A program update for The Farmer’s Office and The Labor Contractor’s Office was released over the weekend. Use the Check for Updates option on the Tools menu to download the update and view the release notes. The release notes includes a summary of the changes made since the last update on May 2nd.

An update for The Shipper’s Office and The Broker’s Office will be posted later this week.

Michigan customers should download this update. It includes an additional weekly maximum accrual setting to support accrual sick pay plans.

We are on target for monthly releases of updates using the Check for Updates feature. Programmers are already hard at work on the next set of over 60 changes targeted to be delivered in the next update in July.

We are also working on a new direct notification system for changes that are requested by customers. When a requested change has been completed or a reported bug has been fixed, customers that contacted us about the change will automatically receive an email letting them know that the change has been completed and the update is available for download. We are planning on testing this new system out with July’s update.

EEO-1 Reporting Due September 30th

Due to a court order in an ongoing case, “Component 2” reporting for the EEO-1 will be due September 30th. This is a new requirement that will involve reporting hours and wage information broken down by sex, ethnicity and race across 12 pay bands. Reporting will be required for both 2017 and 2018.

At this point we do not have details on exactly how this information will be reported. The notice says that this information will be released sometime before mid-July. When we have specifications on the reporting requirements, data formats, etc. the EEO-1 report will be updated to produce the required information.

If you have done payroll in our system for 2017 and 2018, all of the information will be ready to generate the “Component 2” part of the EEO report. If you started on our payroll software sometime in 2017 or 2018, you may need to combine information from your old system and ours. If you imported check and hour data into our software, then the HR program may be able to generate the required data. (This can depend on how the data was formatted and imported into our payroll system.)

New W-4 Form

The IRS has released a draft form of the new W-4. The IRS is taking comments about the new form at WI.W4.Comments@IRS.gov. This draft is proposed for the 2020 tax year. The new form is very different from the current W-4, so your employees will need to spend some time learning about the new form.

The form itself is one page, with one page of instructions, a page with two worksheets, and a page with tables to use in situations where employees and/or their spouses have multiple jobs. (While this may sound complicated, it is better than the alternative form that the IRS considered with a total of eight pages and required employees follow a flowchart!)

The form is still a draft, and it may change before it is released. Also, the IRS has not released new employer instructions. So we are not making any programming changes at this time. But the draft form does give us some idea of what changes will be required.

Once the IRS releases a final draft form and more information including employer instructions, we will start programming to support the new tax calculations.

Why a New Form is Needed

The IRS determined that a new form was necessary after the Tax Cuts and Jobs Act of 2017. In the past the W-4 used an “allowance-based” method to determine income tax withholding amounts. Allowances are similar to, but not quite the same, as exemptions on personal income tax returns.

The TCJA increased the standard deduction and eliminated the separate exemptions that were deducted from earnings before calculating taxes. With this change, the allowance-based system used for the W-4 didn’t really match up with how taxes are calculated.

What’s Changed on the W-4

Instead of determining the number of allowances to claim, the new W-4 has four separate dollar amounts. There are lines for dependent credits, other income and the amount over the standard deduction if the employee is going to itemize deductions on their tax return. There is also a line for an additional amount the employee wants to have withheld (this is already on the current W-4). These dollar amounts will be used directly in calculating the withholding tax.

At this point, it looks like the employee account entry will need to be modified to have the three dollar amounts for lines 3, 4a, and 4b. The existing entry for any additional amount to withhold will be used for line 4c.

For most employees, the dependent tax credit dollar amount (line 3) will likely be all you’ll need to enter.

An online calculator will also be available if employees wish to use that to determine their withholding amounts.

Transitioning Between Withholding Calculation Methods

At this point, indications are that employers will be able to use the old exemption-based method to calculate withholding amounts in certain cases. This could apply if a current employee does not fill out a new W-4 for 2020. The employer would need to continue deducting federal income tax withholding based on how the old W-4 was filled out. But once an employee fills out a new W-4, the new tax calculation would go into effect.

We are planning on the following changes to support both calculations:

  • The program will not let you enter both a number of federal allowances and the dollar amounts from the new W-4 on an employee account. One or the other method must be selected. If you are are entering dollar amounts from a new W-4, you will need to zero out the number of federal allowances.
  • If no dollar amounts from the new W-4 have been entered but there is a number entered for federal allowances, the old calculation will be used.
  • If no allowances are entered, the new calculation will be used. This is the case even if no dollar amounts are entered for the new W-4 form are entered.

Impact to State Withholding

For employees that have state income tax withheld from their checks, this change to the W-4 means that they will likely need to complete the equivalent state form. In California for instance, this is the DE 4 form.

Many employees may use the same number of allowances for both federal and state withholding. Since the new W-4 does not have a number of allowances, the state form may need to be completed.

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