Five Year-end Tax Tips for 2017
Challenges and uncertainty abound as small business owners face the end of 2017. We’ve identified five key tax-related issues to consider as you plan for 2018:
- Tax reform;
- Filing provisions for the Affordable Care Act (ACA);
- An earlier due date for W-2 Form filing;
- The 401(k) retirement plan tax credit; and
Preparing for the challenges and developing alternatives in the face of uncertainty may reveal opportunities for your company. At the very least, you won’t be caught off-guard.
Congress is grappling with an overhaul of the federal tax code, leaving the country wondering about the outcome and making decisions challenging for future tax filings. The House of Representatives and Senate both released their respective versions of a tax reform bill, and the two chambers must reconcile the differences. The final outcome could look different from either plan in its current state, and there is no certainty that national tax transformation will occur at all.
Regardless, you’ll have to use the best information available to plan for tax reform and its potential impacts on your business. Based on the bills released, legislative debate across Congress, and the tenets of the Republican party, we might expect lower corporate tax rates and elimination of some business deductions.
Affordable Care Act filing
For tax year 2017, businesses defined as applicable large employers (ALEs) under the employer shared responsibility provision of the ACA must provide the Internal Revenue Service (IRS) with detailed reports of the healthcare coverage they offer. Unlike the previous two years, the IRS provides no transition relief in 2017 for how employers file or how they offer coverage. To avoid the risk of substantial penalties, perform your due diligence so that the information on Forms 1094-C/1095-C is accurate and submitted on time.
Additionally, the IRS will now enforce the assessment for the ACA shared responsibility provisions. It answers more questions about this part of the law online, where the agency provides:
- More specifics on how employers will know that they may owe a shared responsibility payment;
- Instructions on steps you should take in response to the payment notices; and
- Information that employers will begin to receive notices of a potential assessment for 2015 late this year, meaning some businesses will need to research these notices, correct any errors in previous filings, and communicate with the IRS while also preparing for current-year obligations.
Accelerated W-2 Form filing
2017 is the second tax year that the IRS has moved up the due date for federal W-2 filing: Jan. 31, 2018. The Social Security Administration indicated that the number of late W-2s filed in 2017 almost doubled compared with 2016, and the number of corrections filed on Form W-2C increased more than 30 percent from last year.
Ensure that you submit all W-2s on time to avoid late or non-filing penalties assessed by the IRS. For tax year 2017, seven more states — Arizona, Arkansas, Kansas, Maine, Missouri, Montana, and Nebraska — have joined 27 others in adopting the W-2 filing deadline of Jan. 31, 2018.
401(k) tax credit
The Credit for Small Employer Pension Plan Startup Costs, which provides a tax credit to eligible employers that establish a 401(k) plan, is again available to small businesses (with no more than 100 employees) who received at least $5,000 in compensation for the tax year. The IRS allows the credit — up to $500 a year for the first credit year and each of the following two tax years — to offset the costs of establishing an eligible plan and educating employees about it.
Qualified Small Employer Health Reimbursement Accounts
Congress established Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) in December 2016 as part of the 21st Century Cures Act. For small employers (non-ALEs) that don’t provide group health coverage, these arrangements provide a way to reimburse workers for the cost of individual insurance, and/or qualified medical expenses, on a pretax basis. A firm must provide the benefit to all eligible employees, have a notice requirement, and allow only employer contributions up to a fixed maximum amount.
Paychex offers other helpful tips to advance the long-term success of small businesses.