State Conformity Under the Tax Cuts and Jobs ActJanuary 09, 2018
Half the states requiring income tax withholding on wages automatically update their tax laws with changes to the federal IRC.
Payroll Changes are Expected at the State Level
IRC stands for the Internal Revenue Code, and IRC conformity refers to the degree to which state tax codes conform to this federal tax code. Most states conform in some manner, but they “decouple” from other federal provisions, leaving them out of their own tax codes.
Almost half the states requiring income tax withholding on wages automatically update their tax laws with changes to the federal IRC. Other states conform to the IRC as of a specific date and legislation is needed to conform to the latest version of the IRS (rolling and fixed). Some states conform to the IRC only for select provisions.
State Conformity with the Federal Internal Revenue Code (IRC)
The federal Tax Cuts and Jobs Act provisions generally took effect on January 1, 2018. However, the effective dates for state changes will vary as determined by their respective legislative bodies.
Two provisions of the federal Tax Cuts and Jobs Act affecting payroll taxability of fringe benefits, could also affect state taxability. Taxes affected include withholding, unemployment tax and other state employment taxes such as disability insurance. The two state taxability provisions to monitor are bicycle commuting benefits and moving expenses.
Fringe Benefits Impacted are:
- Bicycle commuting benefits: An employer may no longer exclude up to $20 per month in reimbursements to an employee for bicycle commuting costs.
- Moving expenses: Qualified moving expenses must now be included in gross income and wages; except in the case of an armed forces member on active duty who moves pursuant to a military order.
Paylocity will continue to monitor current and pending legislation as it develops. We will continue to advocate on our clients’ behalf.
Thank you for choosing Paylocity as your Payroll Tax partner. Should you have any questions please contact your Paylocity account manager.
This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.