The 2020 tax season is right around the corner. Shortly after putting away your holiday decorations, it’ll be in full swing, making it prudent to prepare now. Advance preparation can alleviate issues before time is limited, leading to a better experience for both your admin teams and employees.
In addition to regular year-end planning, there are some important updates to key forms and reporting practices this year. Let’s take a closer look at what’s new.
Preparing for the new Form W-4
The Form W-4, Employee’s Withholding Certificate, is undergoing a major transformation in 2020. The IRS released a second draft in August followed by an updated version of the Publication 15-T, Federal Income Tax Withholding Methods.
Both documents are IRS-approved for programming payroll systems, although a final version of the W-4 has been delayed until November. For more information on the scope of the changes, check out our recent in-depth blog.
CIC Plus has a preliminary list of updates related to the Form W-4 and how they will impact data output and management. A final review will be completed once the new W-4 is finalized. We’re also monitoring developments at the state level, too; states that currently use the Federal W-4 will need to decide if they will continue to use it or create their own new state-specific forms.
Introducing state-level ACA reporting
A number of states are now mandating the annual reporting of ACA form 1095-C & 1095-B. New Jersey and Washington, D.C. are the first to enact this requirement for tax year 2019, and several other states will have similar requirements beginning with tax year 2020.
Based on what has been released to date, New Jersey has indicated that its process allows for the reporting to be provided in the same XML format currently used for the IRS and their deadline for submitting the file will be March 31, 2020. Washington, D.C. has said their process will require the reporting be provided in a flat file format, however the final specifications or deadline for submitting the files for tax year 2019 have yet to be communicated.
Since there is no required deadline for the various States to provide finalized requirements, continued monitoring of the state sites will be a necessity going forward.
A quick look at New Jersey’s ACA reporting requirements
The New Jersey Health Insurance Market Preservation Act became effective from January 1, 2019. It applies to employers with 50 or more employees, whether they are New Jersey-based organizations or out-of-state entities with a New Jersey presence.
These employers must use IRS forms 1094-C and 1095-C, or 1094-B and 1095-B, or defer to New Jersey’s own forms if the federal forms are discontinued. Submissions go through New Jersey’s W-2 filing system. Filers have until March 31, 2020, to electronically submit these reports for the 2019 tax year.
The requirements are different in D.C. For more information on those and on the wider shift toward state-level ACA compliance reporting, be sure to read our blog post.
Understanding changes to Puerto Rico Forms 499R-2/W-2PR
For tax year 2019, Puerto Rico has made a few changes to its withholding statement. The Form 499R-2/W-2PR has been revised for the 2019 tax year to include new boxes to indicate if the wages being reported are related to agricultural work or to services performed by a church, minister, or member of a religious order.
Your year-end best practices checklist
Tax season is always a busy time for Payroll and HR teams. Here are a few best practices to stay on top of things while keeping up with all the above regulatory changes, too.
Encourage electronic delivery of tax statements
Paper forms are both costlier and more complex to manage than electronic equivalents. By encouraging employees to register to receive their W-2 and ACA statements electronically, it’s easier to ensure early delivery while reducing postage costs and the risks of lost mail. Plus, fewer statements will need to be reissued.
Take advantage of test files
When you use CIC Plus for managing W-2 and ACA year-end statements, consider sending test files early and often so that everything is ready for January. There’s no extra cost when you test your file with us.
Look out for common W-2 mistakes
W-2 errors can be costly, in terms of the time lost fixing them, plus the delay in filing taxes and receiving a possible refund. Many details can be entered incorrectly or left out, but the most common include:
- Employee name and address
- Medicare and Social Security wages and taxes
- Employer EIN
- Inaccurate Box 12, Code or values
- Box 13 indicators
- State Tax IDs
- Employee SSNs/TINs
- Inaccurate Box 14 reporting, including missing descriptions
Tax season can be a stressful time. But CIC Plus can make it easier to ensure compliance and get employees the year-end statements they need on time. Learn more by contacting our team or visiting our blog.