The Social Security Administration (SSA) has announced that the maximum earnings subject to Social Security (OASDI) tax will increase from $147,000 to $160,200 in 2023 (an increase of $13,200). The maximum Social Security employer contribution will increase $818.40 in 2023. The $160,200 wage base for 2023 is significantly greater than the wage base forecasted by the SSA's Office of the Chief Actuary back in June.
For 2023, the FICA tax rate for both employers and employees is 7.65% (6.2% for OASDI and 1.45% for Medicare).
For 2023, an employer must withhold:
Social Security and Supplemental Security Income (SSI) benefits will increase by 8.7% in 2023. The average monthly Social Security benefit will increase from $1,681 to $1,827, and the maximum federal SSI monthly payment to an individual will increase from $841 to $914. The maximum federal SSI monthly payment to a couple will increase from $1,261 to $1,371 in 2023. The amount of earnings that is required in order to be credited with a quarter of Social Security coverage will increase from $1,510 to $1,640.
The retirement earnings test remains in effect for individuals below normal retirement age (age 65 to 67, depending on year of birth) who continue to work while collecting Social Security benefits. For affected individuals, $1 in benefits will be withheld for every $2 in earnings above $21,240 in 2023 (up from $19,560 in 2022). For working individuals collecting benefits who reach normal retirement age (NRA) in 2023, $1 in benefits will be withheld for every $3 in earnings above $56,520 (up from $51,960 in 2022), until the month that the individual reaches NRA. After that month, there is no limit on earnings.
The IRS has released a corrected IRS Publication 1220 (Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) for the 2022 tax year. The IRS had noted in a Quick Alert issued October 6, 2022, that an update to the publication was needed to address certain erroneous items.
The new version of Pub 1220, Exhibit 2 corrects:
The Department of Homeland Security (DHS) has announced, in consultation with the U.S. Department of Labor, it will be issuing a regulation to make 64,716 additional H-2B non agricultural worker visas available for the 2023 fiscal year (FY) in addition to the 66,000 H-2B visas normally available [USCIS Press Release, DHS to Supplement H-2B Cap with Nearly 65,000 Additional Visas for Fiscal Year 2023, 10/12/2022].
H -2B visas. The H -2B temporary nonagricultural worker program is designed to serve U.S. businesses unable to find a sufficient number of qualified U.S. workers to perform nonagricultural work of a temporary nature. Congress sets the annual H -2B visa limit at 66,000, with 33,000 for workers who begin employment in the first half of the fiscal year (Oct. 1 - March 31) and 33,000 for workers who begin employment in the second half of the fiscal year (April 1 – Sept. 30).
The need for supplemental worker visas. DHS Secretary Alejandro N. Mayorkas explained "At a time of record job growth, this full year allocation at the very outset of the fiscal year will ensure that businesses can plan for their peak season labor needs. We also will bolster worker protections to safeguard the integrity of the program from unscrupulous employers who would seek to exploit the workers by paying substandard wages and maintaining unsafe work conditions.”
Supplemental visa allocation. The supplemental H -2B visa allocation consists of 20,000 visas to workers from Haiti and the Central American countries of Honduras, Guatemala, and El Salvador. The remaining 44,716 supplemental visas will be available to returning workers who received an H-2B visa, or were otherwise granted H-2B status, during one of the last three fiscal years. The regulation will allocate these remaining supplemental visas for returning workers between the first half and second half of the fiscal year to account for the need for additional seasonal workers over the course of the year, with a portion of the second half allocation reserved to meet the demand for workers during the peak summer season.
Other components of the temporary final rule. The DHS notes that H-2B workers may be unable to report or leave abusive work conditions or exercise their rights. The upcoming temporary final rule will also include provisions to protect both U.S. and H-2B workers. Specifically, under the rule, employers that have committed labor violations in the H-2B program will be subject to additional scrutiny during the supplemental cap petition process. Also the rule will contain provisions that ensure employers are first seeking and recruiting American workers for available jobs, as the visa program requires.
Worker Protection Task Force. The DHS and DOL also announced a new White House-convened Worker Protection Taskforce that will focus on: (1) threats to H-2B program integrity, (2) H-2B workers’ fundamental vulnerabilities, including their limited ability to leave abusive employment without jeopardizing their immigration status, and (3) the impermissible use of the program to avoid hiring U.S. workers.
A recent email from E-Verify reminds employers that E-Verify cases referred on or after July 15, 2022 must now use standard timeframes to resolve Tentative Non Confirmation (mismatches). E-Verify, however, recommends that employees whose E-Verify cases were referred between March 2 to December 31, 2020, with an SSA mismatch visit their local SSA offices between October 1 to December 31, 2022, to resolve their mismatch. All employees must visit SSA to resolve their mismatch by the final deadline of September 29, 2023, or their case will automatically get a Final Nonconfirmation (FNC). See E Verify’s Social Security Resumes E Verify Operations Webpage or E Verify User Manual for more information.
Background. E-Verify is a free, Internet-based system that determines the employment eligibility of new hires by comparing information from the new hire's Form I-9,Employment Eligibility Verification, to Department of Homeland Security (DHS) and Social Security Administration (SSA) records.
An SSA or DHS Tentative Non-confirmation (TNC) may result if the information entered in E-Verify does not match SSA records or data available to DHS. A TNC does not necessarily mean that the employee is not authorized to work in the United States. There are procedures to follow if a TNC is received.
COVID delayed processing expired. Employees now have the normal eight federal working days to contact their local SSA office to begin resolving the mismatch. An extension was provided during the COVID-19 pandemic due to the closures of SSA offices.
The Social Security Administration (SSA) has announced that the maximum earnings subject to Social Security (OASDI) tax will increase from $147,000 to $160,200 in 2023 (an increase of $13,200). The maximum Social Security employer contribution will increase $818.40 in 2023. The $160,200 wage base for 2023 is significantly greater than the wage base forecasted by the SSA's Office of the Chief Actuary back in June].
For 2023, the FICA tax rate for both employers and employees is 7.65% (6.2% for OASDI and 1.45% for Medicare).
For 2023, an employer must withhold:
Social Security and Supplemental Security Income (SSI) benefits will increase by 8.7% in 2023. The average monthly Social Security benefit will increase from $1,681 to $1,827, and the maximum federal SSI monthly payment to an individual will increase from $841 to $914. The maximum federal SSI monthly payment to a couple will increase from $1,261 to $1,371 in 2023. The amount of earnings that is required in order to be credited with a quarter of Social Security coverage will increase from $1,510 to $1,640.
The retirement earnings test remains in effect for individuals below normal retirement age (age 65 to 67, depending on year of birth) who continue to work while collecting Social Security benefits. For affected individuals, $1 in benefits will be withheld for every $2 in earnings above $21,240 in 2023 (up from $19,560 in 2022). For working individuals collecting benefits who reach normal retirement age (NRA) in 2023, $1 in benefits will be withheld for every $3 in earnings above $56,520 (up from $51,960 in 2022), until the month that the individual reaches NRA. After that month, there is no limit on earnings.
The U.S. Citizenship and Immigration Services (USCIS) has announced that employers should continue using the current Form I-9 (Employment Eligibility Verification), which has an October 31, 2022 expiration date, until further notice.
Background. Form I-9 is used to verify the identity and employment authorization of individuals hired for employment in the United States. All U.S. employers must properly complete Form I-9 for each individual they hire for employment in the United States. This includes citizens and non-citizens. Both employees and employers (or authorized representatives of the employer) must complete the form.
New form. On March 30, 2022, the U.S. Department of Homeland Security (DHS) published a notice in the Federal Register to invite public comments on its proposed extension and revisions to Form I-9. The current version of Form I-9 was issued on October 21, 2019. This version is set to expire on October 31, 2022.
Comment periods. An initial comment period on the new Form I-9 was permitted until May 31, 2022. A second comment period for the new version of the form was permitted until August 8, 2022.
Proposed changes. The USCIS previously said that the changes to the proposed new Form I-9 are minor.
These changes include: (1) compress Sections 1 and 2 from two pages to one page to reduce paper use and storage burden on employers; (2) change Section 3 to a Re-verification and Rehire Supplement that provides three separate areas to enter re-verification and rehires within three years of the date of the initial execution of an employee's Form I-9; (3) employers would only print and use the supplement as needed, further reducing paper use and storage burdens on employers; (4) update the List of Acceptable Documents to include a link to List C documents issued by DHS and the acceptable receipts listed in 8 C.F.R. 274a.2(b)(1)(vi); (5) reduce and simplify the instructions from 15 pages to seven pages, further reducing paper usage; and (6) remove electronic PDF enhancements to ensure that it can be completed on all electronic devices and is not software dependent.
Proposed changes to document examination. The DHS is proposing to permanently allow optional alternatives for examining the documentation presented by individuals seeking to establish identity and employment authorization for purposes of completing the Form I-9 (Employment Eligibility Verification) that could mirror the flexibilities being temporarily permitted due to the coronavirus (COVID-19) health emergency. Comments are allowed through October 17, 2022.
Employers should continue to use current Form I-9. Until further notice, employers should continue to use the Form I-9 after its October 31, 2022 expiration date. The DHS will publish a Federal Register notice to announce the new version of the Form I-9 once it becomes available.
U.S. Representatives Stephanie Bice [R-OK-5] and Haley M. Stevens [D-MI-11] introduced H.R. 9125 that seeks to amend the Family and Medical Leave Act (FMLA) to expand reasons a worker may take FMLA leave.
Background. Currently, the FMLA provides eligible employees up to 12 workweeks of unpaid leave during any 12-month period for specified family and medical needs. FMLA leave may be taken for: (1) the birth or placement of a child; (2) the care of a spouse, child, or parent with a serious health condition; (3) the serious health condition of the employee; or (4) any qualifying exigency arising out of the fact that the employee's spouse, child, or parent is on covered active duty (or has been notified of an impending call or order to covered active duty) in the Armed Forces [29 U.S.C. § 2612(a)(1)].
Introduced legislation. The bipartisan bill called the "Safe Leave for Victims of Domestic Violence Act," seeks to expand the eligible reasons that a worker may take FMLA leave to include addressing issues related to being a victim of dating violence, domestic violence, sexual assault, sex trafficking, or stalking, and other purposes. FMLA leave could be used to seek medical attention or treatment, mental health or counseling services, or services from a victim services organizations, civil or legal services, and also be used to secure safe housing. Further, the legislation allows an eligible employee to use or an employer to require the use of accrued paid vacation, personal, or sick leave for the leave. The bill also permits an employer to require a certification with a request for leave.
State of the States. Currently, half of the states require employers to provide paid or unpaid leave to workers for similar reasons or specify under paid sick leave laws that earned leave may be used for such purposes.
An investigation by the Department of Labor's (DOL) Wage and Division and subsequent litigation has resulted in a federal court ordering three bakeries and their owner/officer to pay nearly $1 million in back wages and liquidated damages to 74 employees to resolve violations of the Fair Labor Standards Act (FLSA).
WHD investigators determined that Pedro Coelho and his three bakeries - Padaminas NY Bakery II LLC, Padaminas NY Bakery LLC, and Padaminas Brazilian Bakery Inc. - willfully violated the FLSA's overtime requirements when they failed to pay employees required overtime. The employees were primarily bakers and counter staff, and were only paid straight time for overtime hours. The employers also failed to keep records of employees' work hours and compensation paid.
The consent judgment and order entered by a U.S. District Court in Connecticut requires Coelho and his businesses to pay $952,433 - $476,216 in back wages and an equal amount in liquidated damages - to the 74 affected employees. The employers also must pay $41,568 in civil money penalties to the department due to the violations' willful nature. The order further prohibits the defendants from violating the FLSA's overtime and recordkeeping requirements and requires them to cooperate with department FLSA investigations and provide truthful responses, information and documents to investigators. It also prohibits them from soliciting employees to "kick back" the wages or liquidated damages.
WHD District Director Donal Epifano commented that: "This is a significant recovery of back wages and liquidated damages for low-wage workers in Connecticut and New York, who were deprived of the hard-earned wages they rightfully earned and that their families need to make ends meet. Such violations are avoidable if employers take the time to know and understand their responsibilities under the Fair Labor Standards Act. The Wage and Hour Division is available to answer questions and address concerns and will not tolerate attempts to circumvent federal employment laws."
Regional Solicitor of Labor Maia Fisher added that: "Wage theft is egregious and illegal. The U.S. Department of Labor continues to pursue investigations and legal actions to ensure employees are properly compensated for their work and hold accountable those employers who refuse or fail to comply with the FLSA."
The news release notes that in fiscal year 2021, the Wage and Hour Division conducted more than 4,200 investigations in the food services industry, recovering $34.7 million for 29,209 workers [Wage and Hour Division, News Release No. 22-1702-BOS, 10/4/2022].
On October 11, 2022, the U.S. Department of Labor (DOL) announced the publication of a proposed rule to revise the Department’s guidance on how to determine who is an employee or independent contractor under the Fair Labor Standards Act (FLSA) [Federal Register 2022-21454, 10/11/22 (published on 10/13/22)].
Proposed rule would rescind current rule. The DOL explains that the Notice of Proposed Rulemaking (NPRM) would rescind an earlier rule on this topic that was published on January 7, 2021, and replace it with an analysis for determining employee or independent contractor status that is more consistent with the FLSA as interpreted by long standing judicial precedent.
Earlier rule. On January 6, 2021, the DOL under the prior Presidential Administration announced a rule addressing the distinction between employees and independent contractors under the FLSA, which emphasized the use of two core factors of the economic realities test (the 2021 rule). Those two core factors are: (1) the nature and degree of the worker’s control over the work, and (2) the worker’s opportunity for profit or loss based on initiative and/or investment. These two factors, under the 2021 rule, were called core factors and weighed greater than other considerations. Opponents argued that the 2021 rule ran counter to established court rulings on the matter. The effective date of the 2021 rule was March 8, 2021. The DOL under the current Presidential Administration issued rules in 2021 to delay and withdraw the rule, which were vacated by a federal district court on March 14, 2022. Currently, the two factor economic reality rule remains in effect.
Announcement of proposed rulemaking. On June 3, 2022, the DOL announced it is developing a proposed rule on determining employee or independent contractor status under the FLSA and held forums in June 2022 to hear perspectives from those who may be affected by employee or independent contractor classification.
Proposed rule. The DOL has said that its proposed rule would reduce the risk that employees are misclassified as independent contractors, while providing added certainty for businesses that engage (or wish to engage) with individuals who are in business for themselves.
The DOL said that it issued this proposed rule because it believes that the worker classification rule from 2021 does not fully comport with the FLSA’s text and purpose as interpreted by courts and departs from decades of case law applying the economic reality test. The DOL said its proposed rule is not using “core factors” but instead aims to return to a totality-of-the circumstances analysis of the economic reality test in which the factors do not have a predetermined weight and are considered in view of the economic reality of the whole activity.
Proposed 29 CFR § 795.110 provides multiple economic realities factors to be considered when determining worker status. The DOL notes that the list is not exhaustive and no single factor is dispositive. These factors are:
The DOL is further proposing to return the consideration of investment to a standalone factor, provide additional analysis of the control factor (including detailed discussions of how scheduling, supervision, price-setting, and the ability to work for others should be considered), and return to the longstanding interpretation of the integral factor, which considers whether the work is integral to the employer’s business.
Comments. The DOL notes that interested parties can submit comments on this proposal by November 28, 2022. The full text of the NPRM, as well as information on the deadline for submitting comments and the procedures for submitting comments can be found at Federalregister.gov. The NPRM’s 45-day comment period closes at 11:59 p.m. ET on November 28, 2022.
The Fall 2022 Edition of the SSA/IRS Reporter includes an article entitled "Worker Classification 101: Employee or Independent Contractor." The article provides an overview for employers on classification of workers as employees or independent contractors. The article reminds employers that "it is critical for business owners to correctly determine whether the people providing services are employees or independent contractors."
Independent contractor vs. employee. The article explains that whether a worker is an employee or independent contractor rests primarily on the relationship between the worker and the business. Specifically, the employer should consider:
Determining if a worker is self-employed. The article clarifies that someone is self-employed if any of the following factors are applicable: (1) the person carries on a business as a sole proprietor or independent contractor; (2) the person is a member of a partnership that carries on a trade or business; or (3) the person is otherwise in business for themselves (this includes a part-time business). It also includes those who earn money from gig economy work.
Consequences of misclassification. Misclassification harms workers wrongfully classified as independent contractors because the employer's share of taxes is not paid, and taxes for the worker are not withheld.
Workers who believe they have been improperly classified as independent contractors generally must receive a determination of worker status from the IRS. Form 8919 (Uncollected Social Security and Medicare Tax on Wages) may then be used to calculate and report their share of uncollected Social Security and Medicare taxes that may be due.
Voluntary Classification Settlement Program. The newsletter notes that the IRS has an optional Voluntary Classification Settlement Program. The program offers, to those opting to participate, a chance to reclassify workers, and offers partial relief from federal employment taxes for eligible businesses who agree to treat the misclassified workers as employees.
The Fall 2022 edition of the SSA/IRS Reporter provides a number of tips to tax professionals on how to avoid email and cloud-based scams.
Fraudulent emails and texts. Tax professionals are often the target of malware and scams because their networks contain valuable taxpayer data. A common tactic used is phishing emails and texts that trick a tax professional to click a malicious link or attachment that steals data.
These scammers can play a long game by masquerading as potential clients and exchanging several emails and gaining a tax professional's trust before they initiate the attack. Once the link or attachment is opened, the malware is unleashed, downloading into the system, providing access to passwords or remote access.
Malware and ransomware attacks. Scammers use malware to gain access to a tax professional's system and can steal refunds by identifying potential tax returns, changing bank account information, and even completing returns and e-filing them. Downloading a link may unleash ransomware, where thieves will attack a system and encrypt the files then demand a ransom to release the data.
In December 2021, Ultimate Kronos Group (UKG), a large human resources software provider, was the victim of a ransomware attack that left its clients and employees unable to access its timekeeping systems. The result impacted the payroll of over 2,000 employers across the private and public sectors. Payrolls were not only delayed, but also the ransomware attack also caused inaccurate payrolls. In the wake of the attack, workers have filed lawsuits against their employers claiming wage payment and wage and hour violations and there is a suit by client employers against UKG for data breach claims. Failure to protect systems can lead to costly legal consequences.
Weak security on cloud-based systems. While storing data on cloud-based systems is convenient, the Reporter notes that thieves take advantage of weak security on these systems. Cloud-based systems should use strong multi-factor authentication (MFA) also known as "Two Factor Authentication" or "Two Step Authentication." MFA offers additional layers of security by requiring two or more authenticators to verify identity before access is granted to the system. Cloud-based systems that use MFA are less likely to be hacked because if a password is compromised, the second authentication requirement should stop an attacker from gaining access. MFA may require obtaining a code from a text on a phone or a fingerprint or face scan. Tax professionals should always opt into MFA and if it is not available on a cloud-based system, they should contact their provider to add the feature to the system. The Cybersecurity and Infrastructure Security Agency (CISA) offers a webpage for more information on MFA.
The Fall 2022 SSA/IRS Reporter is reminding employers that they don't need to physically inspect an employee's Social Security card to verify an employee's name and Social Security Number (SSN). Employers may use the Security Number Verification Service (SSNVS) available through the Social Security Administration's (SSA) Business Services Online (BSO) website.
The SSNVS allows users to verify up to 10 names and SSNs online and provides immediate results. Users may also upload up to 250,000 names and SSNs and can usually expect next day results.
If a mismatch should occur, the employer should not take adverse action against the employee such as firing or suspending the employee. Employers should apply company policy consistently across all workers. Employers should keep in mind that a mismatch from the SSNVS does not speak to a worker's immigration status.
The following are the steps to handle an SSN mismatch.
The SSA provides a pamphlet regarding the SSNVS.
An investigation by the U.S. Department of Labor's (DOL) Wage and Hour Division (WHD) found that Resta Contracting LLC (a construction staffing agency) and its owner Bethany Resta intentionally misclassified workers as independent contractors. A U.S. District Court judge entered a consent judgment that orders Resto Contracting LLC and owner to pay $139,036, in back wages and an equal amount in liquidated damages to the affected workers.
The WHD found that the employer hired workers - as finishers, loaders, operators, and carpenters - and then illegally misclassified them as independent contractors. The employees were then paid straight time for all hours, with no overtime, in violation of the Fair Labor Standards Act. They also failed to maintain proper records of hours worked.
As a result of the WHD's investigation, the DOL's Office of the Solicitor filed a complaint in federal court to obtain back wages and damages from the employer. The court agreed with the DOL's argument that bankruptcy could not stop enforcement and litigation after the employer filed for bankruptcy as an attempt to stop the case. Months of contested litigation ended when the employer agreed to the consent to judgment and to FLSA compliance.
Regional Solicitor Oscar Hampton III commented that: "The Department of Labor will pursue back wages and liquidated damages aggressively for workers whose employers take advantage of them or who believe they are above the law. The consent judgment secured in this case demonstrates our commitment to recovering stolen wages and protecting workers' Fair Labor Standards Act protections."
In addition to the back wages and damages, the consent judgment permanently enjoins the employer and its owner from future FLSA violations and prohibits them from discharging or taking retaliatory action against employees exercising their FLSA rights [Wage and Hour Division, News Release No. 22-1888-PHI, 10/6/2022].
The IRS has revised Publication 1187 for tax year 2022. The publication provides the electronic filing specifications for Form 1042-S (Foreign Person's U.S. Source Income Subject to Withholding).
Purpose. The publication explains that generally, the boxes on the paper forms correspond with the fields used for the electronic file. However, if the form and field instructions don't match, the guidance in Publication 1187 supersedes the form instructions.
It also notes that filers shouldn't send copies of paper forms to the IRS for any forms filed electronically as this will result in duplicate filing. The Filing Information Returns Electronically (FIRE) System can accept multiple files for the same type of return. For example, if a company has several branches issuing Forms 1042-S, it is not necessary to consolidate all the forms into one transmission. Each file may be sent separately.
What's New for 2022. The publication highlights the following changes:
The revised publication should be used in conjunction with: (1) Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding; (2) Instructions for 1042-S; (3) IRS Publication 515 (Withholding of Tax on Nonresident Aliens and Foreign Entities); and (4) IRS Publication 1179 (General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns).
Electronic filing requirements. The publication notes that filers of 250 or more information returns are required to file electronically. A provision of the Taxpayer First Act of 2019 authorized the reduction of the 250 form threshold for 2022 tax year returns. However, until final regulations are issued, and if they are effective for the 2022 tax year for the 2023 filing year, the threshold will remain 250 information returns.
Due date. The filing of Form 1042-S electronically or by paper is March 15, 2023.
IRS Assistance. The IRS' Technical Services Operation (TSO) is available to help with the technical aspects for the new IR Application for TCC, filing information returns through the FIRE systems, self-help resources, etc. The TSO can be reached at (866) 455-7438 (toll free) or at (304) 263-8700 (International, and not toll-free).
During the IRS's October 6 monthly payroll industry conference call, a representative from the Service explained the redesign of the 2023 Form W-2 (Wage and Tax Statement).
Employers must file Form(s) W-2 if they have one or more employees to whom they made payments (including non-cash payments) for the employees’ services in their trade or business during the year.
On September 29, 2022, the IRS issued a draft version of the 2023 Form W-2, which the Service labeled as an early draft form. It should not be relied upon for filing purposes. However, the IRS notes that it does not release draft forms until it believes all changes have been incorporated. Though, unexpected issues may arise or legislation passed that may alter a draft form.
The IRS explained on the payroll conference call that beginning with the 2023 Form W-2, there will no longer be a designated employer copy. However, employers are still advised to keep a copy for their records.
The 2023 draft Form W-2 compresses the employee copies B, C and 2 to fit onto one page, with the instructions for employees to be provided on the other side of that page. Copies 1, B, C and 2 may be completed online. Completing any one of the copies will auto-populate the others.
The IRS representative explained that the redesign of the form is due to a shortage of the chemical transfer paper used to print the forms.
Copy A of Form W-2 will remain unchanged and the red ink will still be used on this copy.
Employers must file the 2022 Form W-2 with the Social Security Administration and distribute it to their employees by January 31, 2023, regardless of whether the employer is filing via paper or electronically.
Arizona—Guide on Business Taxes Updated
The Arizona Department of Revenue has updated its publication, Business Basics: A Guide to Taxes for Arizona Businesses, which provides an overview of the various forms, licenses, and taxes a business may have to file and pay including corporate income tax, individual income tax, income tax withholding, transaction privilege and use tax, personal property tax, and luxury tax. The publication also discusses payments via electronic fund transfer, as well as unclaimed property and unemployment insurance requirements, and provides the contact information for various government offices and agencies [Arizona DOR Publication No. 622, 09/01/2022].
California—Three Localities Announce 2023 Minimum Wage Increases
Three California localities have announced 2023 minimum wage increases. San Jose: Effective January 1, 2023, the minimum wage rate in San Jose increases from $16.20 per hour to $17.00 per hour. The minimum wage requirement set forth in the San Jose Minimum Wage Ordinance applies to adult and minor employees who work two or more hours per week (tips not included). Half Moon Bay: Effective January 1, 2023, the minimum wage rate for Half Moon Bay increases from $15.56 per hour to $16.45 per hour. The minimum wage is adjusted based on the regional Consumer Price Index (CPI) on January 1st of each year. This law applies to all employees working at least two or more hours per week at any businesses within the geographic boundaries of the City of Half Moon Bay. Sunnyvale: Effective January 1, 2023, the minimum wage rate will increase from $17.10 per hour to $17.95 per hour as adjusted by the regional CPI. The Sunnyvale minimum wage requirements apply to any person working within the Sunnyvale city limits who performs at least two hours of work in any particular week.
California—COVID-19 Supplemental Sick Leave Poster
The California Department of Industrial Relations has issued an updated COVID-19 supplemental paid sick leave poster in 2022. Covered employees in the public or private sectors who work for employers with 26 or more employees are entitled to up to 80 hours of 2022 COVID-19 related paid sick leave from January 1, 2022 through December 31, 2022, immediately upon an oral or written request to their employer, with up to 40 of those hours available only when an employee or family member tests positive for COVID-19. There is also a Spanish version of the updated poster as well. California Governor Gavin Newsom recently signed Assembly Bill 152 that extended the 2022 COVID -19 Supplemental Paid Sick Leave program until December 31, 2022.
California—Cupertino and East Palo Alto Announce 2023 Minimum Wage Rates
The following California localities have announced their 2023 minimum wage rates: (1) Cupertino, $17.20 per hour, effective January 1, 2023; and (2) East Palo Alto, $16.50 per hour, effective January 1, 2023. The minimum wage requirement set forth in the East Palo Alto Minimum Wage Ordinance applies to adult and minor employees who work two (2) or more hours per week (tips not included). Any person, who performs at least two hours of work in a calendar week for an employer that maintains a facility in the City of Cupertino or is required to pay the Cupertino Business License fee, is entitled to be paid the Cupertino minimum wage. An employer may not use an employee’s tips or fringe benefits as a credit towards the employer’s obligation to pay the Cupertino minimum wage.
California—Legislation Entitles Certain Healthcare Workers to Meal and Rest Periods
Recent legislation, effective January 1, 2023, entitles employees who provide direct patient care or support direct patient care in a general acute care hospital, clinic, or public health setting directly employed by specified public sector employers to one unpaid 30-minute meal period on shifts over five hours and a second unpaid 30-minute meal period on shifts over 10 hours, as provided by specified existing law. Senate Bill 1334 also authorizes these employees to waive those meal periods and would provide for on-duty meal periods, as provided by specified existing law. Further, the legislation entitles these employees to a rest period based on the total hours worked daily at the rate of 10 minutes net rest time per four hours or major fraction thereof, as provided. require these employers, if they fail to provide an employee a meal period or rest period in accordance with the bill, to pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest period is not provided. The bill exempts employees who are covered by a valid collective bargaining agreement that provides for meal and rest periods and, if the employee does not receive a meal or rest period as required by the agreement, includes a prescribed monetary remedy [L. 2022, S1334].
Illinois—Significant Payment Toward Unemployment Insurance Loan Has Been Made
In a news release, Illinois Governor JB Pritzger announced that the Illinois Department of Economic Security (IDES) will make a payment of $450 million toward the remaining $1.8 billion borrowed as part of its unemployment insurance loans from the federal government. The payment reduces the total owed by the state by 25%. The release adds that because the state is continuing to see low unemployment insurance claims, the unemployment insurance trust fund had capacity to make this payment without impairing the IDES' ability to pay benefits. IDES Director Kristen Richards commented that: "This contribution is another significant step toward paying down the federal loan. [IDES] will continue to work with business and labor representatives through the agreed bill process to support this critical resource." The release explains that federal Ioans were necessary to supplement the state's unemployment insurance trust fund and provide economic relief to unemployed workers throughout the duration of the COVID-19 pandemic.
Kentucky—2022 Electronic Filing Specifications for Forms 1099 Released
The Kentucky Department of Revenue has released the 2022 specifications and instructions for reporting Forms 1099 information to DOR via electronic media. Forms 1099 include Forms 1099-NEC, 1099-R, and 1099-K, and 1099-MISC. DOR accepts annual 1099 information via CD only. Form 42A806 (Transmitter Report), must be included with each CD submitted, though 1099s only need to be filed if income tax has been withheld. DOR does not accept paper copies of Forms W-2, W-2G or 1099. Payers issuing 25 or fewer withholding statements, 1099’s with KY tax, or W-2G’s, must either file Form K-5 or submit the information in the accepted electronic format. Paper copies of Forms W-2, W-2G and 1099 received by DOR will not be processed and will not be considered filed. Kentucky does not participate in the combined Federal/State Filing Program. CDs should be sent to: Kentucky Department of Revenue, Electronic Media Processing, 501 High Street, Sta. 57, Frankfort, KY 40601. Form 1099 electronic media files should be submitted to DOR by January 31, 2023 [ 2022 Specifications for the Electronic Submission of 1099B, 1099DIV, 1099G, 1099INT, 1099K, 1099MISC, 1099NEC, 1099OID, 1099R and W2G Tax Information on CD].
Maine—Fourth Quarter Instructions Updated for 2022 MEETRS Withholding Specifications
Maine Revenue Services released updated 2022 MEETRS Withholding Specifications pertaining to the Quarter Four (Q4) only. These updated instructions have an effective date of December 1, 2022, and revised date of September 29, 2022. The updated instructions note that: (1) the Maine Tax Portal will be available for filing and paying beginning December 1, 2022; (2) all future filings must conform to the specifications or they will not pass validation; (3) optionally, E record, location 190 ‘No workers/No withholding’ – if no employee records (S record), no T record is required; (4) E record, location 225-228 changed to ‘Total number of employees/payees’; (5) Maine withholding accounts opened after December 1, 2022 will receive an eight-digit Account ID. Example: 1234-5678. A Q4 sample file is available. Reports for the quarter ending December 31, 2022, must be submitted no later than January 31, 2023.
Michigan—Employer Withholding Tax Credit for Adoption Leave
Michigan—Nonresident City Income Tax Assessment Upheld
The plaintiff was properly subject to nonresident city income tax even though the COVID-19 pandemic caused the plaintiff's employer to authorize its employees to work from home or telecommute. The plaintiff alleged that the city demanded the plaintiff's employer to continue withholding the city taxes for nonresident employees who were working from home, contrary to the Michigan Department of Treasury’s confirmation that nonresident telecommuters were not subject to city taxation. The Michigan Court of Appeals held that the plaintiff's contention that the City Income Tax Act (CITA) does not apply to him because he transferred outside the city limits is contrary to the statute’s plain language that requires employers to withhold city taxes, employees to provide exemptions and estimates of where the work will be performed, and submission of the appropriate documentation to reflect the work relationship. The factual allegations raised in the plaintiff's first amended complaint, even when construed as true, do not render the city's actions unlawful. Further, because the CITA allows the city to require withholding "on another basis," no factual development of these claims could justify a recovery. As a result, the plaintiff’s factual claims are not legally sufficient to state a claim on which relief can be granted. The plaintiff’s own conclusions to the contrary are both incorrect and insufficient to state a cause of action. Regardless of whether the city made oral or written representations to the contrary, it also adopted the CITA that created a mandatory process for collection of city taxes by employers, a methodology for estimating and revising exemptions that lowered the tax premised on residency and work location, and the entitlement to a refund. There was no allegation that the plaintiff availed himself of the procedure established by the legislature [Hofmeister v. City of Jackson, Mich. Ct. App., Dkt. No. 358159, 09/29/2022 (unpublished)].
Mississippi—Tax Withholding FAQs Issued
The Mississippi Department of Revenue (DOR) has issued a series of Frequently Asked Questions (FAQs) on income tax withholding. The FAQs provide answers to questions in the areas of employer/employee questions (such as "How do I know how much income tax to withhold from my employee's salary?" and "My employer is not withholding tax or will not provide me with a W-2 form. What should I do?) and filing returns (such as "When are withholding tax returns due?"). There are also FAQs on registration and updating account information.
Missouri—2023 Unemployment Tax Rate Information Has Been Released
The Missouri Department of Labor (DOL) has announced that unemployment tax rates for new employers will be 2.511% for 2023, an increase from the current rate of 2.376% (see Payroll Guide ¶15,504). However, the rate for nonprofits organizations will remain at 1.00%. For experienced rated employers, the rate is based on a ratio arrived at by dividing an employer's account balance by its average annual taxable payroll. Rates could range from 0.0% to 6.0%, not including maximum rate surcharge and/or contribution rate adjustment. Rates for employers participating in the Shared Work Program could range from 0.0% to 9.0%, also not including maximum rate surcharge and/or contribution rate adjustment. Additionally, if an employer has been at the maximum experience rate for two consecutive years, a surcharge of one-quarter percent is added to the rate. In the event that an employer remains at the maximum rate for a third or subsequent year, an additional surcharge of one-quarter percent shall be added each year to the annual rate calculation up to one percent. If an employer continues to remain at the maximum rate, an additional surcharge of one-half percent shall be added. In no case shall the surcharge exceed one and one-half percent in any given year. The taxable wage base for unemployment benefits will decrease to $10,500 (currently, $11,000). A Federal Interest Assessment is not expected to be necessary for the calendar year 2023.
New York—Updated Information on the Employer Compensation Expense Program for 2023
The updated webpage for the Employer Compensation Expense Program (ECEP) indicates that the tax rate will continue to be 5% (the rate has been at 5% since 2021). It reminds employers that they make their annual affirmative election to participate in the ECEP no later than December 1 to pay the optional tax in the following calendar year. Enrollment for the tax year 2023 began on October 1, 2022. More information on the program is available through the New York Technical Service Bureau Memorandum No. TSB-M-18(1)ECEP, 07/03/2018.
North Carolina—Tax Relief for Victims of Hurricane Ian Granted
The North Carolina Department of Revenue has granted relief to victims of Hurricane Ian. The IRS had also previously granted relief to affected taxpayers. The DOR will remove any late penalties for returns and payments due from September 28, 2022, through February 15, 2023, if the return is filed, or the tax is paid by February 15, 2023. The penalty relief does not apply to tax payments that were due to be paid prior to September 28, 2022. Additionally, taxpayers who file on a semiweekly basis will only receive a waiver of the penalty for failure to pay the tax on withholding payments due on or after September 28, 2022, and before October 13, 2022, if the tax was paid on or before October 13, 2022.
North Carolina—DOR Reviewing Withholding Return Filing Frequency
In an email, the North Carolina Department of Revenue (“NCDOR”) notes that it is required by law to review the income tax withholding history of each North Carolina employer to ensure their filing frequency is within statutory guidelines. The NCDOR determines an employer’s filing frequency by considering the average amount of withholding tax the employer withheld in the preceding 12 month period that ended on June 30. If an employer’s filing frequency is not within statutory guidelines, NCDOR is authorized to notify the employer of a new filing frequency. On October 5, NCDOR began mailing notices to impacted taxpayers of a change in filing frequency for the 2023 tax year. Taxpayers receiving this notice must begin filing and paying North Carolina income tax withholding at the new assigned filing frequency, beginning January 1, 2023. The notice also included additional details such as due dates for withholding returns and payments.
South Carolina—SCDOR Announces Tax Relief for Hurricane Ian Victims
The South Carolina Department of Revenue (SCDOR) has announced that SCDOR will be following an IRS decision to extend the deadline for certain tax filings and payment to February 15, 2023 due to Hurricane Ian. The tax relief is extended to individuals in the state as well as taxpayers who have businesses in South Carolina whose operations have been affected by the hurricane, those whose tax records are located in South Carolina, those whose returns are prepared by tax professionals in South Carolina, and relief workers. SCDOR will grant the same relief period granted by the IRS. If the IRS grants an additional relief period, the SCDOR has stated that it will consider granting the same relief. In addition, on a case-by-case basis, SCDOR may grant additional tax relief depending on the taxpayer’s particular circumstances. This relief also includes the filing of quarterly payroll returns due on October 31, 2022 and January 31, 2023. South Carolina payroll tax deposits due on or after September 25, 2022 are not extended. Penalties on payroll tax deposits due on or after September 25, 2022 and before October 11, 2022 will be abated, however, if the tax deposits are made by October 11, 2022 [South Carolina Information Letter No. 22-19, 10/10/2022].
South Carolina—Governor Authorizes Paid Leave for State Employees Due to Hurricane Ian
South Carolina Governor Henry McMaster has signed Executive Order No. 2022-30 which provides paid leave to state employees impacted by Hurricane Ian. Paid leave is authorized according to state government office closures or abbreviated schedules on specified dates and locations as detailed on the Executive Order. Further, if an office was closed or operated on an abbreviated schedule that is not listed on the Executive Order, state employees will receive paid leave without the need of the issuance of a separate Executive Order.
Washington—New Guide for Unclaimed Property Holder Reporting Released
The Washington Department of Revenue (DOR) has released an updated Guide to Reporting Unclaimed Property. Holders of unclaimed property must file and remit unclaimed wages issued or with a last activity date of July 1, 2020 through June 30, 2021, before November 1, 2022. Prior to October 31, 2022, holders may email WAUCPHolders@dor.wa.gov to request an extension. Holders may file unclaimed wages for out-of-state last known addresses (except California) with Washington for 10 or fewer properties, totaling $1,000 or less. Otherwise, out-of-state unclaimed property should be filed with the respective state. Holders are required to submit a negative report (even when there is nothing to report) if an unclaimed property report was submitted in the past, a compliance letter has been received, or the holder participated in an on-site consultation visit.
Washington—SeaTac Announces Minimum Wage Increase for 2023
The SeaTac minimum wage rate for hospitality and transportation industry employees working in and near SeaTac will increase from $17.54 per hour to $19.06 per hour, effective January 1, 2023. Hospitality and transportation employers are required to provide written notification of the rate adjustment to each of their workers by January 1. The use of a tip credit is not permitted [City of SeaTac Announces 2023 Minimum Wage Adjustments, 10/6/22].
Wisconsin—DOR Revises Unclaimed Property Holder Report Guide
The Wisconsin Department of Revenue (DOR) has updated Publication 82 (Unclaimed Property Holder Report Guide). Holder reports are due by November 1, 2022 for unclaimed wages issued or with a last contact of July 1, 2020 through June 30, 2021. Late filed reports will be assessed a $150 penalty. Late payments will be assessed a penalty equal to 15% of the value of the property. All holder reports must be filed electronically. Holders may request an extension of up to 60 days to file and remit unclaimed property through MyTaxAccount prior to November 1, 2022. The guide notes that holders may submit an application for the voluntary disclosure program from February 1, 2022 through February 28, 2023. Wisconsin will accept up to ten items of unclaimed property for out-of-state addresses (except California). DOR will forward the names and property to the appropriate states.
Wisconsin—Electronically Transmitting Confidential Taxpayer Information
The Wisconsin Department of Revenue has updated its Fact Sheet that provides an overview of the methods used by the Department to send confidential taxpayer information to taxpayers and their representatives. Secure methods to send emails and/or attachments include My Case Manager (MCM) Secure Messaging through My Tax Account (MTA), use of the Department's secure file transfer, Cisco Registered Envelope Service (encrypted email), and DocuSign. Taxpayers and their representatives using non-secure methods to exchange information with the Department (such as Dropbox or regular email) must sign a waiver using DocuSign [Fact Sheet 5100 - Electronically Transmitting Confidential Taxpayer Information, Wis. Dept. Rev., 10/12/2022].
Wisconsin—November 17 Public Hearing on Unemployment Insurance for Employer and Employee Interests
The Wisconsin Department of Workforce Development's (DWD) Unemployment Insurance Advisory Council is holding hearings on the state's unemployment program and welcoming suggestions for changing the law and improving the program. The Council represents employee and employer interests and recommends changes to the unemployment law to the legislature. Registration is required. The conference date is November 17, 2022 from 2:00 to 4:00 p.m. and then from 5:00 to 6:00 p.m. Comments are allowed and may be sent by email (UILawChange@dwd.wisconsin.gov) or mail (Janell Knutson, Chair Unemployment Insurance Advisory Council, P.O. Box 8942, Madison, WI 53708).
Wisconsin—Unemployment Tax Rates Continue To Be Determined Under Schedule D in 2023
The Wisconsin Department of Workforce Development (DWD) has posted the unemployment tax rate information for employers for tax year 2023 on its website. Schedule D will continue to be in effect in 2023. Legislation passed in 2021 locked Schedule D through 2023. Rates range from 0% to 12% for employers with payroll under $500,000, and from 0.05% to 12% for employers with payroll of $500,000 or more. New employers (other than new construction employers) with payroll under $500,000 will continue to pay 3.05%. New employers with payroll of $500,000 or more (other than new construction employers) will continue to pay 3.25%. The new construction employer rate with payrolls of $500,000 and under increases from 2.50% to 2.90% in 2023. The new employer rate for construction employers for payrolls over $500,000 increases from 2.70% to 3.10% in 2023. All of the above rates include the solvency tax, which ranges from 0% to 1.3%. The taxable wage base will remain at $14,000 in 2023.
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