07 March 2018 Certain 2018 fringe benefit limits and Form W-2 penalties are updated under the Tax Cuts and Jobs Act In Revenue Procedure 2018-18, the IRS has updated the 2018 annual limits that apply to certain fringe benefits and the penalties that apply to Forms W-2 /1099 that are late or incorrect. These updates are a result of a change in the inflation calculation under the Tax Cuts and Jobs Act (TCJA). (Revenue Procedure 2018-18 is printed in IRB 2018-10, 3-5-2018.) Pursuant to the revised limits on fringe benefits, employers will need to adjust their payroll and other systems to reflect these revised caps and determine if adjustments are needed to 2018 employee contributions made prior to this IRS guidance. Many provisions of the tax law are adjusted for inflation to protect taxpayers from the effects of rising prices. Prior to January 1, 2018, many of these inflation adjustments were based on annual changes in the level of the Consumer Price Index for All Urban Consumers (CPI-U) that measures prices paid by typical urban consumers on a broad range of products, and is developed and published by the U.S. Department of Labor. Effective January 1, 2018, the TCJA requires the use of the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) to adjust those tax provisions that were previously indexed by the CPI-U. The C-CPI-U, like the CPI-U, is a measure of the average change over time in prices paid by urban consumers. It too is developed and published by the U.S. Department of Labor, but differs from the CPI-U in accounting for the ability of individuals to alter their consumption patterns in response to relative price changes. The C-CPI-U accomplishes this by allowing for consumer substitution between item categories in the market basket of consumer goods and services that make up the index, while the CPI-U only allows for modest substitution within item categories. (TCJA Section 11002.) See the Attachment below for the employment tax provisions affected by the change in the inflation adjustment calculation for 2018.
Document ID: 2018-0514 | ||||||||||||||
