2016 Payroll And ACA Updates And Changes

The U.S. government recently announced some important ACA and payroll updates for 2016.

Payroll Changes:

• Beginning in 2016, W2s and W3s will need to be filed with the government by the end of January instead of the end of February. 

• The Cadillac tax on high value health plans has been delayed from 2018 to 2020.  In addition, any tax being paid will now be deductible by the employer.  

ACA Changes:

The U.S. Treasury and IRS are extending some Affordable Care Act reporting deadlines to help companies meet the requirements.

• 1095-C's are now due to employees by April 1, 2016, and the filing of 1094-C's and 1095-C's with the IRS is now due June 30, 2016.

• Employers will have two more months past February 1, 2016 to give individuals forms for reporting on offers of health coverage and the coverage provided (1095-C's).

• The deadlines to report this information to the IRS are extended by three months past the previous February 29, 2016 due date for paper filings and the March 31, 2016 date for electronic returns.

President Approves W-2 Due Date Change, Transportation Fringe Parity (Bloomberg BNA)

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President Obama signed legislation (H.R. 2029) that is to require earlier filing for Forms W-2 and W-3, the retroactive application of an increase in tax-free transit and van-pool benefit amounts and other payroll-related provisions.

Included in the new law is a new safe harbor for de minimis errors on information returns and payee statements, an extension of the work opportunity tax credit through 2019, a delay in the implementation date of the "Cadillac" excise tax on high-cost health plans, the reinstatement of the research tax credit, and a permanent extension of the employer wage credit for employees called into active duty.

A year's Forms W-2 and W-3 now are generally due to the SSA in the next year by the last day of February, although electronic Forms W-2 are due March 31. The due dates for other information returns, such as the Form 1099, are similarly changed by the legislation.

The provision is to be in effect starting with returns and statements pertaining to the first calendar year after the date of enactment. Since the law was enacted in 2015, the due dates for information returns change for the 2016 forms due in early 2017.

Here are highlights of other provisions in the law:

• Transit Benefits - The legislation establishes permanent parity for the exclusion from income for employer-provided mass transit passes, van-pool benefits and parking benefits. The measure is retroactive to January 1, 2015. The transit and van pool benefit had been $130 a month, but upon enactment, the law allows the benefit to be $250 per month in 2015 and $255 a month in 2016, equal to the maximum tax-free amount allowable for employer-provided parking. 

• Work Opportunity Tax Credit - The legislation extends the credit through 2019. Starting in 2016, the credit would be modified to apply to employers who hire qualified long-term unemployed individuals who have been jobless for at least 27 weeks and the applicable credit with respect to such individuals would be 40 percent of the first $6,000 of wages. 

• De Minimis Error Safe Harbor - A safe harbor from penalties is established for employers that fail to file correct information returns and that fail to furnish correct payee statements. The safe harbor could be used for an error of up to $25 if it involved tax withholding, or otherwise up to $100. The issuer of the information return would not be required to file a corrected return and no penalty would be imposed. The provision is to take effect for returns and statements filed after the 2016 tax year.

• Employer Wage Credit - The provision would permanently extend the employer wage credit of 20 percent for employees called to active military duty. Starting in 2016, the credit would be modified to apply to all employers, rather than those with up to 50 employees under current law. 

• Excise Tax On High-Valued Health Plans - The implementation of the excise tax on high-valued health plans is delayed two years under the new law, to January 1, 2020, from the earlier date of January 1, 2018. 

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