Tax Cuts and Jobs Act Offers New Options

February 22, 2018

The Tax Cuts and Jobs Act has prompted a number of employee benefits that companies need to address to comply with the new law.

When Congress passed the long-promised Tax Cuts and Jobs Act late last year by a 51-49 vote, the reaction was swift. Just hours after the bill was signed into law by President Trump, companies from Alaska Airlines to Zions Bancorps announced one-time bonuses for all or qualifying employees. 

Stephen Miller of the Society for Human Resource Management compiled a large list of the numerous employee benefits that companies need to address in order to comply with the new law. These changes will occur in benefits that cover commuting, paid leave, retirement plans, education savings plans, achievement awards, moving expenses, onsite gyms, meals, and business expenses. Miller also pointed out that the new law limits the tax deductions that businesses can claim for certain employee benefits and suggests the changes may cause some employers to revisit their offerings. 

Companies Face Decisions 

An example of the choices companies will need to face in the future is exemplified by changes to the transit commuting deduction. While participating employees will still be able to use pre-tax dollars to pay for commuting benefits, those employers who pay for or subsidize their employees’ commuting expenses will no longer be able to claim this deduction. It is one of a number of choices employers will have to consider. Do they risk alienating employees by cutting a popular benefit or absorb the write-off costs to keep their train- and bus-using employees happy? 

“On its own, eliminating the tax deduction for employers may seem like a disadvantage to offering these benefits, although some employers would still need to do so to stay competitive and to comply with state and local laws,” said Bobbi Kloss, HR leader at Benefit Advisors Network. 

Paid Leave Option 

The new tax bill adds a federal tax credit for employers that provides paid family and medical leave. According to Miller, by using the Family and Medical Leave Act, employers can claim a general business credit equal to a percentage of wages paid to employees who earn under $72,000 per year. Employers must “provide at least two weeks of leave and compensate their workers at a minimum of 50 percent of their regular earnings. The tax credit will range from 12.5 percent to 25 percent of the cost of each hour of paid leave,” wrote Miller. 

Long-Term Effect 

As the new tax cuts become the norm rather than a novelty, employees will likely earmark that extra money to pay off credit card debt, save for a vacation, fund a long-awaited project in their house, or put it toward some other pragmatic solution. Employers would be wise to do the same. How today’s companies spend their new influx in revenue, whether it goes toward higher salaries, stockholder dividends, employee training, or research and development, could be a major factor in employee satisfaction and retention in the future. 


Get Taxes Done Right, Without the Stress

We know there's a lot that goes into preparing and filing payroll tax forms. Save time and get support from our expert team. As a Registered Reporting Agent with the IRS, we can help prepare and file all the necessary forms you need to remain compliant - even in the face of changing legislation. Learn more here.

Payroll Tax Services