Photo courtesy of Nick TranSan Diego Chapter
American Payroll Association                                            25 Years

2017 PAYROLL UPDATES

FEDERAL CHANGES:

IRS Releases Publication 509 for 2017:

The legal holidays for 2017 are as follows:

 

January 2— New Year's Day (observed)

January 16— Birthday of Martin Luther King, Jr.

January 20— Inauguration Day

February 20— Washington's Birthday

April 17— District of Columbia Emancipation Day (observed)

May 29— Memorial Day

July 4— Independence Day

September 4— Labor Day

October 9— Columbus Day

November 10— Veterans Day (observed)

November 23— Thanksgiving Day

Remember that a statewide legal holiday does not delay a due date for making a federal tax deposit. 

IRS Releases 2016 Form 940: The IRS has released the 2016 Form 940: https://www.irs.gov/pub/irs-pdf/f940.pdf

2017 W-4 form (English):  https://www.irs.gov/pub/irs-pdf/fw4.pdf

Mileage Rates:
Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

·         53.5 cents per mile for business miles driven, down from 54 cents for 2016

·         17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016

·         14 cents per mile driven in service of charitable organizations

The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged.

Pension Plan Limits:

The IRS has announced the 2017 pension plan limits. They are as follows:

  • Employee elective deferral will remain at $18,000
  • Catch up contributions for employees 50 and over will remain at $6,000
  • Limit on defined contribution plans will increase to $54,000 up from $53,000 for this year
  • Annual compensation limit will increase to $270,000 up from $265,000
  • Definition of highly compensated employee remains at $120,000
  • Personal exemption:
  • ·         The personal exemption remains at $4,050.
  • ·         The standard deduction for single taxpayers and married taxpayers filing separately rises by $50 to $6,350.
  • ·         The standard deduction for married taxpayers filing joint returns rises by $100 to $12,700.
  • ·         The standard deduction for heads of household rises by $50 to $9,350.

Social Security Wage Base:

The 2017 social security wage base is $127,200; up $8,700 from the current base of $118,500.   

 

The rate does not change. It will still be 6.2% for employees and 6.2% for employees.  The maximum tax that can be deducted in 2017 is $7,886.70.  That is $539.40 up from last year. 


The Medicare rate remains 1.45 percent for both employees and employers and there is no wage limit.  The Additional Medicare Tax still kicks in at $125,000 for married filing separately, $200,000 for single and all other taxpayers and $250,000 for married taxpayers who file jointly; the rate remains 0.9% paid by the employee only.

Standard deduction:

The personal exemption remains at $4,050.

The standard deduction for single taxpayers and married taxpayers filing separately rises by $50 to $6,350.

The standard deduction for married taxpayers filing joint returns rises by $100 to $12,700.

The standard deduction for heads of household rises by $50 to $9,350.

2017 Income Tax Brackets

Income tax bracket adjustments for tax year 2017 were issued on Oct. 25 by the IRS in Revenue Procedure 2016-55. The level of income that is subject to a higher tax bracket can influence a number of decisions by employees, including how much salary to defer into a traditional 401(k) plan, which reduces taxable income for a given year by the amount contributed, or whether to participate in a nonqualified deferred income plan, if that option is available through the employer.

A comparison of income tax rates and ranges for 2017 and 2016 follows below.
 

Single Filing Individual Return (other than surviving spouses and heads of households)

Tax Rate

2017 Taxable Income

2016 Taxable Income

10%

$0 – $9,325

$0 – $9,275

15%

$9,326 – $37,950

$9,276 – $37,650

25%

$37,951 – $91,900

$37,651 – $91,150

28%

$91,901 – $191,650

$91,151 – $190,150

33%

$191,651 – $416,700

$190,151 – $413,350

35%

$416,701 – $418,400

$413,351 – $415,050

39.6%

$418,401+

$415,051+

 

Married Filing Jointly (and surviving spouse)

Tax Rate

2017 Taxable Income

2016 Taxable Income

10%

$0 - $18,650

$0 – $18,550

15%

$18,651 – $75,900

$18,551 – $75,300

25%

$75,901 – $153,100

$75,301 – $151,900

28%

$153,101 – $233,350

$151,901 – $231,450

33%

$233,351 – $416,700

$231,451 – $413,350

35%

$416,701 – $470,700

$413,351 – $466,950

39.6%

$470,701+

$466,951+

 

Married Filing Separate Returns

Tax Rate

2017 Taxable Income

2016 Taxable Income

10%

$0 – $9,325

$0 – $9,275

15%

$9,326 – $37,950

$9,276 – $37,650

25%

$37,951 – $76,550

$37,651 – $75,950

28%

$76,551 – $116,675

$75,951 – $115,725

33%

$116,676 – $208,350

$115,726 – $206,675

35%

$208,351 – $235,350

$206,676 – $233,475

39.6%

$235,351+

233,476+

 

Heads of Households

Tax Rate

2017 Taxable Income

2016 Taxable Income

10%

$0 – $13,350

$0 – $13,250

15%

$13,351 – $50,800

$13,251 – $50,400

25%

$50,801 – $131,200

$50,401 – $130,150

28%

$131,201 – $212,500

$130,151 – $210,800

33%

$212,501 – $416,700

$210,801 – $413,350

35%

$416,701 – $444,550

$413,351 – $441,000

39.6%

$444,551+

$441,001+

Minimum Salary:

The DOL has approved the following:

Effective Date: December 1, 2016.

Minimum Salary: $913 per week, or $47,476 annually. This is slightly less than the $970 per week ($50,440 annually) originally proposed, but still more than double the current $455 per week.

Bonuses and Commissions May Now Be Included: In a somewhat surprising concession to employers, the new rules will allow non-discretionary bonuses, incentive payments and commissions to count for up to 10% of the minimum salary, provided these amounts are paid at least quarterly.

Highly Compensated Employees: The minimum salary for employees exempt under the “highly compensated” employee exemption will increase to $134,004 from $100,000.

Automatic Updates: The new minimum salary levels will not update automatically every year as originally proposed, but they will be adjusted every three years beginning January 1, 2020. The salary level will be pegged to the 40th percentile of full-time salaried workers in the lowest-wage Census region. For 2020, the DOL estimates that the minimum will go up to $51,168. The minimum for highly compensated employees will be tied to the 90th percentile of full-time salaried workers in the lowest-wage Census region, which the DOL estimates will be $147,524 in 2020.

Duties Tests: The new rule contains no changes to the existing duties tests.

STATE CHANGES:

Minimum Wage: (Federal Minimum Wage remains at $7.25 per hour)

Schedule for California Minimum Wage rate 2017-2023.

Date

Minimum Wage for Employers with 25 Employees or Less

Minimum Wage for Employers with 26 Employees or More

January 1, 2017

$10.00/hour

$10.50/hour

January 1, 2018

$10.50/hour

$11.00/hour

January 1, 2019

$11.00/hour

$12.00/hour

January 1, 2020

$12.00/hour

$13.00/hour

January 1, 2021

$13.00/hour

$14.00/hour

January 1, 2022

$14.00/hour

$15.00/hour

January 1, 2023

$15.00/hour

 

Alabama: $7.25 (Federal Minimum Wage)
Alaska: $9.75(Indexed Annual increases will begin on January 1, 2017)
Arizona: $10.00 * ($10.00 to $12.00 in $0.50 Indexed Annual Increases between 1/1/2017 to 1/1/2020)
Arkansas: $8.50
California: $10.50  ($11.00 to $15.00 in $1.00 Indexed Annual Increases between 1/1/2018 to 1/1/2022)
  - Emeryville: $12.25  for small businesses with 55 employees, $14.44 companies with more than 55 employers
  - Los Angeles: $10.50 effective July 2016 with increases each year until it reaches $15 in 2020
  - Oakland: $12.25
  - Richmond: $12.30, and $13 in 2018 (with exceptions based on employer)
  - San Diego: $11.50
  - San Francisco: $14.00 effective July 2017,  $15.00 effective July 2018
  - San Jose: $10.30
Colorado: $9.30* ($9.30 to $12.00 in $0.90 Indexed Annual Increases between 1/1/2018 and 1/1/2020)
Connecticut: $10.10
Delaware: $8.25
District of Columbia: $11.50 ($0.75 Indexed Annual increases will begin on January 1, 2017)
Florida: $8.05*
Georgia: 
$5.15 (if covered by Fair Labor Standards - $7.25)

Hawaii$9.25, $10.10 in 2018
Idaho: $7.25
Illinois: $8.25
- Chicago $11.00 July 2017, $12.00 July 2018, $13.00 July 2019
Indiana: $7.25
Iowa: $7.25 
Kansas: $7.25
Kentucky: $7.25
- Louisville: $9.00 July 2017)
- Kentucky State Workers $10.10
Louisiana: $7.25 (Federal Minimum Wage)
Maine: $9.00 ($10.00 to $12.00 in $0.50 Indexed Annual Increases between 1/1/2017 to 1/1/2020)
Maryland$9.25 July 2017,  $10.10 July 2018
Massachusetts$11.00  ($3.75 for tipped employees), $16.50 per hour for working on a Sunday
Michigan$8.90, $9.25 by January 2018
Minnesota Large employers are required to pay workers $9.50/hour and small employers $7.75 (Indexed Annual increases will begin on January 1, 2018)
Missouri: $7.70 *
Mississippi: $7.25 (Federal Minimum Wage)
Montana: $8.05 * Except $4.00 for businesses with gross annual sales of $110,000 or less

Nevada: $7.25 for employees who receive qualifying health benefits, $8.25 for employees who do not receive qualifying health benefits.*
Nebraska$9.00 
New Hampshire: $7.25 (Federal Minimum Wage, as State Minimum wage was repealed in 2011)
New Jersey: $8.38*
New Mexico: $7.50
- Albuquerque: $8.75 ($7.75 with benefits)
New York: $11.00 by 12/31/2016, $13.00 by 12/31/2017, $15 by 12/31/2016  ($9.75 for fast food workers in NYS and $10.50 for fast food workers in NYC, with limitations)
- More information on 
New York minimum wage increases.
North Carolina: $7.25
North Dakota: $7.25
Ohio: $8.10* ($7:25 for employers grossing $283,000 or less)
Oklahoma: $7.25
Oregon: $9.75 (or higher based on county density) (From $10.25 to $13.50 in $0.50 intervals from 7/1/2017 to 7/1/2022)
Pennsylvania: $7.25
Puerto Rico: $7.25
Rhode Island: $9.60 
South Carolina: $7.25 (Federal Minimum Wage)
South Dakota: $8.55 *

Tennessee: $7.25 (Federal Minimum Wage)
Texas: $7.25
Utah: $7.25
Vermont$10, $10.50 by January 1, 2018 *
Virgin Islands: $7.25
Virginia: $7.25
Washington: $11.00* (From $11.00 to $13.50 in $0.50 intervals from 1/1/2017- 1/2/2020)
- Seattle: $15 (for businesses over 500 employees in 2017 and for all businesses by 2021
West Virginia$8.75
Wisconsin: $7.25
Wyoming: $7.25


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