Year-End Best Practices For Equity Plan Providers

Social Security and Medicare

In 2023, both the Social Security tax and Medicare tax rates will remain the same, at 6.2% and 1.45%, respectively. With the new wage cap of $162,000.00, the maximum withholding for Social Security will be $9,932.40. Medicare tax rates are not subject to a maximum. The threshold at which the additional Medicare tax of 0.9% applies is unchanged at $200,000.

Tax Rates

When it comes to rates themselves, you’ll want to focus on specific state and country rates, and your company may be dealing with multiple rates. Make note of any changes from last year when you submit your import files, and be sure those changes are reflected in your payroll system.

Year-End Requirements

Releases or Purchases

• Make sure the tax import file has correct tax year on the release/purchase file

Blackouts

• Provide 2023 company blackout dates for transactions (if you do not have all the blackout dates for the upcoming calendar year, update the details as soon as they are available)

Corporate Actions

• Report corporate actions on a 1099 form, as they may affect the tax reporting

SOX Controls

• Verify access to data for SOX controls (this may be required quarterly or annually, based on your narrative)

Communicate With Internal And External Stakeholders

Once you have gathered all the required information, it is time to work with your internal partners, such as accounting teams, payroll teams and human resources to create a list of the reports you ran last year for your business partners. If there are any files to report this year, we strongly recommend keeping all the information, including termination information, up-to-date in the reports. It is also very important to confirm your tax rates and have appropriate approvals from your third-party vendors.

Form W-8 Reminders

There have been several notable changes and updates regarding W-8 certification in the last few years. As a reminder, the IRS requires both DOB And a tax ID number to validate the W8 form. One of the biggest changes is the date of birth (DOB) requirement. As of 2018, the IRS requires both DOB information and a tax ID number to validate the form. That said, the IRS will consider a previously filed form that only contains a foreign tax ID to be valid until it expires. Based on the U.S.’s arrangement with these countries, the IRS gives an option to individuals from Australia, Bermuda, the British Virgin Islands or the Cayman Islands to refuse to provide DOB information. Additionally, a foreign Taxpayer Identification Number (TIN) is not required for citizens of these countries.