Important Year End Updates for Owners

Important Year End Updates for Owners

As 2015 quickly winds down and the New Year approaches, important legislative and tax changes are also on the horizon.

We’ve put together a list of the top changes that you’ll need to be prepare your staffing / consulting business for in 2016. From minimum wage increases to states with changing tax tables, to Earned Income tax credit notice requirements, we’ve collected the information you need to face the tax and legal changes coming in 2016 with confidence.

We’ve compiled the top legislative and tax changes that will impact staffing companies in 2016, including:

•   Earned Income Tax Credit Notice Requirements
•   Minimum Wage Increases
•   Unemployment Wage Limits
•   FUTA Reduction States
•   States with changing tax tables
•   Various Federal Tax Rate Changes
•   Standard Deduction Changes
•   Fact Sheet for determining Employees vs. Independent Contractors


Earned Income Tax Credit Notice Information
For 2015, you are encouraged to notify the following employees that they may be able to claim EIC on their 2015 tax returns:
•   Employees with one qualifying child and wages less than $44,846.  The employee’s copy of Form W-2 Tricom prepares has the required statement about the EIC on the back of the form. 

There are seven states that require employers to provide some additional notification to their employees about their possible eligibility for earned income credit. The following states allow employers to use Federal Notice 797:
•   California
•   Illinois
•   Louisiana
•   Texas

The following states require the use of a state-specified form:
•   New Jersey
•   Virginia
•   Maryland require

Once these documents are updated for the current year, they will be available on Tricom’s website under: http://tricom.com/resources/tax-tools. Please contact your Tricom Accounting representatives if you have any questions.

Minimum Wage Increases
The following states will implement changes to their minimum wage for 2016:
 

State 2015 2016 Change
Alabama 8.75 9.75 1.00
Alaska 8.75 9.75 1.00
Arizona 8.05 8.20 0.15
Arkansas 7.50 8.00 0.50
California 9.00 10.00 1.00
Colorado 8.14 8.30 0.16
Conneticut 9.15 9.60 0.45
District of Columbia 10.50 11.50 1.00
Florida 8.05 8.22 0.17
Hawaii 7.75 8.50 0.75
Maryland 8.00 8.75 0.75
Massachusetts 9.00 10.00 1.00
Michigan 8.15 8.50 0.35
Minnesota 9.00 9.50 0.50
Missouri 7.65 7.80

0.15

Montana 8.05 8.20 0.15
Nebraska 8.00 9.00 1.00
New Jersey 8.38 8.59 0.21
New York 8.75 9.00 0.25
Ohio 8.15 8.30 0.15
Oregon 9.25 9.45 0.20
Vermont 9.15 9.60 0.45
Washington D.C. 9.47 9.67 0.20
West Virginia 8.00 8.75 0.75
       


Federal Contract Workers


10.15
   


*Rates vary by small and large employer. Annual sales over $500,000 is a large employer.
 
2016 Unemployment Wage Bases:

 

State 2016 2015 State 2016 2015
Alabama 8,000 8,000 Montana 30,500 39,500
Alaska 39,700

38,700

Nebraska 9,000 9,000
Arizona 7,000 7,000 Nevada 28,200 27,800
Arkansas 12,000 12,000 New Hampshire 14,000 14,000
California 7,000 7,000 New Jersey 32,600 32,000
Colorado 12,200 11,800 New Mexico 24,100 23,400
Connecticut 15,000 15,000 New York 10,700 10,500
Delaware 18,500 18,500 North Carolina 22,300 21,700
Washington D.C. 9,000 9,000 North Dakota 37,200 35,600
Florida 7,000 7,000 Ohio 9,000 9,000
Georgia 9,500 9,500 Oklahoma 17,500 17,000
Hawaii 42,200 40,900 Oregon 36,900 35,700
Idaho 37,200 36,000 Pennsylvania 9,500 9,000
Illinois 12,960 12,960 Puerto Rico 7,000 7,000
Indiana 9,500 9,500 Rhode Island 22,000 21,200/22,700*
Iowa 28,300 27,300 South Carolina 14,000 14,000
Kansas 14,000 12,000 South Dakota 15,000 15,000
Kentucky 10,200 9,900 Tennessee 9,000 9,000
Louisiana 7,700 7,700 Texas 9,000 9,000
Maine 12,000 12,000 Utah 32,000 31,300
Maryland 8,500 8,500 Vermont 16,800 16,400
Massachusetts 15,000 14,000 Virginia 8,000 8,000
Michigan 9,000 9,500 Washington 44,000 42,100
Minnesota 31,000 30,000 West Virginia 12,000 12,000
Mississippi 14,000 14,000 Wisconsin 14,000 14,000
Missouri 13,000 13,000 Wyoming 25,500 24,700

*The first rate represents most employers; the higher rate is for those companies with the highest unemployment rate.

22 States increased their wage limit for 2016.
1 State decreased their wage limit for 2016.

FUTA Reduction States
Employers in the following states may be subject to a reduction in FUTA credit on their IRS Form 940 for 2015:
 

State: Credit Reduction:
California 1.5%
Connecticut 2.1%
Ohio 1.5%
Virgin Islands 1.5%


Connecticut faces a higher credit reduction of 2.1% because it is subject to the Benefit Cost Rate (BCR). Connecticut was a credit reduction state in 2011,2012, 2013, and 2014 thus making its credit reduction amount to be 1.5%; however, because it did not apply for a BCR waiver by the 7/1/2015 deadline it is subject to a .6% add-on.

States that have paid their FUTA loan in 2015:
•   Indiana
•   Kentucky
•   New York
•   North Carolina
•   South Carolina

State Tax Table Changes:
The following two states have changed their income tax withholding amounts for 2016. If you have employees in these states, they may notice differences in the amount of state tax withheld.
•   California
•   Kentucky

Additional Employee Tax Changes:<
•   California Employee disability rate has not changed but the wage base has increased to $106,742 from $104,378
•   New Jersey Employee taxes have decreased: Employee unemployment has stayed the same at .425% but TDI (temporary disability) has decreased from .25% to .20% and FLI (family leave insurance ) has decreased from .09% to .08%, The total rate for 2016 will be .0705% down from .0765%

Federal Tax Changes
The following are changes that are being implemented at the Federal level:
•   Social Security Limit: 2016 limit is $118,500 (No change from 2015); Additional .9% Medicare tax on employee wages over $200,000 is still in place for 2016. •   401K Limit: 2016 limit is $18,000 (unchanged from 2015) •   Elective Deferrals to SIMPLE retirement plan: New limit is $12,500 (unchanged from 2015)

2016 Standard Deduction Changes:
The following are additional standard deduction changes:
•   Single & Married Filing Separately: $6,300 (same as 2015)
•   Married Filing Jointly: $12,600 (same as 2015)
•   Head of Household: $9,300 from $9,250

IRS Develops new Fact Sheet on Determining Employee from Independent Contractor
The IRS has issued a fact sheet reminding employers of the importance of correctly determining whether workers are employees or independent contractors. The new fact sheet compiles links to related forms and other information. [FS-2015-21,8-19-15; www.irs.gov/uac/Newsroom/Payments-to-Independent-Contractors].

Other Labor Law Updates:
•    If your company’s application still includes a question asking about criminal history, make sure you don’t operate in a state that has implemented a “ban the box” law prohibiting that practice. New York, Ohio, Oregon, Virginia, and Vermont are among 19 states and over 100 cities and counties that passed legislation in 2015 prohibiting asking applicants about their criminal history.
•   You may want to review your application and hiring practices to ensure you’re not in violation of new religious accommodation obligations. In the wake of June’s Supreme Court Abercrombie & Fitch decision, the burden is now on the employer.
•   Some states strengthened equal pay laws in 2015, including California and New York. Assess your starting and incumbent salaries to ensure you’re not opening yourself up to equal pay act claims.
•   The Supreme Court unanimously ruled in 2015 that if your business requires employees to pass through security screenings at the end of their shifts, that employers do not have to pay workers for security-check wait times.
•   2015 saw the EEOC begin to enforce Title VII to include sexual orientation, even if your state law does not.
•   Since the Supreme Court decision Obergefell v. Hodges in June, states are now required to recognize same-sex marriage. If you administer benefits, you’ll want to review to ensure you are in compliance with obligations stemming from this change.
•   This fall, the federal budget revealed that OSHA now has the power to increase penalties by up to 82%. Make sure your compliance efforts are strong to avoid feeling the pain.
•   New rules on overtime pay are tentatively expected in July 2016, but this schedule could be adjusted.

For more legislative and year end updates, please refer to Tricom.com. We’ll post the latest legislative and tax updates, as well as tax tools and other resources for 2016 as they become available. For specific questions, please contact Mary Jo Heim in the Tricom Accounting Department at 262-509-6214 or your Tricom Accounting representative.

 

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