Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Anticipating a Trump adminstration | An employment tax perspective 11-30-2016

2,972 views

Published on

Following are slides from the Ernst & Young LLP webcast, "2016 Employment Tax Year in Review," where an overview was provided of some of the possible outcomes of a Trump Administration on US employment tax.

Published in: News & Politics
  • Be the first to comment

  • Be the first to like this

Anticipating a Trump adminstration | An employment tax perspective 11-30-2016

  1. 1. Anticipating a Trump Administration An employment tax perspective
  2. 2. Page 2 2016 employment tax year in review Disclaimer ► This material has been prepared for general informational and educational purposes only and is not intended, and should not be relied upon, as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ► The views expressed by the presenters are not necessarily those of Ernst & Young LLP. ► This presentation is © 2016 Ernst & Young LLP. All Rights Reserved. EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more of the member firms, of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
  3. 3. Speaker Proudly presented by Workforce Advisory Services Debby Salam, CPP Ernst & Young LLP Director Payroll Information Services These slides are from the Ernst & Young LLP webcast, 2016 employment tax year in review, that aired on November 30, 2016.
  4. 4. Page 4 2016 employment tax year in review Anticipating a Trump Administration Potential employment tax implications Plan provisions Trump campaign proposal Potential implications Parental leave Trump has proposed up to six weeks of paid leave for up to 46% of a worker’s normal wages for new mothers caring for a newborn child. This amount would be paid as an unemployment insurance (UI) benefit, funded by reducing fraud in the UI program.  More stringent requirements for employer responses to state unemployment insurance claim notices.  Action on previous Administrations’ proposals to raise the federal unemployment wage base to higher than the current $7,000. Dependent care savings account Trump has proposed up to $2,000 per year tax-free employer/employee contributions to pay for child care or elder care expenses. Balances can roll over from year to year for future qualitied expenses.  Reduction in current dependent care assistance benefits of $5,000 per year, resulting in added employment tax for employer-provided day care and dependent care assistance benefits in excess of $2,000 per year.  Cafeteria plan design change to eliminate the current “use or lose” on dependent care assistance flexible spending accounts.
  5. 5. Page 5 2016 employment tax year in review Anticipating a Trump Administration Potential employment tax implications Plan provisions Trump campaign proposal Potential implications Income tax rate reduction The current seven income tax brackets with a highest rate of 39.6% would be consolidated under Trump’s tax plan to three—12%, 25%, and 33%, with the highest tax rate at 33%.  Businesses that pay employee income taxes on bonuses, taxable relocation, etc. (i.e., gross up) would see a reduction in compensation expenses.  Businesses that reimburse international assignees for US income tax could likewise see a reduction in compensation expenses. Social Security President-elect Trump has signaled his intent to preserve Social Security; however, the Social Security trust fund is projected to have dedicated resources sufficient to cover benefits only through 2034.  One option suggested to extend the life of the Social Security trust fund is removing the cap on Social Security wages, set at $127,200 for 2017.  Another option would privatize Social Security, potentially increasing plan administration costs for businesses.
  6. 6. Page 6 2016 employment tax year in review Anticipating a Trump Administration Potential employment tax implications Provision Trump campaign proposal Potential implications Immigration reform In his pledge to deter illegal immigration, Trump has indicated his support of mandatory e-Verify. Since employment is a significant incentive for illegal entry into the US, expect the Trump Administration to focus on employers and their hiring practices.  Businesses should consider voluntary registration for e-Verify where they are not already required to use it.  Expect harsher consequences for the use of invalid Social Security Numbers on Forms W-2 and tighter restrictions and enforcement on the use of the Individual Taxpayer Identification Number (ITIN). IRS administration Recently, the IRS has refused to reduce or abate late-deposit and filing penalties where in the past, similar cases on appeal would have resulted in abatement or penalties reduced.  Under a Trump Administration, IRS officials may be directed to return to previous penalty abatement policies.
  7. 7. Page 7 2016 employment tax year in review Anticipating a Trump Administration Potential employment tax implications Provision Trump campaign proposal Potential implications Overtime pay Effective 1 December 2016, the Obama Administration effectively increased the pay of many salaried exempt employees by raising the salary threshold to $913 per week ($47,476 per year), double the current amount. This salary test will be adjusted for inflation every three years, and is expected to rise to $981 per week ($51,000 per year) when it is first inflation-adjusted on 1 January 2020.  Trump has vowed to overturn executive orders issued by President Obama, and this could be one that is reversed, or the impact on business lessened. Should that occur, businesses could save not only on wage expense, but on related employment taxes such as Social Security and state unemployment insurance (SUI) in those jurisdictions with a high SUI wage base.
  8. 8. Page 8 2016 employment tax year in review Ruling temporarily halts new federal overtime rules Higher minimum salary for exempt employees won’t start on 1 December Employer considerations ► On 22 November 2016, a federal judge placed a hold on the federal overtime rule changes issued by the US Department of Labor earlier this year ► The rule changes were to be effective on 1 December 2016 ► The ruling merely halts enforcement of the overtime rule changes until the case is finally decided or legislative action is taken • Businesses are left now in a quandary, having to decide whether to implement the changes now or wait for the final ruling • Those businesses that have already implemented the changes to employees’ salaries or job statuses are left to decide whether to reverse the changes or leave the changes they’ve made in place
  9. 9. Page 9 2016 employment tax year in review Ernst & Young LLP Putting inform into Information Stay connected Like our payroll year-end page on Facebook Tour the EY payroll year-end checklist Learn about multistate payroll tax at EY get on board Follow EY on Twitter @EYEmploymentTax Visit EY on LinkedIn @Payroll Perspectives from EY

×