Employment Tax Updates: Mobile Workforce Bill, Form I-9, and More

1. Top Employment Tax Updates Presenter: Patricia Mazini Date: Thursday, October 6, 2016

2. Federal Updates Mobile Workforce Bill Passes U.S. House of Representatives • The bill, known as the Mobile Workforce State Income Tax Simplification Act of 2015, H.R. 2315, would streamline the state income tax code across the country by setting a 30-day threshold before nonresident state income taxes take effect for employees who need to travel for work. • An employee’s earnings would still be subject to full taxation in the state of his or her residence, but would only be subject to another state’s taxes if the employee works there more than 30 days in a calendar year. • Many employees are now legally required to file an income tax return in each state where they travel for work, even if it’s only for a single day, while businesses have to comply with each state’s different withholding requirements for employee travel.

3. Federal Updates New Form I-9 • On August 25, the Office of Management and Budget approved a revised Form I-9, Employment Eligibility Verification. • United States Citizenship and Immigration Services must publish a revised form by Nov. 22, 2016. • Employers may continue using the current version of Form I-9 until January 21, 2017. After January 21, 2017, all previous versions of Form I-9 will be invalid.

4. Federal Updates Extensions of time to file Form W-2 with the SSA are no longer automatic • The due date for filing 2016 Forms W-2, W-2AS, W-2CM, W-2GU, W-2VI, W-3 and W-3SS with the SSA is now January 31, 2017. • Extensions of time to file Form W-2 with the SSA are no longer automatic. • One 30-day extension to file Form W-2 by submitting a complete application on Form 8809, Application for Extension of Time to File Information Returns. • Note: This does not affect extensions of time to furnish Forms W-2 to employees.

5. Federal Updates Draft Version of 2017 Form 941, Employer’s Quarterly Federal Tax Return • New credit - Payroll tax credit for research.

6. California Updates CA Supreme Court – Final wage payments apply to “retired” employees • The California Supreme Court has ruled that Cal. Lab. Code §§ 202 and 203, which requires prompt payment of final wages when an employee quits employment, also applies to employees who retire.

7. California Updates The Franchise Tax Board (FTB) – Incorrect Credit Adjustments • The Franchise Tax Board (FTB) had incorrectly adjusted the 2015 tax year withholding credits on taxpayer’s personal income tax returns due to late-filed withholding reports from employers. • Approximately 31,000 returns were impacted.

8. California Updates Minimum Wage Rate Ordinance • The City of Berkeley • The city of Berkeley has adopted an ordinance that will increase the minimum wage rate from $11 per hour to: • (1) $12.53 per hour, effective Oct. 1, 2016,  • (2) $13.75 per hour, effective Oct. 1, 2017, and • (3) $15.00 per hour, effective Oct. 1, 2018.  • The ordinance also includes a provision on paid sick leave. • The City of San Mateo • The city of San Mateo has enacted a minimum wage rate ordinance that, effective Jan. 1, 2017, increases the minimum wage rate from $10 per hour to $12 per hour. • The rate increases annually after that until it reaches $15.00 per hour, effective Jan. 1, 2019

9. California Updates California Expands OT Pay Requirements for Agricultural Workers • Generally, overtime is required to be paid at a rate of 1.5 times the employee’s regular rate of pay for any hour worked over 8 hours in a workday or for any hours worked over 40 hours in a workweek (Cal. Lab. Code § 510). • Effective January 1, 2019, an agricultural employee must be paid 1.5 times the employee’s regular rate of pay for any hour worked over 9.5 in any workday or for any hours worked over 55 hours in a workweek. (For employer with 25 or fewer employees, the requirement is effective January 1, 2022). • Effective Jan. 1, 2020 – 9 hours workday / 50 hours workweek • Effective Jan. 1, 2021 – 8.5 hours workday / 45 hrs workweek • Effective Jan. 1, 2022 – 8 hours workday / 40 hours workweek • Effective Jan. 1, 2022, an agricultural employee must be paid double time for hours worked in excess of 12 hours in a day.

10. Other State Updates Worker Misclassification - Four more states work with DOL • The U.S. Department of Labor (DOL) Wage and Hour Division (WHD) has entered into Memorandums of Understanding (MOUs) to prevent worker misclassification with state agencies in: • Nebraska • North Carolina • Oklahoma • Pennsylvania • All signed a 3 year MOU that allows for the departments to share information and resources for enforcement and conduct joint investigations • It is important for employers to be aware of the costly federal and state penalties that can result when employees are incorrectly classified as independent contractors.

11. Other State Updates New Jersey – Pennsylvania Reciprocity Agreement • On Sept. 2, New Jersey Gov. Chris Christie announced his intention to end the longstanding reciprocal tax agreement between New Jersey and Pennsylvania. • The agreement which can be terminated without the vote of the New Jersey Legislature, exempts employees that live in New Jersey and Pennsylvania but work on the opposite side of the Delaware River from being taxed in the state where they work. • Impact to the State of New Jersey: $180 million

12. Other State Updates New York Adopts Direct Deposit and Paycard Regulations • Effective March 7, 2017, the NY DOL adopted regulations on wage payments by direct deposit and paycards, placing severe restrictions on both methods of payment • Restrictions • Written Notice and Consent • Employers must obtain consent from employees for refusal to accept payment by direct deposit or paycard • Electronic notice and consent allowed • Consents given prior to the effective date of the rule (without the required notice) will remain valid • Recordkeeping – length of employment + 6 years • Prohibited Fees • Paycards can never expire • 7 Day waiting period • Paycard change in terms and conditions – • 30 days written notice • In primary and plain language • At least 12 point font

13. Other State Updates Iowa – Minimum Wage Ordinance • The Board of Supervisors has passed an ordinance that will increase the minimum wage rate from $7.25 per hour to: • (1) $8.25 per hour, effective Jan. 1, 2017, • (2) $9.25 per hour, effective Jan. 1, 2018, and • (3) $10.25 per hour, effective Jan. 1, 2019.

14. Other State Updates Minnesota – Paid Sick Leave • On September 7, 2016, the St. Paul City Council passed an ordinance requiring employers to provide paid sick leave (PSL) to employees. • The ordinance is effective: • July 1, 2017 for employer with 24 or more employees and • Jan 1, 2018 for employers with 23 or fewer employees. • Employers must provide 1 hour of PSL for every 30 hours worked, up to 48 hours in a year. • Up to 80 hours of PSL can be carried over • Employers must retain records documenting hours worked and PSL taken for 3 years.

15. Other State Updates Ohio - FUA Loan Repayment • On August 30, 2016, the state repaid its remaining $271 million federal unemployment account loan balance • If the state does not take out a new loan by the November 10, 2016 deadline, it can avoid being a FUTA credit reduction state for 2016.

16. Other State Updates Pennsylvania – Tax Amnesty Program • The Department of Revenue (DOR) has announced that it will be conducting a tax amnesty program from April-June 2017. • Employer withholding taxes are included in the program. • The DOR will waive all penalties and half of the interest owed if an employer pays all taxes and half of the interest due during the amnesty period and files the required returns.

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