Tips and Upcoming Changes for 2017
In this issue you can read about the upcoming changes to the time it takes to receive your tax refund and to the overtime rules. We will also be discussing the importance of knowing the laws for hiring in-home caregivers and verifying your Social Security credits.
IRS Warns of 2017 Tax Refund Delays
New tax laws and the rise in identity theft have led to an increase in the time it will take for you to receive your tax refund next year.
If you are eligible for the Earned Income Tax Credit and the Additional Child Tax Credit, the IRS will now hold your entire refund until at least February 15, 2017. In addition, the rise in identity theft is causing the IRS and state tax authorities to spend additional review time to protect against fraud.
If you expect a large refund, and you don’t like the idea of a tax refund delay, you can adjust your tax withholding for the remainder of 2016, so you get more take-home money now and a smaller refund. Information on the IRS website about tax withholding can help you determine the amount of tax that should be withheld.
Time to Prepare for Overtime Changes
On December 1, 2016, sweeping changes to the Fair Labor Standards Act will make 4.2 million currently exempt employees eligible for overtime. The salary threshold for exempt status will jump to $47,476 a year from the current $23,660. Employers must either increase the salary of currently exempt employees, or reclassify them as hourly wage earners, so they will be eligible for overtime pay.
The salary threshold will be indexed once every three years. If you have low-salaried employees who work a lot of overtime, it might make sense to raise salaries to at least the threshold. If you have low-salaried employees who do not work much overtime, it probably would be better to convert them to hourly workers.
For more information about these changes visit the U.S. Department of Labor’s website.
In-Home Caregivers
To manage the demands of both taking care of family members and working, many people are now hiring in-home caregivers. Whether the caregiver helps with your children or your elderly parents, important consideration must be given to tax and reporting obligations.
Is the caregiver considered an employee or an independent contractor? Each classification has its own reporting requirements. The answer to this question is not easy and will depend on the totality of the family/caregiver relationship as defined by both the Department of Labor and Internal Revenue Service Code.
For additional information, we encourage you to read an article in the Journal of Accountancy that discusses the importance of following all laws, from tax, to immigration, to labor.
Verifying Social Security Credits
The Social Security Administration no longer mails out your Social Security Statement automatically every year. Since the Social Security Administration imposes time limits for reporting Social Security earnings, it is imperative that you check your statements at least annually for errors. You can obtain a personal Social Security Statement online by creating an account and using the “My Social Security” feature available at SSA.gov.
If your Social Security earnings have been recorded incorrectly, it could make a big difference in your benefit amount. The time limit for reporting Social Security earnings is 3 years, 3 months, and 15 days following the end of the calendar year. If you are self-employed and you still need to file some missing tax returns, you’ll especially want pay close attention to these time limits.
The online statement offers secure access to earning records. It also shows estimates for retirement, disability, and survivor’s benefits. If you are a covered worker, you should check this statement to ensure that your wages and net self-employment earnings are reported accurately. Beginning in 2014, the Social Security Administration began sending paper statements every five years to individuals between the ages of 25 and 60, and annual statements to individuals for each year after age 60 who had not established a “My Social Security” account.