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Editor's Note: Keep up to date with constantly changing payroll tax laws and trends!

Rena PirsosOverview: HR managers need to understand the complex issues and requirements involved in payroll tax law compliance in order to effectively oversee payroll processing and ultimately avoid costly penalties. This involves managing the following tasks, among many others:

  • Preparing paychecks, which involves calculating employees' gross salary and the amounts to be deducted and withheld from those earnings for federal, state, and local taxes, various health and welfare benefits and for involuntary and voluntary payroll withholdings;
  • Determining the proper method(s) for paying employees, e.g., direct deposit, paper checks or payroll debit cards, based on federal and state wage payment laws;
  • Periodic depositing and reporting of withholdings with government agencies; and
  • Recordkeeping.

Trends: The following are some important issues currently impacting payroll:

  • Earlier deadlines for electronic filing of 2016 Forms W-2 in 2017: Effective with Forms W-2 filed in 2017, the Protecting Americans From Tax Hikes Act of 2015 changed the due date for electronically filing Forms W-2 with the Social Security Administration to January 31, from March 31. Many states have also accelerated their electronic filing deadline to conform to the new federal filing date.
  • Final IRS regulations define marriage in gender-neutral terms: The IRS issued final regulations on September 2, 2016, that define the term "spouse" in a gender-neutral manner under federal law for purposes of employer-provided health and retirement benefits and payroll taxes. The regulations follow up on two Supreme Court decisions that have recognized same-sex marriage at the federal and state levels since 2013.
  • State Payroll Deduction Auto-IRAs: Concern over the low rate of retirement savings among Americans and a lack of access to workplace plans for many workers has led some state governments to create their own savings programs that employers are required to administer. For example, California, Connecticut, Illinois, Maryland and Oregon have developed, or are developing, programs requiring employers that do not offer employees other retirement savings arrangements to automatically enroll employees in tax-favored IRAs funded by payroll deductions. The Department of Labor's Employee Benefits Security Administration (EBSA) has issued a final rule that guides states on how to design these payroll deduction savings initiatives to avoid the risk of preemption by the Employee Retirement Income Security Act (ERISA) and employers that eventually may be required to offer such programs to employees.

Author: Rena Pirsos, JD, Legal Editor

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HR and legal considerations for employers regarding payroll.

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