07 October 2019 New York 2020 employer election for the Employer Compensation Expense Program begins October 1, 2019 The New York Department of Taxation and Finance announced that eligible employers may begin enrolling to participate in the 2020 Employer Compensation Expense Program (ECEP) on October 1, 2019. The enrollment period for this voluntary program will run until December 1, 2019. Calendar year 2020 will be the second year for the program. (NYS Tax Department's Tax Professional Newsletter, 9-27-2019.) Employers may elect to pay the ECEP tax if they have employees that earn over $40,000 in wages each year and have compensation in New York State. Employers that elect into the ECEP for the year pay the ECET on employee total New York wages that exceed $40,000 for the calendar year. As previously reported, the ECEP law was enacted as part of the New York 2018–2019 budget and allows employers to opt into the program to protect New York individual taxpayers from increased federal income taxes resulting from the $10,000 cap on state and local tax (SALT) deductions under the federal Tax Cuts and Jobs Act (TCJA). (See EY Payroll Newsflash, Vol, 19, 117, 7-11-2018.) Employers are encouraged to sign up for updates to the program. The Department reminds employers that they are not required to participate in the ECEP, but once enrolled the employer may not revoke their election for the entire calendar year 2020. Employers must pay the ECET on all covered employees and must file all four quarterly ECET returns. Employers make an ECET election using the Department's Business Online Services account. Employers that elect participation should communicate their participation to covered employees and tell them that they may be eligible for a tax credit on wages over $40,000 when filing their income tax return. Employers are encouraged to inform employees at the end of the year the amount of their wages subject to ECET. Employees should review their Form IT-2104Employee's Withholding Allowance Certificate, to adjust their withholding to account for the ECET credit. If an ECET election is made after the December 1 deadline, it will not take effect until the second succeeding calendar year. For example, if an employer makes an initial election on December 20, 2019, that employer will not be eligible to participate in the ECEP until calendar year 2021. The ECET is a tax that employers can elect to pay when they have employees who earn annual New York wages and compensation over $40,000. The rate of tax gradually increases over three years. The tests for determining whether an employee is employed in New York are the same tests used to determine whether an employee is employed in the Metropolitan Commuter Transportation District (MCTD), substituting New York State for the MCTD as the relevant geographic area. If at least one of these tests is met, then an employee is deemed to be employed in New York. Once a covered employee's wages exceed $40,000, the employer must begin remitting ECET payments. The ECET is paid on the same dates that withholding tax payments are required to be made, and ECET quarterly returns are due at the same as withholding tax returns; however, ECET payments and returns are submitted separately from withholding. An employer may not deduct or withhold from an employee's wages any portion of the ECET paid. Additionally, no tax credit(s) may be used to reduce the amount of the ECET due from an electing employer. The ECET applies only to those wages of each covered employee that exceeds $40,000 for the calendar year. If covered employees with annual wages of more than $40,000 are employed by the employer within New York for only part of the calendar year, they become a covered employee only when they are employed in New York as determined under the standards above. The electing employer will be subject to the ECET on the payroll expense paid to those part-year employees only when and to the extent the wages and compensation paid to them for employment in New York exceeds $40,000. See the Department's notice TSB-M-18(1) issued July 3, 2018, for examples of how the ECET is calculated. For more information on the ECET, see the Department's website. See also the IRS notice of final regulation regarding state and local tax credits.
Document ID: 2019-1782 | |||||||||
