2019 Exemptions, Allowances and Penalties for Employees

Annual Payroll and Withholding Update Part 4 of 5

Part 4 of our Annual Payroll and Withholding Update outlines information employees need to know in 2019, including Form W-4 expiration, Missouri W-4 requirements, unsubstantiated business expenses and Form 1099 penalties and due date.

Form W-4

A Form W-4 on which an employee claims exemption from withholding legally expires February 15th of the year after it is filed.  Remind employees who claimed exemption from withholding on their 2018 Form W-4, the exemption expires and they will need to file a new 2019 Form W-4 on or before February 15, 2019.  Form W-4 is available at https://www.irs.gov.  Forms W-4 must be available for inspection by an IRS employee if requested.  Employers may receive requests from the IRS requiring submission of a copy of Form W-4 for one or more employees.

Missouri Form W-4

Form MO W-4 allows employees to claim the same allowances as on the Federal Form W-4. Employees should review the Form MO W-4 to ensure correct withholdings.  The employer must send a copy of Form MO W-4 to the Department of Revenue within 20 days after any NEW employee completes the form.  This information is being used to enforce the state’s child support laws.  The forms are available at http://dor.mo.gov/forms/.

Unsubstantiated Business Expenses or Advances

An employee is required to substantiate expenses to an employer under an accountable plan and any amount exceeding the amount substantiated must be returned to the employer.  Unsubstantiated amounts must be reported as Form W-2 (and FICA) income.  In a non-accountable plan, all expense payments to employees are treated as wages.

Information Returns

Failure to file accurate and timely 1099 forms continues to carry severe penalties ($50 to $270 per 1099).  The penalty for intentional disregard of filing requirements is at least $540 per information return with no maximum penalty.  Accordingly, we are reminding you of the filing requirements for payments made during 2018.

Among other requirements, an entity must report on Form 1099 payments of $600 or more to non-corporate “service providers”.  This includes rent, fees, commissions, prizes, awards or any other form of remuneration paid to non-employees.  An example would be a consultant who is not incorporated.  Payments made for legal services must be reported even if the payment is made to the attorney’s professional corporation.  Any dividend or interest payment to a non-corporation of $10.00 or more must be reported to the Internal Revenue Service (IRS) and the recipient.

The 2018 Form 1099 must be given to the recipient and sent to the IRS, using either paper or electronic filing procedures, by January 31, 2019 when you are reporting non-employee compensation payments in box 7.  For payments other than box 7 non-employee compensation, the due dates to the IRS are February 28, 2019 if you file on paper or April 1, 2019 if you file electronically, but the due date to the recipient remains January 31st.

Taxpayers are asked to certify the filing of Form 1099 in conjunction with filing their annual income tax returns.

Contact an Anders advisor with any questions on how these amounts affect you.

Read Part 1 of the Annual Payroll and Withholding Update.
Read Part 2 of the Annual Payroll and Withholding Update.
Read Part 3 of the Annual Payroll and Withholding Update.
Read Part 5 of the Annual Payroll and Withholding Update.