Tax & HR Compliance Changes You Need to Know for 2016
You might still be wrapping up the last details of the 2015 tax season, and the last thing on your mind is planning for 2016. However, now is the ideal time to understand and prepare for tax and compliance regulations that are changing. It will save you valuable time and resources later in the year. The good news is that if you already rely on CIC Plus to help manage your compliance program, we have you covered with any regulatory changes to W-4s, W-2s and ACA reporting (although we still encourage you to continue reading!).
While 2015 proved to be a significant year for compliance changes for employers with the first reporting season of the Affordable Care Act, take comfort in knowing we don’t anticipate any major tax or regulatory changes in 2016. Here is a summary of the compliance-related developments that are expected in 2016.
It’s been a typical year for changes to the federal, state and local W-4 tax withholding forms. As of mid-February, we have 54 forms that require updates. The most common changes continue to be adjustments to the standard deductions, although we are seeing more states modifying how they are tracking marital status to include domestic partners.
A potential tax change that employers will want to monitor closely is the pending legislation in Alaska that would introduce a state income tax for employees. The New Sustainable Alaska Plan calls for a proposed 6% state income tax. If passed, the withholding would go into effect in 2017.
The most significant change that employers need to prepare for this year is that the IRS has moved the filing date for submitting W-2 information forward. Beginning with the 2016 tax season, employers will need to deliver employee tax information to the IRS by January 31, 2017—one month earlier than in the past. The IRS is hoping that the additional time will help the agency combat tax fraud. However, it leaves employers with even less time to gather the necessary payroll information, increasing the likelihood of potential data errors. Some states, including Alabama, Indiana, Utah and Connecticut, also have brought their submission deadlines forward and others are expected to follow suit.
The IRS also is continuing to pilot an anti-fraud program that adds a verification code to employee copies of W-2 forms for tax year 2015. A limited number of payroll service providers and employers are participating in the program to test the feasibility of verifying W-2 data. If the program proves to be successful, the IRS may change W-2s to include a verification code field no earlier than for tax year 2017.
In other employee-related governance matters, the National Labor Relations Board (NLRB) is taking a proactive approach to reviewing employers’ policies that might infringe on the rights of employees. Certain policies, including social media, employee communications and confidentiality, are coming under closer scrutiny. As organizations review and make changes to these policies, HR teams should have a process in place for employees to review and accept these policy changes to ensure compliance.
We are also seeing an increase in the number of states that are requiring employers to monitor paid sick leave for their employees. This can be managed efficiently through the introduction of a new online employee form.
Affordable Care Act
Managing the tracking and reporting of the requirements related to the Affordable Care Act was a primary focus for many organizations in 2015. We don’t anticipate any significant changes to the reporting guidelines this year, which should give employers an opportunity to review and make any necessary operational changes to how they collect, manage and report the required ACA information on employee health care coverage going forward.
As always, we will continue to monitor any regulatory developments that will impact employer compliance efforts, and will share updates as needed.