The IRS has announced changes to some of the previously announced 2018 cost-of-living adjustments (COLAs) [Rev. Proc. 2018-18, 2018-10 IRB 392]. The new COLA amounts reflect tax law changes created by the Tax Cuts and Jobs Act.
Foreign earned income exclusion
For 2018, the maximum foreign earned income exclusion amount under IRC §911(b)(2)(D)(i) is lowered to $103,900 ($104,100 previously). The maximum amount of the foreign housing cost exclusion is $14,546 ($14,574 previously).
Medical Savings Accounts
To be eligible to make contributions to a Medical Savings Account (or to have the employer make the contributions), an employee must be covered by a high deductible health plan. For 2018, a high deductible health plan is a plan with an annual deductible of $2,300-$3,450 for individual coverage (unchanged) and $4,550-$6,850 for family coverage ($4,600-$6,850 previously).
Maximum out-of-pocket expenses now can be no more than $4,550 for individual coverage ($4,600 previously) and $8,400 for family coverage (unchanged).
Health savings accounts
The maximum annual contribution to a health savings account is reduced to $6,850 ($6,900 previously) for family coverage. The other amounts are unchanged.
Adoption assistance
For 2018, the maximum amount that can be excluded from an employee’s gross income for qualified adoption expenses under an employer’s adoption assistance program is lowered to $13,810 ($13,840 previously). The amount excludable from an employee’s gross income also phases out at lower amounts of the employee’s modified adjusted gross income.
Penalties for failure to file correct information returns and to provide correct payee statements
For tax years beginning in 2018 (forms filed in 2019), the penalty amounts per return under IRC §6721, failure to file correct information returns, and the penalty amounts under IRC §6722, failure to furnish correct payee statements, will remain the same However, some of the calendar year maximum penalties have been reduced.
A detailed description of the changes will be included in the April issue of PAYROLL CURRENTLY (Issue 4, Vol. 26).
