every January 1. Note that the City of San Mateo has a minimum wage of $16.75 per hour in 2023.

Colorado—December 16 Deadline for Public Comment on Withholding Tax Rule

The Colorado Department of Revenue (DOR), Division of Taxation, is seeking input from the public regarding draft amendments made to the Colorado income tax withholding rule. The rule is titled: "Rule 39-22-604 Colorado Income Tax Withholding." The DOR has said that the rule's purpose is to provide guidance regarding several matters, including the current method for calculating withholding; exemption certificates, including the new optional Colorado exemption certificate (DR 0004); employees who do not provide a withholding certificate; the applicability of penalty and interest to late payments; and exempt wages for which reporting is not required. Comments on the draft rule can be shared by email to: dor_taxrules@state.co.us. The due date is December 16, 2022. After evaluating the comments received, the DOR will determine whether the draft rule should move forward and, if so, whether further revisions to the rule are necessary. If the DOR moves forward with the proposed rule, additional comments will be accepted following a notice of proposed rulemaking.

Connecticut—State Revenue Department Revises Publication Discussing Annual E-Filing Requirements

The Connecticut Department of Revenue Services (DRS) has issued a revised information publication discussing electronic filing requirements for several information returns that include Form 1099-MISC, Form 1099-NEC, which must be filed electronically through the DRS's myconneCT. The tax year 2022 due date for filing these forms is January 31, 2023. To request an extension of time to file information returns, the taxpayer must complete Form CT-8809 (Request for Extension of Time to File Information Returns) and mail it to DRS on or before January 31, 2023. Form CT-8809 cannot be filed electronically. Electronic filing is required, if 25 or more Forms 1099-MISC or 1099-NEC are filed, unless a waiver is granted. To request a waiver complete and mail Form CT-8508 (Request for Waiver From Filing Informational Returns Electronically) on or before January 1, 2023. Form CT-8508 cannot be filed electronically. If a waiver is granted, information return(s) must be submitted to DRS on CD. The revised publication replaces IP 2021(15) [Connecticut Informational Publication No. 2022(15), 11/16/2022].

Illinois—Disaster Relief for Flooding Victims Announced

The IRS has announced tax relief for individuals with businesses in St. Clair County which were impacted by severe flooding occurring between July 25 and 28, 2022. Quarterly payroll returns normally due on August 1 and October 1, 2022, and January 31, 2023 are now due February 15, 2023. Penalties on payroll tax deposits due on or after July 25,2022 and before August 9, 2022 will be abated if deposits are made by August 9, 2022 [IRS News Release, IL-2022-08, 11/16/2022]. 

Illinois—Collective Bargaining Initiative Passes

A ballot initiative to amend the Illinois State Constitution with the "Workers' Rights Amendment " passed during the November 8, 2022 election. The Amendment provides sweeping worker rights to collective bargaining, including allowing workers to negotiate "wages, hours, and working conditions." 

Indiana—Information Return Electronic Filing Guide Updated for 2022

The Indiana Department of Revenue (DOR) has released its updated W-2 and WH-3 Electronic Filing Requirements guide, updated for tax year 2022. The updated guide reminds employers that removable media is no longer accepted, and that electronic files may either be submitted via the INTIME portal or SFTP (Secure File Transfer Protocol) upload. No changes have been made to the record layouts for either file type.

Kentucky—Several Counties Release Occupational Tax Rate Information for 2023

The occupational license tax rates for several counties have increased for the 2023 tax year. Kenton County, which previously had a fixed taxable wage base of $25,000 since 1978, voted to increase the wage base to 50% of the Social Security wage base in the 2022 elections. Boone County will impose a Board of Education Tax at 0.5% for resident employees of the Boone County School District, along with a 0.8% tax on all employees, and finally a 0.15% Mental Health Tax. Campbell County will impose a 1.05% tax subject to a wage cap of $38,667, Fort Thomas City a 1.25% tax, Alexandria City a 1.5% tax subject to wage cap of $160,200, Cold Spring City a 1% tax subject to a wage cap of $160,200, Southgate City a 2.5% tax, and Highland Heights City a 1% tax subject to a wage cap of $160,200.

Maryland—Comptroller Reminds Employers of EITC Eligibility Notification Requirements

The Maryland Comptroller's Office reminds employers to provide, on or before December 31, 2022, electronic or written notice to an employee who may be eligible for the federal and Maryland earned income tax credits (EITC). Employees may be entitled to claim an EITC on their 2022 federal and Maryland resident income tax returns if both their federal adjusted gross income and their earned income is less than the following: $53,057 (married filing jointly, $59,187) with three or more qualifying children; $49,399 (married filing jointly, $55,529) with two qualifying children; $43,492 (married filing jointly, $49,622) with one qualifying child; and $16,480 (married filing jointly, $22,610) with no qualifying children. Also, legally married same-sex couples must file as married filing jointly or married filing separately for tax year 2022. Employees wishing to adjust their withholding to reflect married status should complete a new Maryland Form MW507, as well as federal Form W-4 [Maryland Tax Alert 22-10, Maryland Comptroller's Office, 10/01/2022].

Massachusetts—Paid Family and Medical Leave Information for 2023

The Massachusetts Department of Family and Medical Leave has updated the information regarding the Paid Family and Medical Leave (PFML) program for tax year 2023. The PFML law covers most Massachusetts employees who have earned at least $5,700 (in 2022) or $6,000 (in 2023) over the past 4 calendar quarters. Updated rate sheets for employers, a workplace poster, and workforce notices for employers with 25 or more employees and fewer than 25 employees have been published to the Department's website. 

Missouri—Power of Attorney Form Has Been Updated

The Missouri Department of Revenue (DOR) has issued a November 2022 revised version of its Form 2827, Power of Attorney . The form is used to designate attorney(s)-in-fact to represent taxpayer(s) before the DOR with respect to specified tax matters, which includes income tax and withholding. This form replaces the Form 2827 that is dated November 18, 2016. 

New York—New York State and Yonkers 2023 Withholding Tables Released

The New York Department of Taxation and Finance (DTF) has issued revised New York State and the City of Yonkers withholding tables, which take effect January 1, 2023. The 2023 New York State and City of Yonkers tables have been revised to reflect certain income tax rate reductions initially enacted in 2016 and accelerated under legislation passed in 2022. For New York State, the supplemental withholding rate for 2023 will remain 11.70%. For Yonkers, the supplemental withholding rate for 2023 will remain 1.95975% for residents, and 0.50% for nonresidents. For payrolls made on or after January 1, 2023, employers must use the revised withholding tax tables and methods in these publications to compute the amount of New York State and City of Yonkers taxes to be withheld from employees. There are no changes to New York City resident wage bracket tables and exact calculation methods.

New York—New York City Proposes Rule Setting Minimum Pay for Food Delivery Workers

The New York City Department of Consumer and Worker Protection (DCWP) is proposing a rule implementing Local Law 115 of 2021. That law requires the DCWP to study the pay and working conditions of food delivery workers and then establish a method for determining the minimum payments that third-party food delivery services and third-party courier services must pay to food delivery workers. The proposed rule would establish a minimum pay rate of $23.82 per hour, phased in over two years and subject to subsequent inflation adjustments. The rate is applicable to a food delivery worker's own trip hours and all food delivery workers' trip hours and on-call hours, in aggregate. This rate represents the sum of a base pay component ($19.86), a workers' compensation component ($1.70), and an expense component ($2.26). A public hearing will be heard on Friday, December 16, at 11:00 am. Members of the public will be able to participate by phone and video conference (Meeting ID: 257 490 864 03, Passcode: Zkw9TY). Interested parties can submit comments through the DCWP website at http://rules.cityofnewyork.us, email at rulecomments@dcwp.nyc.gov, or by U.S. mail to DCWP, 42 Broadway, New York, NY 10004. 

Ohio—2023 Due Dates and Payment Schedule Released

The Ohio Department of Taxation has released the Ohio and School District Employer Withholding Tax Due Dates 2022-2023 Payment Schedule. The payment schedule provides the monthly, quarterly, and partial weekly deposit schedules for the 2022 and 2023 tax years. It also includes the deadlines for filing Forms IT 941, SD 141, W-2, 1099-R, and IT-3. EFT filers do not file Form IT 941.

Oregon—Declaration of Intent for Equivalent Plan Applications for PFML Program Due November 30

Employers who are unable to complete an equivalent plan application in advance for 2023 may submit a Declaration of Intent on Frances Online by November 30, 2022. A submission of a Declaration of Intent does not provide pre-approval for the equivalent plan. After submitting the Declaration of Intent, the Equivalent Plan Application must be submitted by May 31, 2023 to meet approval deadlines for the plan to be in effect on September 3, 2023. Beginning January 1, 2023, employers must begin withholding contributions for the state's PFML program or a proposed equivalent plan. By June 30, 2023, if the equivalent is not approved, the employer must collect and pay contributions for all unpaid periods since January 1, 2023, with all due penalties and interest. There is a Equivalent Plan Guidebook, Equivalent Plan Fact Sheet, and Equivalent Plan Checklist available.

Oregon—Respiratory Syncytial Virus (RSV) Declared Public Health Emergency Now Eligible for Oregon Family Leave

The Oregon Family Leave Act (OFLA) requires employers with 25 or more employees to provide employees with unpaid time off of up to 12 weeks for parental leave for sick child leave. The Oregon Bureau of Labor & Industries (BOLI) has recently updated the OFLA webpage. Governor Kate Brown signed Executive Order No. 2022-23, declaring a public health emergency due to the increasing pediatric cases of respiratory syncytial virus (RSV). The declaration extends to March 6, 2023, unless extended or terminated earlier by the governor. In general, to be eligible for OFLA leave benefits, workers must be employed at least 180 days and also work at least an average of 25 hours a week. However, since January 1, 2022, during a public health emergency, employees become eligible for OFLA leave if they have worked for a covered employer for at least 30 days and have worked an average of at least 25 hours per week in the 30 days before taking leave. 

Puerto Rico—Electronic Filing Specifications for Informative Returns (Forms 480 Series) Issued for 2022

The Puerto Rico Department of the Treasury (PRDOT) has revised an Information Bulletin that provides the electronic specifications for filing Form 480 series (informative returns) through SURI, Puerto Rico's online portal for the 2022 tax year. The guidance notes the following forms have been modified: (1) Form 480.7 (Individual Retirement Account; (2) Form 480.7C (Retirement Plans and Annuities); (3) Form 480.7G (Tuition Statement for the American Opportunity Tax Credit; (4) Form 480.5 (Summary of Informative Returns); (5) Form 480.6B.1 (Annual Reconciliation Statement of Other Income Subject to Withholding); (6) Form 480.30 (Nonresident Annual Return for Income Tax Withheld at Source); (7) Form 480.7B.1 (Annual Reconciliation Statement of Tax Withheld from Individual Retirement Accounts and Educational Contribution Accounts); (8) Form 480.7C.1 (Annual Reconciliation Statement of Tax Withheld from Retirement Plans and Annuities); and (9) Form 480.6SP.2 (Annual Reconciliation Statement of Services Rendered). All informative returns must be submitted electronically using EFINFPR format. Control numbers are generated and assigned by the payer when filing Informative Returns. Control numbers must be 9 digits and must be unique for the payer, form type, and tax year. The sequence from 900000000 to 999999999 will be reserved only for the use of the Department for all other submissions, excluding text file submissions [Puerto Rico Informative Bulletin No. 22-03, 11/17/22].

Utah—2023 Unemployment Tax Rates Unchanged and Wage Base Increasing

A spokesperson with the Utah Department of Workforce Services has confirmed with Thomson Reuters the 2023 unemployment tax rate information. Unemployment tax rates for experienced employers will continue to range from 0.3% to 7.3% in 2023. New employer rates vary by industry, except new, out-of-state contractors are assigned the 7.3% maximum tax rate. The social cost rate will remain 0.3% in 2023. For 2023, the reserve factor is 1.10. The taxable wage base will increase from $41,600 to $44,800 in 2022. 

Washington—2022 Fourth Quarter Unemployment Tax Reporting Changes

The Washington Employment Security Department (ESD) with the National Payroll Reporting Consortium (NPRC) recently held a webinar regarding the fourth quarter unemployment tax reporting changes. Employers are required to report Standard Occupational Classifications (SOC). SOC is a system used by federal agencies to classify workers into occupational categories. Employers that fail to report the SOC or the job title of a worker are subject to the incomplete report penalty if the employer knowingly failed to report this information. SOC information can be found on the U.S. Bureau of Labor Statistics website. Failure to include SOC codes may result in a penalty for incorrect or incomplete SOC code reporting. The webinar notes that employers who use the newer version of Employer Account Management Services (EAMS) can look up SOC codes. Beginning December 1, 2022, the fourth quarter filing opens in the upgraded EAMS. There are separate EAMS for single filers and bulk filers. Beginning November 28, 2022, bulk filing and bulk amending is available in the upgraded EAMS. Employers should upgrade their accounts from the old EAMS to the new EAMS now.

West Virginia—Unemployment Wage Base Remains $9,000 in 2023

A spokesperson for the Workforce West Virginia has confirmed with Thomson Reuters that the unemployment taxable wage base will remain $9,000 for 2023.