South Florida Hospital News
Monday December 10, 2018
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December 2018 - Volume 15 - Issue 6

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Year-end Payroll and Accounts Payable Considerations in Healthcare

With year-end 2018 fast approaching outlined below are recent 2019 IRS inflationary adjustments and also changes as a result of the Tax Cuts and Jobs Act (“Act”) that affect our compliance with payroll and accounts payable reporting.

The Internal Revenue Service (“IRS”) recently released cost of living adjustments that affect retirement related limitations for 2019. Some of those changes include the following:
• Contribution limits for employees who participate in certain retirement plans such as IRC §401(k), §403(b) and most §457 plans increased from $18,500 in 2018 to $19,000 in 2019; the catch up contributions for those age 50 and over remains at $6,000.
• The limit on IRA contributions increased from $5,500 to $6,000 in 2019; the catch up contribution for those age 50 and over remains at $1,000.
• The limitation on the annual benefit for a defined benefit plan increased from $220,000 to $225,000 in 2019.
• The limitation for defined contribution plans increased from $55,000 to $56,000 in 2019.
 
The maximum earning subject to social security tax were increased from $128,400 to $132,900 for 2019. Rates for Social Security and Medicare have remained the same; however, included in the Act are personal income tax rate changes for individuals, which affected the amount of employee withholding in 2018.
 
In addition, the Act included various changes to fringe benefits, such as the following:
• Qualified moving expenses cannot be excluded from an employees’ income for the years 2018 - 2025. There are certain exceptions for military personnel and reimbursements for expenses incurred in 2017.
• Certain employee achievement awards can be excluded from employees’ wages; however, the Act excludes certain tangible property such as cash, gift cards tickets to shows and sporting events.
• Certain meals and entertainment expenses are disallowed; however, the 50% deduction for business related meals was retained.
 
Tax-exempt organizations should also be aware of the new 21% excise tax on excess executive compensation paid to covered employees in excess of $1 million. In addition, there is a potential requirement to include certain employee fringe benefits, such as qualified transportation and parking as unrelated business income subject to a 21% corporate tax rate.
 
2018 Forms 1099-MISC are generally due to recipients by January 31, 2019. If there is reporting of nonemployee compensation in Box 7, filing is also due by January 31, 2019. For other than Box 7 reporting, Forms 1099 are due by February 28, 2019 for paper filers and April 1, 2019 for electronic filers (required if more than 250 Forms). A 30 day extension may be requested via Form 8809. Beware that payments for medical services always require a Form 1099 no matter the type of payee.
 
In addition the backup withholding tax rate was reduced from 28% to 24% starting in 2018. Back up withholding can apply to payments such as dividends, interest, rents, commissions or fees for services. Back up withholding may be required if the following conditions exist, including but not limited to, failure to provide a taxpayer identification number (“TIN”), providing incorrect TIN, underreported interest or dividends or failure to certify that they are not subject to backup withholding.

For more information contact Linda Gnesin, CPA, Manager, WithumSmith+Brown, PC, at (973) 532-8867 or lgnesin@withum.com or visit www.withum.com.

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