Critical Payroll and Tax Compliance Updates

July 2015

U.S. Supreme Court Rules that Federal Subsidies are Legal Under the ACA

ACA is here to stay… BDB is here to help!

On June 25, 2015, the Supreme Court issued a decision in the case King vs. Burwell, ruling that tax credits are legal for qualifying individuals who purchase health insurance in a federal Exchange.

Background

The Affordable Care Act requires each state to establish an exchange (health insurance Marketplace) through which individuals can purchase health insurance coverage. If a state does not establish an exchange, the Department of Health and Human Services will set up a federally facilitated exchange to operate in that state. Currently, only 16 states and the District of Columbia have established exchanges, with 34 states having exchanges operated either in whole or in part by the federal government.

The case focused on the wording of the law, which stated that insurance premium tax credits were available to qualified individuals who purchase health insurance through exchanges “established by the state.” The plaintiffs argued that only state exchanges can grant eligibility for tax credits, but not federal exchanges. This threatened to shake the foundations of the ACA, as employers are subject to penalties only if their employees receive credits/subsidies. If the plaintiffs’ arguments would have been upheld, employees in states with federally run exchanges would not have been eligible for credits, and employers in those states would not have been subject to penalties for failing to provide affordable, minimum value coverage.

In a 6–3 vote, the Supreme Court ruled that tax credits can be granted by any exchange, whether federally or state operated. The ruling stated that the wording of the law must be understood in context with the rest of the law.

What does this mean for you?

ACA is here to stay, and BDB is at your side, poised to help with our industry unique ACA solutions. Our trained professionals will explain and elucidate the impact of ACA on your business and make your ACA compliance easy and straightforward. Reach out to your client services representative today so you can stop worrying and start preparing for the first ACA filings due at the beginning of 2016.

For a webinar recoding on Using BDB’s Tools for ACA Compliance click here.

IRS releases HSA limits for 2016

The Internal Revenue Service released the 2016 limits on inflation-adjusted health savings account (HSA) contributions.

2016 annual HSA contribution limits:

Self-only HDHP coverage: $3,350 (no change from 2015)
Family HDHP coverage: $6,750 (increased $100 from 2015)

As in 2015, an individual who has reached the age of 55 by the end of the calendar year may contribute an additional $1,000 per year.

For a copy of the ruling click here.


New York Avoids FUTA Credit Reduction for 2015

New York has fully repaid its loan from the federal unemployment account. If the state remains debt free until November 10, New York employers will not have to pay additional FUTA tax for 2015. New York employers had been facing a general credit reduction of 1.5 percent that would have increased their unemployment tax costs by up to $105 for each employee.


IRS Detects Breach of “Get Transcript” System

The IRS announced on May 26 that criminals used taxpayer specific data to access over 100,000 accounts through the IRS “Get Transcript” system. The criminals obtained the taxpayer data from non-IRS sources and used it to pass the IRS authentication process. Information accessed included Social Security information, birth dates and street addresses. The IRS is providing free credit monitoring services for the taxpayers whose accounts were accessed and will be notifying all of these taxpayers about the incident.

For more please click here.


Rhode Island to Increase Minimum Wage

For the fourth time in four years, Rhode Island’s minimum wage will be increasing. Effective January 1, 2016, minimum wage will increase from $9.00 per hour to $9.60 per hour. Minimum wage for tipped workers will increase by $1 over the next two years, marking the first increase for these workers in 20 years. The current minimum wage for tipped workers in Rhode Island is $2.89 per hour. New legislation will increase minimum wage to $3.39 per hour on January 1, 2016, and to $3.89 on January 1, 2017.


Local Tax Rate Changes

Scranton, PA is First to Increase LST

On April 23, Scranton passed a law to triple the annual LST tax withheld from employees working in Scranton, Pennsylvania. The annual tax was increased from $52 per year, to $156 per year. Tax is to be withheld from employees’ paychecks at $3 per week, up from $1 per week. The increase is retroactive, effective January 1, 2015. Employers will need to collect the retroactive amount as soon as possible as well as amend their first quarter 2015 return. For more information please click here.

Philadelphia, PA

The Philadelphia, Pennsylvania Department of Revenue has announced a change in the wage tax rate. The resident rate is decreased to 3.9102% (previously, 3.92%). The nonresident rate is decreased to 3.4828% (previously, 3.4915%). Tax changes are effective July 1, 2015.

Chicago, IL

Effective July 1, Chicago minimum wage increased from $8.25 to $10 per hour. Minimum wage for tipped employees increased from $4.95 to $5.45 per hour. Under the ordinance, minimum wage in Chicago will continue to gradually increase each year until it reaches $13 per hour in 2019.

The ordinance also details several employer requirement effective July 1:

  • Chicago employers must retain records of all gratuities paid to tipped employees and proof that no gratuities were returned to the employer.
  • Employers must post a notice in the workplace detailing the minimum wage law and employees’ rights under the law.
  • Employers must also provide new employees with a notice of minimum wage and employee rights with their first paycheck.

For more information please click here.

Ohio Localities

Ohio has changed a number of its local tax rates. Effective July 1, 2015, Cedarville’s tax rate will be 1.25%, Ravenna’s tax rate will be 2.25%, and Trimble’s tax rate will be 1%.