IRS issues Pub 15-A, Employer’s Supplemental Tax Guide

The IRS has released Pub. 15-A. The publication includes the 2017 formula tables for percentage method withholding, wage bracket percentage method tables, combined federal income tax, employee social security tax, and employee medicare tax withholding tables.

Qualified small business payroll credit

For tax years beginning after December 31, 2015, a qualified small business may elect to claim up to $250,000 of its credit for increasing research activities as a payroll tax credit against the employer’s share of social security tax. The portion of the credit used against the employer’s share of social security tax is allowed in the first calendar quarter beginning after the date that the qualified small business filed its income tax return. The election and determination of the credit amount that will be used against the employer’s share of social security tax is made on Form 6765, Credit for Increasing Research Activities. The amount from Form 6765, line 44, must then be reported on Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities. Form 8974 is used to determine the amount of the credit that can be used in the current quarter. The amount from Form 8974, line 12, is reported on Form 941 or 941-SS, line 11.

New certification for PEO’s

The Tax Increase Prevention Act of 2014 required the IRS to establish a voluntary certification program for professional employer organizations (PEOs). PEOs handle various payroll administration and tax reporting responsibilities for their business clients and are typically paid a fee based on payroll costs. To become and remain certified under the certification program, certified professional employer organizations (CPEOs) must meet tax status, background, experience, business location, financial reporting, bonding, and other requirements described in sections 3511 and 7705 and related published guidance. The IRS began accepting applications for PEO certification in July 2016. Certification as a CPEO affects the employment tax liabilities of both the CPEO and its customers. A CPEO is generally treated as the employer of any individual performing services for a customer of the CPEO and covered by a contract, described in section 7705(e)(2), between the CPEO and the customer, but only for wages and other compensation paid to the individual by the CPEO. For more information, visit IRS.gov and enter “CPEO” in the search box. (IRS Pub 15-A, Employer’s Supplemental Tax Guide, January 5, 2017.)

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