17 December 2017 Numerous employer provisions retained in conference agreement on tax reform, IRS to delay 2018 income tax withholding tables On December 15, 2017, the Conference Agreement on the Tax Cuts and Jobs Act (H.R. 1) was released, along with an explanation of the provisions to which the conferees agreed. The Conference Agreement specifies how the differences in H.R.1 as passed by the House and Senate are resolved. The House and Senate must each now pass the Conference Agreement and submit it to President Trump for his signature. Voting is expected to begin this week with final enactment anticipated by December 25, 2017. In anticipation of changes that H.R. 1 would make to the individual income tax rates, the IRS issued a statement indicating that the 2018 income tax withholding tables and related guidance will be issued in Notice 1036 sometime in January 2018 with those changes reflected in wage payments as soon as February 2018. This IRS announcement relieves concerns employers have expressed about the late enactment of the tax bill and their ability to timely incorporate federal withholding tax changes by January 1, 2018. Under the Conference Agreement, the current seven tax rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% would be modified to 10%, 12%, 22%, 24%, 32%, 35% and 37%. Accordingly, the flat federal rate of income tax withholding for supplemental wages over $1 million would decrease to 37% — 22% for supplemental wages up to $1 million. H.R. 1, if enacted, would also affect other employer-related provisions that would also take effect January 1, 2018 (e.g., repeal of exclusion from taxable wages for employer-paid moving expenses), but so far the IRS has not indicated if compliance delays will be extended for matters beyond the 2018 income tax withholding tables and methods. For the most part, the Conference Agreement follows the Senate version of H.R. 1, which contained fewer provisions affecting employers than the House bill. Specifically, the Conference Agreement does not include the House bill's repeal of such business tax credits as the Work Opportunity Tax Credit and the requirement that employers provide quarterly employee wage detail. The Conference Agreement also did not adopt the House bill's repeal of the tax-favored status of adoption assistance, dependent care assistance, educational assistance and medical savings accounts. The Conference Agreement contains numerous provisions that would either eliminate the tax-favored status of certain fringe benefits, modify their current requirements or disallow a business deduction for their cost. Employers will need to carefully consider how the new law would affect existing fringe benefit offerings and be prepared to immediately incorporate changes to their payroll system earnings and deduction codes if and when the law is enacted. Following is a summary of the fringe benefits and employee-related expenses affected by the Conference Agreement.
View the attached PDF file for a side-by-side comparison of the Conference Agreement to the House and Senate bills. Document ID: 2017-2132 | ||||||||||||||||||||||||||
