1

Dear AIPB Member:

Heads up on 2019 1099-MISC

Recap: You must provide a 2018 1099-MISC to the IRS and almost all noncorporate entities (see below) to whom you paid at least $600 during 2018—but almost never to an S or C corp (see below). The 1099s are due to payees and the IRS by Jan. 31. Form 1096, Annual Summary and Transmittal of U.S. Information Returns, is due to the IRS by Feb. 28.

The bad news. In addition to 2018 filing being more complicated, employer 1099s face intense scrutiny. A primary reason is that the IRS’ believes that there is a lot of underreporting by independent contractors (ICs) that results in their not paying enough income tax.

New rules for 2018 filings. The IRS is proposing extensive new filing rules and wants to apply them for 2018. Forms filed simply on the wrong media, even if correct, can trigger huge tax penalties.

4 tips for filing Forms 1099-MISCHere are four quick tips to help you get a handle on the 1099-MISC process this year:

1. Review vendor files carefully. Not filing a 1099-MISC to someone you should have can create a small disaster. However, other mistakes are harmless, such as filing a 1099-MISC you didn’t need to, such as to a C or S corp, or to a self-employed whom you paid less than $600 for 2018.

Independent contractors must receive 1099-MISC forms if they are not incorporated—i.e., are a sole proprietorship, partnership, disregarded entity or LLC that has elected not to be treated as a corporation—and whom you paid at least $600 in cash for services they provided to your firm in 2018. Exception: Attorneys who do business as corporations must receive 1099s.

Other noncorporate recipients of 1099s:

n Inside and outside corporate directors

n Outside accountants, lawyers and salespeople

n Auto mechanics/service stations that repair company cars

n Plumbers, electricians, painters, carpenters, tech consultants or office cleaners

n Equipment lessors and repairpeople

n Office/company car lessors

The General LedgerThe Complete Newsletter for Professional Bookkeepers

JANUARY 2019VOL. 36, NO. 1

Notice: Items from The General Ledger and Bookkeeping Tips are showing up on websites with no attribution to AIPB. All material from both is copyrighted by AIPB and may not be reproduced in any form without AIPB’s written permission. To obtain permission, email the excerpt you want to use to info@aipb.org. We will grant you permission to use it with a minor attribution to AIPB.

Enroll at savewithups.com/aipb (this URL is case-sensitive) at the AIPB Members Only page…

or by calling 1.800.636.2377, 8 a.m.-6 p.m. EDT, M–F.

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Save precious hours closing the books Find everyday journal entries and adjusting and closing journal entries fast—with AIPB’s what-to-debit, what-to-credit Encyclopedia of Journal Entries. Rated by buyers at over 4+ stars.

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2. Triple-check IC TINs. If they don’t match IRS records, it can mean real trouble. Avoid name/TIN mismatch penalties by registering in the free, easy-to-use online IRS TIN Matching program before doing your 1099s. You can verify up to 25 on one screen.

3. You can truncate a payee’s TIN to 5 digits but only on payee paper or electronic copies —the 1099 filed with the IRS must have the full TIN. Truncated TINs, look like this:

• SSNs: XXX-XX-1234 or ***-**-1234 • EINs: XX-XXX1234 or **-***1234. Warning: Do not truncate your firm’s EIN.

4. You must complete paper forms for payees and your files, even if you file electronically with the IRS. The IRS has fillable Copies 1, B, 2, C and D online. You may use these online fillable forms for payees’ copies and your files. See the complete list of IRS fillable forms.

The General Ledger (ISSN #10462910) is published monthly for $65 a year by The American Institute of Professional Bookkeepers, 6001 Montrose Road, Suite 500, Rockville, MD 20852, 1-800-622-0121.

Executive Director and Co-President: Stanley I. Hartman Publisher and Co-President: Stephen SahleinGeneral Manager and Educational Support Services Supervisor: Barbara Regotti

Manager, Bookstore and Customer Services: Patricia BeltranSupervisor, Member Services: Daniela Jarath

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold or offered with the understanding that the publisher and the editors are not engaged in rendering legal, accounting or other professional services. If legal advice or other assistance is required, the services of a competent professional should be sought. — From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations.

Copyright 2018 by American Institute of Professional Bookkeepers. All rights reserved. Reproduction in any form is forbidden without consent of the publisher.

www.aipb.org

Dr. Barry C. Broden (Ret.)Department of Accounting and

TaxationUniversity of Hartford

Wayne L. Edmunds, CPA, JD, MLTDepartment of AccountingVirginia Commonwealth University

Lorelei M. Krucki, CPPDepartment of Corporate TrainingSt. Petersburg College

Dr. Gordon S. May (Ret.)J.M. Tull Schoolof Accounting (Emeritus) University of Georgia

Debera J. Salam, CPPDirector, Payroll Information and

Process ServicesErnst & Young LLP

L. G. Schloss (Ret.)Department of AccountingIona College, Retired

AIPB Board of Advisors

Corrections: • In the December issue, Adoption Assistance

on the 2018 Fringe Benefits Reporting chart on page 8 “should be up to $13,810 for 2018 and $13,570 for 2017.

• In the December issue, the supplementary withholding rate should have been 22%.

We apologize for any inconvenience.

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Temporary 2019 Form W-4 guidance. Key elements of the new IRS guidance, which applies through April 30, are:

n Changes in terminology imposed by The Tax Cuts and Jobs Act—e.g., “withholding exemptions” is replaced by “withholding allowance” to identify items that reduce an employee’s withholding. Each withholding allowance is multiplied by a dollar amount and the total is the employee’s “withholding allowance.” The dollar amount for 2018 is $4,150 (the amount for each year is published in Pub. 15.

n Suspension of the requirement that employees furnish their employers new W-4s within 10 days of any reduction in the employee’s allowances die solely to The Tax Cuts and Jobs Act.

n Continuation of the requirement that employees furnish their employers with a revised W-4 within 10 days if events in the employee’s life have resulted in the employee’s having fewer withholding allowances—e.g., a divorce, death.

n In general, failure to file a required W-4 will continue to result in withholding as single with no withholding allowance.

n Employees entitled to the 20% business pass-through deduction may include an estimate of that deduction when determining the withholding allowance.

n When it becomes available for 2019, employees can use the IRS online withholding calculator instead of the W-4 worksheets to estimate their withholding, or use Pub. 505, Tax Withholding and Estimated Tax.

Expect a revised W-4 for 2020 early enough in 2019 for software firms and payroll processors to adapt before Jan. 1, 2020.

Watch those 401(k) contribution limits. The limits are per employee—not per account. The IRS is about to crack down on excess contributions. Some employees exceed the annual limit ($19,000 for 2019) because they have multiple accounts, according to a Treasury report.

Frequent cause of excess contributions: An employee who changes jobs during the year or has more than one job schedules contributions up to the annual maximum with each employer. But the annual limit applies to the total contributions made to all accounts.

IRS target: Those who have more than one 401(k) account during the year. [Tax Notes Today]

Ridel A. Guerrero Fernandez, CB, Miami Gardens, FL

Michele A. Martin, CB, Taylorsville, KY Jennifer Rogers, CB, Mt. Airy, MDMaria S. Veloz, CB, Norwalk, CTWeixing Ding, CB, Seattle, WA Robert Steedman, CB, Newport Beach, CAMisty Schepis, CB, Caldwell, IDGwendolyn M. Wardle, CB, Tucson, AZ Katharina Fritzsche, CB, Tucson, AZJessica E. Rockwell, CB, Gardnerville, NV

Md Salah Uddin Mahtab, CB, Norcross, GACatherine J. Burnett, CB, Fairfield, CT Robert S. Frith, CB, Taunton, MA Kathryn A. Nemeth, CB, Phoenix, AZDolores M. Toledo, CB, Corona, NY Deborah A. Alston, CB, Charlotte, NC Olalekan Oluwa, CB, Secane, PA Athena V. Anthony, CB, Spokane, WA Angela Clark, CB, Mertens, TXDebra Knight, CB, Nitro, WV

AIPB congratulates these newly Certified Bookkeepers (CBs):Certification Honor Roll

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2019 Tax Table Ceilings and Limits

Married Individuals Filing Jointly and Surviving Spouses Heads of Households

If taxable income Is over . . .

but not over . . . the tax is . . .

of the amt. over . . .

If taxable income Is over . . .

but not over . . . the tax is . . .

of the amt. over . . .

$ -0- $ 19,400 10% of the taxable income $ -0- $ -0- $ 13,850 10% of the taxable income $ -0-$ 19,400 $ 78,950 $ 1,940 + 12% $ 19,400 $ 13,850 $ 52,850 $ 1,385 + 12% $ 13,850$ 78,950 $168,400 $ 9,086 + 22% $ 78,950 $ 52,850 $ 84,200 $ 6,065 + 22% $ 52,850$168,400 $321,450 $ 28,765 + 24% $168,400 $ 84,200 $160,700 $ 12,962 + 24% $ 84,200$321,450 $408,200 $ 65,497 + 32% $321,450 $160,700 $204,100 $ 31,322 + 32% $160,700$408,200 $612,350 $ 93,257 + 35% $408,200 $204,100 $510,300 $ 45,210 + 35% $204,100 $612,350 $164,709.50 + 37% $612,350 $510,300 $152,380 + 37% $510,300

Standard deduction: $24,400 Standard deduction: $18,350

Unmarried (Not Surviving Spouses or Heads of Households) Married Individuals Filing Separate Returns

If taxable income Is over . . .

but not over . . . the tax is . . .

of the amt. over . . .

If taxable income Is over . . .

but not over . . . the tax is . . .

of the amt. over . . .

$ -0- $ 9,700 10% of the taxable income $ -0- $ -0- $ 9,700 10% of the taxable income $ -0-$ 9,700 $ 39,475 $ 970 + 12% $ 9,700 $ 9,700 $ 39,475 $ 970 + 12% $ 9,700$ 39,475 $ 84,200 $ 4,543 + 22% $ 39,475 $ 39,475 $ 84,200 $ 4,543 + 22% $ 39,475$ 84,200 $160,725 $ 14,382.50 + 24% $ 84,200 $ 84,200 $160,725 $14,382.50 + 24% $ 84,200$160,725 $204,100 $ 32,748.50 + 32% $160,725 $160,725 $204,100 $32,748.50 + 32% $160,725$204,100 $510,300 $ 46,628.50 + 35% $204,100 $204,100 $306,175 $46,628.50 + 35% $204,100$510,300 $153,798.50 + 37% $510,300 $306,175 $82,354.75 + 37% $306,175

Standard deduction: $12,200 Standard deduction: $12,200

Helping employees or clients with 2019 FITW. Here’s how to use these tables:n Since you are not allowed to give tax advice, when

employees ask you how much they should withhold, show them these tables.

n You need to know what’s in your payroll software—don’t just rely on the numbers it generates. Use the tables below to see if the numbers generated make sense.

n Have these tables in front of you when talking to clients about their taxes or making decisions.

n For a client, it can be faster and easier to decide whether to defer some income or other decisions by inputting these data into a calculator or spreadsheet.

n Use the tables to see the breakpoints between tax brackets and to see other tax factors.

n You may be expected to know some of these data—no one wants to be told, “Let’s see what the computer says.”

Caution: Do not use these tables for 2019 personal tax returns.

Personal and dependent exemptions. Eliminated under The Tax Cuts and Jobs Act.

2019 aged or blind. The additional standard deduction amount for an aged or blind individual who is married is $1,300—if unmarried and not a surviving spouse, $1,650.

2019 Kiddie Tax. Unchanged again. Kicks in when a dependent child’s unearned income exceeds $1,100. The Kiddie Tax AMT exemption may not exceed the sum of the child’s earned income for the taxable year, plus $7,750.

2019 monthly qualified transportation fringes. Transit passes or commuter highway vehicles, $265; parking, $265.

2019 adoption assistance program limits. Up to $14,080 is excludable from an employee’s gross income for the adoption of a special needs or other child. Phaseouts begin at AGIs over $211,160 and end at $251,160.

2019 health flexible spending account limit on employee pretax contributions, $2,700.

2019 dependent care spending accounts. The maximum continues to be limited to the lower of the following:

• $5,000 for marrieds filing jointly ($2,500 for single parents or marrieds filing separately);

• the employee’s “earned income” for the year; or

• the spouse’s “earned income,” if the employee is married as of the end of the taxable year.

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STATE NEWS

Although you may know about the items reported below if you are in the affected state, we report them for members whose company or clients have multistate locations.

Alaska. The 2019 minimum wage is $9.89 for all employees in the private sector—for-profit, not-for-profit or nonprofit. Details at Minimum Wage. [Department of Labor and Workforce Development, News,

10-31-18]

Arkansas. The 2019 minimum wage is $9.25; tipped employees, $2.63 in cash wages.

Colorado. The 2019 UI wage base is $13,100. [Department of Labor and Employment, UI Employer

Services.]

Georgia. The revised 2019 withholding tables are available. The 2019 supplemental SITW rate for wages over $15,000 is 5.75%; up to $15,000, the rates are unchanged. [DOR, Employer Tax Guide, rev. 1-19]

Iowa. Tell employees about the new state withholding calculator. [DOR, News Release, 11-13-18]

Michigan n The scheduled minimum wage increase to $10 is

delayed, possibly until April.

n The new unclaimed property website lets you both report unclaimed property or wages and remit funds electronically. Important: Even if you hold no unclaimed property, you are strongly urged to file a zero report to establish a filing history.

n The state UI system offers UI claimants a seamless login and quick overview of claim data.

Minnesota. The 2019 UI wage base is $34,000. [UI,

Overview of 2019 Tax Rates]

Missouri. The 2019 UI wage base is $12,000. [Department of Labor and Industrial Relations, Tax Rates]

New York. Warning: State law says the following wage thresholds and minimum wages are effective on or after Dec. 31, 2018. Thus, technically, you must pay them for 1 day in 2018—on Dec. 31. We assume that the law was intended for 2019 and was not supposed to include Dec. 31, 2018. If you are concerned, check with the New York State tax authorities.

The 2019 overtime exemption thresholds for executive or administrative personnel are as follows: n New York City ✔ 11 or more employees, $1,125.00/week

($58,500/year) ✔ 10 or fewer employees, $1,012.50/week

($52,650/year)

n Nassau, Suffolk and Westchester Counties, $900.00/week ($46,800/year)

n Employers outside of New York City and Nassau, Suffolk and Westchester Counties: $832/week ($43,264/year)

Also: The 2019 state minimum wage is as follows:

n New York City ✔ 11 or more employees, $15.00 ✔ 10 or fewer employees, $13.50

n Nassau, Suffolk and Westchester Counties, $12.00

n Outside New York City and Nassau, Suffolk and Westchester Counties, $11.10

North Carolina. The 2019 UI wage base is $24,300. [Division of Employment Security, information for annual

experience for 2019 taxation]

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2019 TRAVEL PER DIEMS

2019 travel reimbursement per diems. Businesses can use the federal per diem rates, including meals and incidental expenses (M&IE) to reimburse employees for business travel expenses without detailed substantiation.

The new rates are in effect from Oct. 1, 2018, to Sept. 30, 2019. [Notice 2018-77]

Incidental expenses only $5/day (unchanged)High-cost locales $287/day (includes $71 M&IE) Other locales $195/day (includes $60 M&IE)High-cost locales M&IE $71 Other locales M&IE $60

A list of high-cost cities is available.

Incidental expenses include: Fees and tips for porters, baggage carriers, hotel staff and staff on ships.

Not included in per diem incidental expenses: Transportation between places of lodging or business and places where meals are taken, the cost of mailing in travel vouchers, employer-sponsored charge card billings. These costs can be separately reimbursed with adequate substantiation.

AIPB courses are available in book or e-book form at the AIPB Bookstore.

Quiz1. The new tax law limits tax deductions for federal and

local taxes for individuals. Does this also apply to business taxpayers?

Questions 2-5: Employers providing paid family and medical leave can get a tax credit equal to 12.5%-25% of wages paid while an employee was on family and medical leave, depending on the circumstances. To obtain the credit, the business must have a written plan that:

2. provides leave to all _____ employees;

3. allows at least _____ weeks of annual leave for each _____-_____ employee; and

4. pays at least _____% of an employee’s wages while on leave.

5. Moving expenses reimbursed in 2018 generally cannot be excluded from gross income. Does this apply to qualified moving expenses incurred in 2017 but reimbursed in 2018?

6. To make sure employee paycheck names and SSNs match their W-4 data, use the Social Security Administration’s SSN _____ _____.

7. For tax purposes, wages earned in 2018 but paid by check or electronically on or after Jan. 1, 2019, are considered _____ (2018/2019) wages.

8. Review before Jan. 15, 2019, any 2018 paychecks outstanding more than _____ pay period(s) so you have time to void and reissue before processing 2018 W-2s.

Answers: 1. no 2. qualified 3. 2, full-time 4. 50 5. no 6. verification service 7. 2019 8. two

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❑ Void box. Check only if a W-2 is incorrect and is being corrected before Copy A is filed with the SSA, even if the employee already has the incorrect W-2.

❑ Box a. Employee’s SSN. If applied for but not received, on paper forms enter “Applied for”; on electronic W-2s, enter “000-00-0000.”

❑ Box b. Employer’s EIN (not owner’s SSN). If an EIN was applied for but not received, enter on paper forms “Applied for”; on electronic forms, zeros.

❑ Box c. Employer’s name/address/ZIP must match the employer’s quarterly and annual tax returns.

❑ Box d. Control number—optional.

❑ Box e. The name exactly as it is on the SS card or W-4. To change a name, ask to see a new SS card. Omit titles, suffixes (Jr., Sr., Mr., Ms.) and degrees (R.N., Dr., M.D.). Use a hyphen or a space in compound names (Smith-Jones or Smith Jones), even if there is no hyphen on the SS card. Connect O’, D’, etc., with an apostrophe or join (e.g., O’Brian or OBrian).

Note: The SSA prefers that no suffix be entered on Copy A (even though there is a box [Suff]), unless “Jr.” or “Sr.” appears on the Social Security card.

❑ Box f. Last known address (include the ZIP code).

❑ Box 1. Wages/tips/other compensation constructively received during the calendar year. Also include:

n Taxable prizes/length-of-service/safety awards; n Noncash payments (include reportable fringe

benefits); n Unsubstantiated business expense

reimbursements; n Accident/health premiums paid for

2%-shareholder-employees by an S corp. Exclude from Boxes 3 and 5 if you paid premiums for nonshareholder employees;

n Distributions from a §457 or nonqualified deferred compensation plan to statutory employees;

n Taxes paid for the employee by the employer; n Payments for nonqualified moving expenses;

n Taxable benefits, such as cash taken under a cafeteria plan, scholarships or fellowship grants;

n Total reported tips (not allocated tips); n Taxable employer Archer MSA or HSA

contributions; n Military differential wage payments; n Nonqualified deferred compensation plan

amounts included in income due to noncompliance with §409A;

n Group-Term Life in excess of $50,000; n Employer contributions to long-term care services

provided through a flexible spending account (FSA).

❑ Box 2. Total FITW. Includes FITW on third-party sick pay (unless reported by vendor), withheld taxes on military differential wages, and the 20% excise tax withheld on excess golden parachute payments.

❑ Box 3. Total wages subject to SS tax, excluding tips (actual or allocated). Include in Box 12 with Codes D, E, F, G and S: elective and nonelective deferrals to §457 plans; taxable Group-Term Life over $50,000; employee and non-excludable employer MSA contributions and employee contributions made to a SIMPLE plan. Box 3 + Box 7 should not exceed $128,400 for 2018.

❑ Box 4. SS tax withheld or paid by the employer should not exceed $7,960.80 for 2018.

❑ Box 5. Total wages (include reported tips) subject to Medicare. No limit on Medicare wages.

❑ Box 6. Medicare tax withheld or employer-paid, including additional tax on wages over $200,000.

❑ Box 7. Enter reported tips, even if funds were insufficient to collect SS tax. The total of Boxes 3 and 7 should not exceed $128,400 for 2018.

❑ Box 8. Enter allocated tips (do not include this amount in Boxes 1, 3, 5 or 7).

❑ Box 9. Leave blank, unless the employer is participating in the W-2 Verification Code initiative. If, so, enter the 16-character alphanumeric code. (Box 9 is for a pilot program designed to combat fraud),

Payroll

Completing the 2018 Form W-2 Box by Boxby Lorelei M. Krucki, CPP, Instructor, St. Petersburg College, St. Petersburg, Florida

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AIPB Professional Courses• Increase your skills and your value to your company/clients • Prepare for the CB exam

AIPB Professional Courses • Increase your skills and your value to your company/clients •Prepare for the CB exam

✓ Master key accounting, tax and finance skills in the privacy of your office or home. ✓ Get a self-contained workbook that also serves as an excellent desk reference. ✓ Go at your own pace through the carefully paced instruction.

✓ Nail down each new skill with a double-quiz at the end of every course section. ✓ Use your course workbook on the job as a time-saving reference.

❑ Box 10. Employer-provided dependent care (paid or incurred) under §129, including the fair market value of employer-provided or employer-sponsored daycare facilities, even if over $5,000. Report amounts over $5,000 in Boxes 1, 3 and 5. Note: Report dependent care benefits on Form 2441.

❑ Box 11. Used by the SSA to see if any portion of Boxes 1, 3 and 5 was earned in a prior year and to verify that the SS earnings test was applied and SS recipients were paid correctly. Generally, Box 11 reports distributions from a §457 or nonqualified deferred comp. plan related to prior years.

❑ Box 12 A-EE. Use uppercase letters left of the line, amount to the right. Paper W-2s can have only 4 items (electronic W-2s can have more). Do not use dollar signs or commas.

❑ Box 13. Check applicable boxes: ❑ Statutory Employee for wages subject to FICA but not FITW; ❑ Retirement Plan if eligible (even if they do not participate); ❑ Third-Party Sick Pay (only if you are both the payer and the W-2 filer).

❑ Box 14. If you report 100% of the lease value of a company-provided car as income in Box 1, also report it here or in a separate statement. You can also report here withheld SDI, health premiums, union dues, education assistance, payment for uniforms, nontaxable income, payments made on the employee’s behalf, charitable contributions, and the additional Med. tax from Box 6. Each item should be labeled.

❑ Boxes 15-20. State/local tax data (will not equal Box 1). Put the 2-letter state name at left. Note: Your state may require reporting all employee wages, even wages reported in other states (this is not duplicating Box 1).

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BENEFIT TYPE W-2

Box 1W-2Box 3/5

W-2Box 10

W-2Box 12

(10)

W-2Box 13

(6)

W-2Box 14

941Line 2

941, Lines

5a, 5c and 5d

940, Part 2 Line 3

940, Part 2

Line 4 (9)

Adoption Assistance up $13,810 for 2018 and $13,570 for 2017

out in out in (“T”)14 out out out in in out

Business Exp.: Unsubstantiated or Excess Payments1

in in out in (“L”) out out in in in out

Dependent Care Assistance Under $5,0002

out out in2 out out out out out in in

Group-Term Life Over $50,000 in in out in (“C”) out out in in in in

Group-Term Life: Former Employees

in in out in8 out out in in12 in in

Health Plan, Aggregate Employer Cost16

out out out in (“DD”) out out out out out out

Third-Party Sick Pay: Taxable Portion11

in in out out out out in7 in in out

Health Insurance-Employer Provided

out out out in (“DD”)16 out out out out out out

Health Savings Account–Employer/Employee Pretax

out out out in (“W”) out out out out in out

Third-Party Sick Pay: Nontaxable Portion11

out out out in (“J”) out out out out in in

Tips: FICA Not Withheld 3 in in out in (“A/B”) out out in in12 in out

Tips: Allocated4 out out out out out out out out out out

Reimbursed Moving Expenses: Taxable13

in in out out out in13 in in in out

Reimbursed Moving Expenses: Nontaxable13

out13 out out in (“P”) out in13 out13 out in in

§401(K) Pretax Contributions, out in out in (“D”) in6 out out in in out

Roth §401(K) Posttax Contributions in in out in (“AA”) in6 out in in in out

Roth §457(B) Posttax Contributions in in out in(“EE”) out out in in in out

SEP Employer Contributions out out out out in6 out out out out out

SEP Employee Contributions out in out in (“F”) in6 out out in in out

§125 Pretax Contributions out out out out out out out out in in

§501(C)(18)(D) Plans in in out in (“H”) in6 out in in in out

Personal Use of Company Car in in out out out in15 in in in out

Wages Paid After Death—Year of Death5 out in out out out out out in in out

Wages Paid After Death—Year After Death5 out out out out out out out out out out

“In” indicates that the benefit is reported in this area of the form. “Out” indicates that the benefit is not reported in this area of the form.

2018 FRINGE BENEFITS REPORTING FOR FEDERAL FORMS

* This chart was reprinted with permission from Payroll Compliance Handbook, Warren Gorham Lamont. © Copyright 2018. All rights reserved. To order, call (800) 950-1211.

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1) Report the amount equal to the government-set rate on the W-2 in Box 12, and the excess or unsubstantiated reimbursement in Boxes 1, 3 and 5.

(2) Report 100% of employer-provided dependent care assistance on the W-2 in Box 10, even if the value exceeds $5,000. Report the excess over $5,000 in Boxes 1, 3 and 5. Remind plan participants to include Form 2441 with their federal tax return or the $5,000 exclusion may be disallowed.

(3) Even if FICA was not withheld, report wages on the W-2 in Box 12 with an “A” for SS tax not collected from tips and “B” for Med. tax not collected. Do not report in Boxes 4 or 6.

(4) This amount is reported in Box 8 only.

(5) Report the federal taxable amount of the payment on a 1099-MISC (rather than in Box 1 of the W-2) issued to the beneficiary or recipient of the wages. Wages paid after death but in the year of death are FICA and FUTA taxable and reported as such on the W-2, 941, and 940. Wages paid in the year after death are not FICA- or FUTA- taxable and are not reported on the W-2, 941, or 940 but only on the 1099-MISC. Federal taxable income in connection with nonqualified deferred compensation paid to the deceased employee’s beneficiary is also reported on a 1099-MISC.

(6) Box 13 “retirement plan” is checked for all participants in a retirement plan. This may include those employees who are eligible but elected not to participate. Discuss with your organization’s benefits consultant.

(7) See the 941 instructions for line 2.

(8) Report taxable group-term life insurance over $50,000 in Box 12 and put a “C” before the amount. Report uncollected SS tax from former employees’ taxable group-term life insurance in Box 12 preceded by an “M.” Report uncollected Medicare tax in Box 12 preceded by an “N.”

(9) Check one of the boxes as appropriate for the wage type that is exempt from FUTA. For instance, check Box 4(a), “fringe benefits” for pretax health contributions under a cafeteria plan arrangement and 4(b), “group-term life” for taxable group-term life in excess of $50,000.

(10) Letters shown in this column must precede the dollar amount in Box 12. There must be at least one space between the code and the dollar amount.

(11) Sick pay received in the first 6 months from the last day of the month the employee last worked is reported on the W-2 in Boxes 1, 3, and 5. Sick pay received after this is reported only in Box 1. Report nontaxable sick pay in Box 12 with code J. if the 941 and W-2 do not agree (usually applies to third-party payers), Form 8922 is required.

(12) Show a credit for the amount of SS and/or Med. tax not withheld from tips and/or group-term life insurance over $50,000 on line 9 of the 941.

(13) For moving expenses incurred after January 1, 2018, all reimbursements are taxable except for employees of the U.S. Armed Forces. These taxable reimbursements, whether provided by the employer or a third party, are included on the W-2 and 941 both as wages subject to FIT, FITW, FICA and FUTA and as SS and Med. wages.

Exception: For members of the Armed Forces on active duty who move because of a permanent change of station (for a definition of permanent change of station and to find out which moving expenses are deductible, see the section on moving expenses in IRS Pub. 3, Armed Forces’ Tax Guide), exclude nontaxable amounts from Box 1 of the W-2 and Line 2 of the 941. If nontaxable relocation reimbursements are made directly to employees, report in Box 12 of the W-2 preceded by a “P.” if made directly by third parties, do not report nontaxable payments in Box 12; instead include these amounts on the 940, Part 2, Line 3 and Part 2, Line 4 (check Box 4e). Box 14 reporting on the W-2 is optional.

(14) When reporting adoption assistance in Box 12, exclude amounts forfeited under an adoption assistance flexible spending account.

(15) If 100% of vehicle use is reported on the W-2 in Box 1, also show the amount included in Box 14, or provide the information to the employee in a separate statement.

(16) If you filed 250 or more W-2s the previous tax year, report in Box 12, code DD, the aggregate cost of employer-provided group health. Does not affect taxable wages.

11

BOOKKEEPING MANAGEMENT

New IRS guidance on employer-provided meals. For years the IRS has been scrutinizing the growing practice of employers providing free or reduced-price meals to employees on the business premises. Based on its audits and discussions with employers, the IRS issued a “generic legal advice memorandum.”

Employer-provided meals are tax free to employees under §119, Meals or lodging furnished for the convenience of the employer, if provided for the employer’s convenience; otherwise, their value is included in the employee’s gross income. For the employer, 50% of the cost of the meals is deductible through Dec. 31, 2025.

When are employer-provided meals given for the employer’s convenience?

When they “are necessary for the employee to properly discharge the duties of a particular job position,” according to the IRS. Such meals are still tax-free, even if some employees in the job decline them—e.g., they prefer to bring their own meal from home or the provided meals don’t meet their dietary requirements.

You can charge employees for the meals up to the amount of the cost to your firm.

Important. If your firm provides such meals, be prepared to show one or more substantive reasons why the meals are for your firm’s convenience, or you will be required to include the cost of the meals in employee compensation.

In recent audits, employers provided the IRS a number of reasons why meals are for the convenience of the employer, including:

n Innovation and collaboration are a key aspect of a company’s business model and culture, and the meals the employer provides facilitate employee innovation, collaboration and productivity.

n Meals are provided to enable employees to work long days and overtime.

n Meals are provided to promote a healthier workforce because the employer-provided meals are more healthful than the meal options available to employees off-premises.

n Meals are provided to discourage employees from jeopardizing trade secrets by encouraging them to remain on the business’s premises for meals, rather than leave the premises and possibly discuss sensitive information during meals in public places.

Without being specific, the IRS said that many of these reasons don’t meet the requirements of §119. The IRS says §119 requires that the employer-provided meals be necessary for the employee to properly perform his or her duties.

An example the IRS gave of a valid non-compensatory reason for providing the meals is that the employer requires short meal breaks and employees wouldn’t have enough time to obtain a meal if they left the employer’s premises. Another example of a valid reason is that the employee is on call during meal breaks and can’t leave the business premises.

While the IRS said it won’t substitute its business judgment for an employer’s, the IRS can question whether employees really need to receive meals on the employer’s premises in order to perform their duties.

Employers can be required to provide the IRS substantiation of the business reasons for furnishing the meals. Employers also can be required to show that providing the meals is an established policy that is communicated to employees. While the policy doesn’t have to be in writing, that is the best substantiation that a formal policy exists and is communicated to employees.

Also, employers must demonstrate that the policy is enforced. Appropriate substantiation will vary

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FREELANCING

Some proprietors can file a simplified 2018 Schedule C-EZ. The business must meet the following conditions. The filer must be a self-employed who:

n has only one business;

n has no employees; and

n has business expenses of $5,000 or less.

The business must:

n use the cash method;

n have no inventory; and

n have no net loss or previous year suspended passive activity losses.

Not allowed on the C-EZ. Home office deductions and depreciation expenses.

Only a draft 2018 C-EZ and instructions were available at press time.

New IRS transcript policy may block you. To reduce identity theft and other cyber crimes, the IRS is phasing in new restrictions on giving transcripts to third parties, including tax pros.

Late 2018. The IRS began removing from transcripts it sends to third parties SSNs, phone numbers,

addresses, and other identifying information. This can make it more difficult for tax pros to help their clients.

January 2019. The IRS stops faxing transcripts to taxpayers and their representatives.

May 2019. The IRS stops mailing transcripts to third parties. They will be sent only to the taxpayer’s mailing address of record with the IRS.

Exceptions. Transcripts can be provided to tax pros immediately under limited circumstances, to be announced.

What to do. Tax pros can obtain a tax transcript through the IRS e-Services portal—if your client has filed Form 8821, Tax Information Authorization, or Form 2848, Power of Attorney and Declaration of Representative.

Key problem: The form must specifically give the tax pro authority for the relevant tax year, requiring clients to file blanket authorizations with the IRS before the transcript is needed—just in case. The IRS is working with the AICPA and the tax pro community to find solutions. [Tax Notes Today]

based on the facts and circumstances. For example, an employer might show that it has disciplined employees for leaving the premises during work hours or that some employees asked for a waiver of the policy.

The IRS currently is working on revised regs for employer-provided meals. [AM 2018-004]

AIPB tip: Occasional meals, such as for birthdays or other celebrations, may be tax free to employees as de minimis fringe benefits. Under §132, Certain fringe benefits, meals can be tax free (scroll to §132(e)(2)) if their value and frequency is so small that accounting for the cost would be unreasonable or impractical. If you operate an eating facility, there are special rules under §132.

13

Rates, Due Dates & IRS Limits

Prime rate and CPI-UPrime rate: 5.5% (effective Dec. 20, 2018)November 2018 CPI-U 2.22%1. Covers all goods/services purchased by

urban consumers.2. Goods costing $1,000 in November 2017 cost $1,022

in November 2018.

December 2018 CPI-U Available Jan. 11, 2019For other CPI indices and more details: 202-691-7000

200% GDS nonfarm MACRS property rates 5-year property* 7-year property**Year 1 20.00 % 14.29 %Year 2 32.00 24.49Year 3 19.20 17.49Year 4 11.52 12.49Year 5 11.52 8.93Year 6 5.76 8.92Year 7 8.93Year 8 4.46* Autos, trucks, computers/peripherals, typewriters, calculators, etc.** Furniture and fixtures, desks, files, etc.

IRS depreciation limits for vehicles placed in service in 2018* Autos (cars) Light SUVs, new or used pickups/vans**

With bonus No With bonus No bonus depreciation bonus depreciation or used

1st year $18,000 $10,000 $18,000 $10,0002nd year 16,000 16,000 16,000 16,0003rd year 9,600 9,600 9,600 9,6004th yr. 5,760 5,760 5,760 5,760 and after

* All the depreciation limits in this column also apply to passenger autos purchased after Sept. 27, 2017 but not put into service until 2018.

For autos purchased after Sept. 27, 2017, and put into service during 2017 use the 2017 IRS depreciation limits.

For passenger autos acquired on or before Sept. 27, 2017, but not placed in service until calendar year 2018, IRS depreciation limits for which first-year bonus depreciation is taken are as follows: Year 1, $16,400, Year 2, $16,000;Year 3, $9,600; Year 4 and after, $5,760

** 6,000 lbs. or less, built on truck chassis, and not specially modified.

Federal per diemsWithin the continental U.S. Outside the continental U.S.

Payroll rates and bases 2018 2019Employee SS and Medicare 6.20%/1.45%* 6.20%/1.45%*Employer SS and Medicare 6.20%/1.45% 6.20%/1.45%Social Security wage limit $128,400 $132,900Medicare wage limit* Unlimited UnlimitedFUTA-taxable wage base $7,000 $7,000FUTA rate 6.0% 6.0%FUTA maximum credit 5.4% 5.4%Min. FUTA deposit rate 0.6% 0.6% (most firms} * Withhold added Medicare tax of .9% on wages over $200,000.

Standard mileage rates 2018

Business* 54.5¢/mi.Relocation** 18¢/mi.Medical 18¢/mi.Charitable rate 14¢/mi.

* For owned/leased passenger autos, vans, pickups or panel trucks and up to 4 taxis used for hire on which no §179 or depreciation was taken.

** Starting in 2018, all relocation payments are taxable to the employee and tax deductible for the employer. Note: If relocation expenses are not reimbursed, the employee cannot deduct them.

Qualified retirement plan limits 2018 2019Pretax contributions for 401(k) and SEP plans and 403(b) annuities $ 18,500 $ 19,000

Workers aged 50 or over (catch-up) $ 6,000 $ 6,000

Sec. 415(b)(1)(A) defined benefit plan annual benefit ceiling $220,000 $225,000

Combined employer/employee pay-in limits for all defined contrib. plans $ 55,000 $ 56,000

Annual compensation limit under Sec. 401(a)(17) and Sec. 404(1) $275,000 $280,000

Sec. 408(k)(3)(C) IRA, SEP or SIMPLE plan limits $275,000 $280,000

SIMPLE pretax contribution limit $ 12,500 $ 13,000

Workers aged 50 or over (catch-up) $ 3,000 $ 3,000

IRS forms and pubs 800-829-3676

14

• The only acceptable reason for delaying deposit of payroll taxes due is a legal federal holiday.

• Deposits of $100,000 or more must be made within one business day of the day that the tax liability is incurred.

Tax CalendarDue Day of Deposit FICA and FITW for Date Week wages paid for the period from

Jan. 15 Tues. Monthly due date for Dec. 2018 liabilitiesJan. 16 Wed. Jan. 9 - 11 Fri.Jan. 18 Fri. Jan. 12 - 15 Tues.Jan. 21 Mon. Martin Luther King, Jr. Day—bank holidayJan. 24 Thurs. Jan. 16 - 18 Fri.Jan. 25 Fri. Jan. 19 - 22 Tues.Jan. 30 Wed. Jan. 23 - 25 Fri.

Feb. 1 Fri. Jan. 26 - 29 Tues.Feb. 6 Wed. Jan. 30 - Feb. 1 Fri.Feb. 8 Fri. Feb. 2 - 5 Tues.Feb. 11 Mon. Form 4070 due from tipped employees.Feb. 13 Wed. Feb. 6 - 8 Fri.

Applicable Federal Rates (AFR) for January 2019Under IRC §1274, if your firm extends a loan due more than 6 months after a customer purchased or exchanged an item and there is no stated interest rate, the IRS imputes one. The IRS-imputed interest rates for December are as follows: Annual Semiannual Quarterly MonthlyShort-term: 3 years or less 2.72% 2.70% 2.69% 2.68%Mid-term: Over 3 but not more than 9 years 2.89% 2.87% 2.86% 2.85%Long-term: Over 9 years 3.15% 3.13% 3.12% 3.11%