The Old & the New W-4

Anne Kelly, CPP

When changes are on the horizon, it’s a good time to look at current practices and how we need to change to keep up with the changing environment.  The 2018 Form W-4 has not yet been released due to the recent rate and bracket changes made in the Tax Cuts and Jobs Act.  (However, the new tax withholding tables are in effect, and you need to be sure that your business is using them for all payrolls dated February 15 or later.)  When the 2018 form is released, employers are required to put it into use within 30 days of its release and stop using the 2017 version.

PBGW and CASI Payroll Plus strongly encourages employers to have all of their employees complete the 2018 Form W-4 when it is released, which we expect to be sometime around the end of this month or beginning of March.  This will encourage employees to consider their tax situation and contemplate how next year’s tax filing might look.  I’ve worked in payroll long enough to have had a number of clients’ employees complain to their HR or payroll department about owing more tax than they can afford and wanting to put blame on the company or the payroll processor for the situation.  Of course, if the employer is following the employee’s current W-4, the employer is not to blame for the employee’s tax situation.  We note, however, that no HR, payroll, bookkeeper or other employee or owner should give tax or investment advice to an employee, unless the advisor is a professional advisor paid by the employer to do so.  Instead, employers should tell their employees to speak to their own tax advisor.

As we look for changes to the W-4 form, we take this opportunity to point out general requirements and best practices related to this important employee form:

  • Make sure that the W-4 you are using with employees is the full form including instructions (currently two pages).
  • A signed W-4 is required to make a change in an employee’s withholding.  An employer should never make a change based on an employee’s verbal or emailed request.
  • An employer is required to begin withholding according to the employee’s newly completed W-4 form no later than the start of the first payroll period ending 30 days from the day the employer receives the form.  This includes time for your payroll company to process the change.
  • Employers MUST have an employee who claimed exempt on their W-4 complete a new W-4 no later than February 15*, or the employer MUST withhold based on the prior valid W-4 (without an exempt status) or withhold at the single status with 0 allowances.  *For 2018 only, this deadline has been extended to February 28.
  • Employers must retain copies of each employee’s most current W-4, and prior forms at least 4 years after the date it was last used.

Please call Anne Kelly, Payroll Administrator, or your accountant if you have questions about your W-4 forms.

PA Makes Big Changes to Form 1099-MISC

Alyssa Giulianelli, CPA, MBA

In Pennsylvania, Form 1099-MISC reporting is no longer a task to think about only at year-end.  Starting in 2018, some non-employee compensation and rental payments that your organization reports on Form 1099-MISC requires PA tax withholding and regular return filings.  Read on for what you may need to do now—not at year end—to be compliant and avoid penalties and interest.

Pennsylvania withholding is now required on payments of $5,000 or more paid annually as:

1)      PA source non-employee compensation or business income paid to a non-PA resident individual or disregarded entity (e.g., LLC) that has a nonresident member

2)      Lease payments made in the course of a trade or business to a non-PA resident lessor who is an individual, a trust, or an estate by a lessee of PA real estate.

Lease payments include rents, royalties, bonus payments, damage rents, and other payments made pursuant to a lease and is reported in Box 1 of Form 1099-MISC.  Non-employee compensation are those payments that you have been reporting in Box 7 of Form 1099-MISC, such as payments to independent contractors and other payments made to individuals for services in the course of your trade or business.  Tax is to be withheld at the rate of 3.07%.  The state tax withheld will be added to box 16 when you file your 1099-MISC returns in January 2019, and your state withholding tax ID will be added to box 17.

If you participate in either of these two activities and you don’t already have a PA employer withholding account, you will need to complete the PA-100 (PA Enterprise Registration) at  If you already have a PA employer withholding account, which you use to file your employee withholding tax payments and reports, you can use the same account number for your 1099 withholding.  If you wish to keep the two accounts separate you can do so by completing the PA-100 for an additional account.  The employer withholding/1099-MISC (e-TIDES) account is needed before you can start sending the Commonwealth payments for the tax withheld or filing reports.

Tax payments are made through the e-TIDES system similar to employer withholding, on a semi-weekly, semi-monthly, monthly, or quarterly basis, depending on the amount of your total tax withholding.  For new withholding accounts, payments made the first year will be remitted on a quarterly basis (due the last day of April, July, October, and January for the immediately preceding three months, respectively).  Thereafter, if the annual 1099 withholding tax is over $20,000 per year ($5,000 per quarter), you will remit taxes on a semi-weekly basis.  For withholding totaling $3,999 – $19,999 annually, you will be a semi-monthly filer; $1,200 – $3,999, a monthly filer; and less than $1,200, a quarterly filer.  If you wish to remit your 1099-MISC withholding along with your employee withholding, under one account, then your deposit frequency will follow the same schedule as your payroll.

PA Department of Revenue just released information this week that they will not assess penalties and interest for an entity’s failure to withhold the 3.07% tax on payments made through June 30, 2018.  However, if the tax is withheld from payments prior to June 30th, you must remit payments timely according to the quarterly schedule, or face penalties and interest.  All payments that fall under Act 43 of 2017 provisions made on or after July 1, 2018 must follow withholding requirements noted in this article.  Therefore, it’s important that you have your PA withholding account set up and ready for payments well before the October 31, 2018 filing deadline (or earlier if you withhold earlier).

As an example, if you plan to pay an independent contractor, who is a New Jersey resident, $5,000 within the year for repairs and cleaning of your PA office, your payments will gross $5,000 but will include $153.50 of PA tax withholding.  Therefore the net payment would be $4,846.50.  It’s important to note that tax reciprocity does not apply to 1099 payments; tax reciprocity applies only to W-2 based employee compensation. Taking the Commonwealth’s July 1st revised deadline into consideration, please remember that payments made to vendors from January 1 through June 30 still count towards the $5,000 threshold.

If you haven’t been doing it already, we strongly suggest that you make it company policy that no company disbursements be made without first getting a completed and signed Form W-9 from your vendors.  As soon as you contract with a vendor, have them complete this form before you begin business with them.  Enter the recipients tax ID into your bookkeeping system and keep W-9s on file.  Form W-9 is available at  Pennsylvania does not have their own version of the W-9 form.

If you have questions about this new tax requirement or need help completing a PA-100, please contact your accountant at PBGW.

Obama/DOL 2016 Overtime Rule Dead

By Jill Scheetz, PHR, SHRM-CP

Remember that work you put into verifying the exempt status of your workers and minimum salary requirements back in late 2015 and early 2016? Well, that was all for naught…kind of.

On August 31, 2017, a federal judge in Texas granted a summary judgment to numerous business groups that had challenged the 2015 Obama administration proposal, which was made rule in 2016 by the U.S. Department of Labor but blocked by a temporary injunction issued by the same Texas court last November. The August 2017 ruling makes the overtime rule invalid, unless appealed by the DOL, which seems unlikely with the current administration.

This means that the minimum salary requirements under the Fair Labor Standards Act are back to the 2004 requirements of $455 weekly ($23,660 annually). However, we may not have heard the end of this topic under the Trump administration. Actions taken by Alexander Acosta, the U.S. Secretary of Labor, indicate that they may be looking for some sort of increase, but probably not to the level proposed by the Obama administration.

I also point out that the FLSA white collar exemption tests still remain, and employers should be certain that all employees classified as salaried, or exempt, should pass the duties test, which can be found on the FLSA or DOL websites. You can also contact me at 215-997-7270 or [email protected] to assist you in determining the status of employees of whom you’re uncertain.