Tax Cuts & Jobs Act of 2017: What You Need to Know

The Tax Cuts and Jobs Act is a United States Congressional bill to amend the Internal Revenue Code of 1986, effectively altering the rate of taxation for individuals and businesses. Major components of the Act include:

• Reducing tax rates for individuals and businesses;
• Increasing the standard deduction and family tax credits;
• Limiting the mortgage interest deduction;
• Limiting the Alternative Minimum Tax for individuals and eliminating it for corporations;
• Reducing the number of estates impacted by the estate tax; and
• Reducing the penalty for the individual mandate of the Affordable Care Act (ACA).

There are items in the Act that will affect employers and employees alike. Regardless of the extent of changes employers and employees are faced with due to legislative changes, you can rest assured that MasterType Accounting & Business Services, P.C. is staying up-to-date and ensuring your business is ready to comply with any and all new requirements.

Withholding Tables / Tax Rates

What You Need to Know as an Individual Taxpayer

• Tax rates will reduce for all tax brackets for married & single taxpayers with the highest tax bracket dropping to 37 percent.
• The Supplemental Tax Rate will be set to 22 percent for payments up to $1 million and 37 percent for bonus payments in excess of $1 million paid after January 1, 2018.
• The number of income tax brackets remain at seven, but the income ranges in several brackets have been updated.

What You Need to Know as an Employer

• The IRS has posted the updated tax withholding tables to IRS.gov, showing the new rates for employers to use during 2018.
• Employers should begin using the 2018 withholding tables as soon as possible, but no later han February 15, 2018.

Exemptions

What You Need to Know as an Employer

• Since personal exemptions were eliminated, this required changes to Federal Forms W-4, Employee's Withholding Allowance Certificate.
• The IRS has stated that a new form may not be released until March 2018.
• Until the new form is available, employers must use the prior versions.
• Any exemptions claimed on Form W-4s completed before the new form is released will be null.
• The removal of personal exemptions will happen concurrently with the release of the new withholding tables.

Fringe Benefits

What You Need to Know as an Employer

Several items that previously were not subject to Federal Employment tax are now required to be added to gross wages and subject to Federal Income, Social Security, Medicare, and FUTA taxes.

• These items include: Moving Expense Reimbursements, Exclusion for Bicycle Commuting Reimbursements, and Employee Achievement Awards.
• Employers will need to update any deductions used for these reimbursements to include them as wages, subject to Federal Income Tax Withholding, Social Security, Medicare, and SUTA taxes.

Busines Income Tax Deductions Eliminated

What You Need to Know as an Employer

The Act also contains repeals of deductions from business income tax such as:

• Eating facilities (meals furnished for convenience of employer)
• Entertainment Expenses
• Settlements - Sexual Harassment
• Transportation Fringe Benefits

Family and Medical Paid Leave

What You Need to Know as an Employer

• A business tax credit is now available if certain requirements are met.
• Qualified paid leave does not include paid family leave benefits provided under a state plan.
• Employers may need to track leave in order to determine eligibility of the credit.
• For MasterType Accounting & Business Services, P.C. (MABS) clients, MABS will monitor the requirements and determine any required changes to reports or analytics to aid in determining eligibility.

A Final Note

Many provisions of this Act are set to expire on December 31, 2025. If no legislation is passed to extend the tax changes beyond that date, tax rates and exemption rules will revert to 2017 law.