The president signed a budget bill in March 2018 that will keep the government funded through September. Both sides of the political aisle claimed victory on the budget deal, but the bigger concern is how it affects payroll departments and employees.
There are three things payroll providers should be paying attention to. One of them is significant in that it will affect how payroll is processed and reported; the other two are relatively minor in their effect on payroll processing. All three are described briefly below. If you have any questions, contact your payroll provider or accountant.
Partial Repeal of Tip Rules
The first and most important thing companies need to know about the federal budget is that it partially repeals rules on tip pools put in place back in 2011. If you operate a bar, restaurant, or other service-oriented business by which employees are paid via tips, this affects you.
The federal budget changes some of the rules put in place by the previous administration. First, employers will no longer be able to keep employee tips. Second, the rule that allowed employers to force workers into a tip pool as long as they did not take a tip credit and those employees were paid at least minimum-wage has also been changed.
Under the new rules, employers accustomed to the practice of retaining employee tips in order to exclude them from a tip pool may no longer do so. Violations of either of the new rules could be subject to a penalty of $1,000 per violation plus any liquidated damages.
BenefitMall, a national payroll and benefits administration provider based in Dallas, says the change in the tip rules will probably confuse bar and restaurant owners in the short term. They recommend working with a payroll provider that has a specialized solution for the restaurant industry.
The federal government’s E-Verify program that combines I-9 data with Homeland Security and Social Security records to confirm employment eligibility has been renewed for the remainder of the fiscal year. Washington will be providing more than $100 million to keep E-Verify going. Another $22 million has been set aside for improving the program, ostensibly through the end of the 2020 fiscal year.
This provision should have very little impact on day-to-day payroll processing. E-Verify is something employers are now used to, so keeping it going through the end of this fiscal year just means business as usual.
IRS Implementation of Tax Cuts
Finally, the federal budget gives $320 million to the IRS to be used to carry out the Tax Cuts and Jobs Act – a.k.a., the GOP tax overhaul – through the remainder of the fiscal year. Again, this provision of the budget will have very little impact on day-to-day payroll processing. We mention it because of persistent questions about whether the IRS is up to the task of implementing the law signed by the president last December.
The additional funding ensures that the IRS has the money it needs to implement the changes made necessary by overhauling the tax code. Whether or not that translates into better tools and resources for employers remains to be seen. At least the IRS has been directed to do its job and given the funds to do so.
Do you own a small business for which payroll seems to be getting more complicated by the year? If so, you may see the new federal budget as making it even harder for you to understand how to handle payroll taxes. Perhaps it is time to consider outsourcing your payroll.