IRS Issues 2019 Publication 15 with New Withholding Tables

Payroll changes are expected at the state level

On December 17, 2018, the IRS issued the 2019 version of Publication 15, Employer’s Tax Guide, Circular E.

IRS Publication 15

IRS Publication 15 provides guidance on the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. The publication also includes information on the forms that employers must give to employees and that employees must give to employers, as well as the forms that must be sent to the IRS and the Social Security Administration (SSA).

IRS Publication 15 also includes the 2019 wage bracket withholding tables and the recently released percentage method withholding tables (click here, for the original Paylocity tax alert) as well as a calendar of important employment tax deadlines.

What’s New

Employees are generally required to furnish a new Form W-4, Employee’s Withholding Allowance Certificate to their employer within 10 days if they experience a “change of status” that results in a reduction of withholding allowances. However, Notice 2018-92 allows employees who experience a reduction in withholding allowances before May 1, that was solely due to tax law changes in the Tax Cuts and Jobs Act (TCJA), to not furnish a new W-4 to their employer until May 10, 2019.

The 2019 amount for one withholding allowance on an annual basis is $4,200, up from $4,150 in 2018. Also, the Social Security taxable wage base will increase from $128,400 to $132,900 in 2019.

Reminders

Per the Tax Cuts and Jobs Act (TCJA) enacted in December 2017, beginning after 2017 and before 2026:

•  Qualified moving expenses must be included in gross income and wages; except in the case of an armed forces member on active duty who moves pursuant to a military order.
•  An employer may no longer exclude up to $20 per month in reimbursements to an employee for bicycle commuting costs.
•  The value of all noncash awards given to an employee for length of service or safety achievement under a qualified plan are excluded from the employee’s wages and are exempt from Federal Income Tax Withholding up to $1,600 per year.  This exclusion does not apply to cash, gift cards, and other non-tangible personal property to be included in the award and must be appropriately taxed if included.
•  If a supplemental wage payment, together with other supplemental wage payments made to the employee during the calendar year, exceeds $1 million, the excess is subject to withholding at 37%(or the highest rate of income tax for the year).For supplemental wage payments up to $1 million the rate is 22%.

For Employers

In June 2018, the IRS released a draft of the proposed 2019 Federal Form W-4.  This was in response to major changes (elimination of personal exemptions) in Tax Reform passed in December 2017.  Recently the IRS has delayed those plans until 2020 in order to further evaluate comments and responses from the business communities regarding the proposed changes.

The IRS has since released a 2019 Form W-4 is largely unchanged from the 2018 version.  A copy of the 2019 form can be found here. (View the original Paylocity tax alert.)

Time and Labor

This will be the first year for taxability changes made under the TCJA.  As you review your W-2 previews, you will need to pay special attention and review any deductions used for these reimbursements and ensure that they were included as part of wages subject to Federal Income Tax Withholding, Social Security, Medicare and FUTA taxes.

Paylocity has received the 2019 Federal Withholding tables and is in the process of validating and entering them into the Time and Labor system.  There is no action required on your part.

Thank you for choosing Paylocity as your Payroll Tax partner. Should you have any questions please contact your Paylocity Account Manager.

This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.