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Updated Knowledge Base: FSA & HSA Articles
We've just refreshed our FSA and HSA Knowledge Base articles with verified guidance to ensure your Avionte back office handles these benefits correctly. Perfect timing for year-end reviews and 2026 planning!
Perfect Timing to Review
Current Plan Sponsors: Verify your transaction type setup before year-end:
- Confirm Vertex Deduction codes are correct
- Verify W-2 boxes are properly mapped
- Ensure annual limits configured
- Team understands excess processing
Considering FSAs/HSAs for 2026? These benefits require advance planning and proper system integration before the plan year begins. Review the articles now so you understand the required setup in Avionte.
Next Steps
- Review your current configuration against our updated guides
- Plan benefit offerings for 2026
- Contact your support team for setup assistance
Our updated Knowledge Base articles are available in the Support Center including practical, tested instructions for compliant benefits administration. Refer to these links for details:
- Health Savings Accounts
- Health Care FSA
- Dependent Care FSA
One Big Beautiful Bill Act Increases 1099-NEC Reporting Threshold
The One Big Beautiful Bill Act (OBBB), signed into law on July 4, 2025, includes a significant change that will affect staffing companies issuing Form 1099-NEC to independent contractors. Starting with tax year 2026, the reporting threshold for Form 1099-NEC increases from $600 to $2,000, and this will be adjusted annually for inflation beginning in 2027.
Current Threshold (2025 Tax Year) Staffing companies must issue Form 1099-NEC to any independent contractor or non-employee who receives $600 or more in compensation during the calendar year.
New Threshold (2026 Tax Year and Beyond) Beginning with payments made in 2026, the threshold increases to $2,000. For tax years 2027 and beyond, this threshold will be indexed for inflation.
Avionté will ensure that both Avionté Classic and Avionté BOLD systems are updated to reflect the new 1099-NEC reporting thresholds well in advance of the 2026 tax year.
IRS Announces No 2025 Payroll Changes Under OBBB Act
August 7 Update: The Internal Revenue Service (IRS) confirmed that payroll processing remains unchanged for 2025 despite the new tax law under the One Big Beautiful Bill (OBBB aka OB3) Act.
What This Means for Staffing Companies
No changes required for 2025:
- Form W-2, Forms 1099, and Form 941 stay the same
- Federal withholding tables unchanged
- Continue current payroll procedures
Looking ahead to 2026:
- New reporting requirements for tips and overtime pay
- Updated forms and guidance coming
- IRS promises transition relief
Action Items
✓ Immediate: No action required - maintain current processes
✓ Planning: Prepare for 2026 reporting changes for tips and overtime premium pay
What's Still Coming
- Official list of tip-eligible occupations (due October 2, 2025)
- New forms and reporting guidance for 2026
- Instructions for employees to claim deductions on tax returns
- Coordination with employers and payroll providers for smooth transition
Stay tuned for additional IRS guidance expected over the coming months.
OBBB: Key Implementation Details – Part 2
Benefits Enhancements Taking Shape
Treasury is developing the regulatory framework for new "Trump Accounts" that will allow employers to contribute $2,500 annually per employee on a tax-free basis starting in 2026. The dependent care FSA limit increase to $7,500 for 2026 plan years provides immediate planning opportunities for companies looking to enhance their benefits packages.
Standard Implementation Timeline Underway
Following typical regulatory practice, Treasury and IRS are moving through the established process of temporary regulations, industry input periods, and final rule publication. This methodical approach ensures that guidance addresses practical implementation concerns and provides clarity for both employers and workers.
Staffing companies can use this transition period to identify affected worker categories and prepare communication strategies for the enhanced benefits. The regulatory timeline suggests that comprehensive guidance will be available well before year-end reporting requirements, allowing adequate time for system updates and staff training.
OBBB: Key Implementation Details Expected This Fall
The One Big Beautiful Bill Act (OBBB) brings significant new tax benefits for workers, and staffing companies are preparing for implementation as Treasury and IRS finalize the operational details. While the law took effect July 4, 2025, federal agencies are working through the standard regulatory process to provide comprehensive guidance.
Tips Deduction Occupation List Coming by October
The new tips deduction, allowing employees to exclude up to $25,000 from federal income tax, will become fully operational once Treasury publishes the official list of qualifying occupations by October 2, 2025. This list will clarify which temporary workers in hospitality, food service, personal care, and beauty services can benefit from the substantial tax savings.
Staffing companies should prepare to communicate these benefits to eligible workers once the occupation definitions are released.
Overtime Reporting Procedures in Development
The IRS is developing practical implementation methods for the overtime deduction that allows workers to exclude up to $12,500 in qualifying overtime pay. The agency is expected to provide "reasonable methods" for employers to calculate and report overtime compensation, along with updated withholding procedures for 2026.
Updated Form W-2 Specifications Expected Soon
The IRS is updating Form W-2 to accommodate the new reporting requirements for both tips and overtime deductions. Technical specifications for separate tip reporting with occupation codes and overtime compensation tracking are in development.
New Tax Law Creates Deductions for Tips and Overtime
As of July 3, 2025, the OBBB Act (H.R.1) passed the House and has since been signed into law by President Trump. The Act creates temporary above-the-line deductions for your employees through 2028: up to $25,000 annually for qualified tips and up to $12,500 ($25,000 if filing jointly) for FLSA-required overtime compensation. These deductions phase out for higher earners ($150,000+ individual, $300,000+ joint filers) and are available whether employees itemize or take the standard deduction. For 2025, no changes to federal income tax withholding are required - employees will see tax relief as refunds when filing returns. This does not affect Social Security or Medicare contributions, or state taxes, which will continue to be withheld.
Employers will be required to report overtime pay on Form W-2s that are due in 2026. Avionté is currently reviewing the impact of these changes on our platform and will continue to share updates as Treasury guidance becomes available.
Resources: Littler Legal Guidance | Employee FAQ | Business Impact Analysis
Don't Let School District Taxes Derail Your Payroll!
Missing school district codes don't have to slow you down! School districts should be selected on addresses in jurisdictions that require collection of school district taxes. Avionte's powerful DRMs can catch missing school districts during payroll processing, but why wait for warnings? Use our "Find Missing School District Codes AQ" tool proactively before starting payroll to identify and fix issues in advance. These standard tools work best together—DRMs provide your safety net while the AQ tool helps you avoid falling in the first place! This quick preventative step saves time, reduces stress on payroll day, and ensures accurate local tax reporting. Turn on the DRMs today and access the AQ tool through Start Page > Actions Menu > Reports, or review more information in our Knowledge Base!
Avionté Classic 2025 State Tax Forms
Additional states have recently published revisions to their tax withholding certificates. Avionté has updated these new 2025 withholding forms in Classic E-documents for your use. These are effective January 1, 2025, and are available within the Avionté Classic Knowledge Base article for your reference.
- Federal: W-4
- Arizona: A-4
- Colorado: DR 0004
- Connecticut: Form CT-W4
- Iowa: IA-W4
- Minnesota: W-4MN
- Missouri: MO W-4
- New York: IT-2104
- North Carolina: Form NC-4
- Rhode Island: RI W-4
Avionté continues to monitor for additional tax form updates as they become available on the individual state revenue agency websites
Avionté BOLD 2025 Tax Forms
The federal Form W-4 and additional states have updated their tax withholding certificates that are effective January 1, 2025. Changes are being made in Avionté BOLD to these Adobe form templates, and the new versions of these tax forms will soon be available within this Avionté Knowledge Base article.
- Federal: W-4
- Federal: W-4 (Spanish)
- Minnesota: Form W-4MN
- Missouri: Form MO W-4
- New York: Form IT-2104
- North Carolina: Form NC-4
- North Carolina: Form NC-4EZ
- Rhode Island: RI-W4
Avionté continues to monitor for additional tax form updates as they become available on the individual state revenue agency websites.
Year-End Updates to Generate ACA-related Reports
Updates have been made to the ACA Companion logic in Avionté Classic to facilitate the generation of the 1095-C and 1094-C forms to comply with the Affordable Care Act (ACA). These forms can be found within the Reports preparation tab in Avionté's application. As referenced in our release notes, the Report Preparation tab populates the 1095-C and 1094-C information into these reports and updates them with Companion Application data. For details on the report layout, including a video tutorial, refer to our Knowledge Base article.
Federal Unemployment Tax Credit Reductions Announced
Under the Federal Unemployment Tax Act (FUTA), employers in states with outstanding advances for two or more consecutive years as of November 10 of the tax year are subject to a FUTA credit reduction. Employers in states with more extensive outstanding advances are subject to a tax penalty in addition to the credit reduction. California and New York had outstanding advances as of November 10, 2024, so employers in these states will have a reduced FUTA credit of 0.9% for 2024. The U.S. Virgin Islands (USVI) has maintained an outstanding advance since 2010, therefore USVI employers face a 4.2% credit reduction. See the U.S. Department of Labor site for more details.
New 2025 IRS Health Plan Premium Affordability Threshold
The affordability percentage for 2025 will increase to 9.02% of an employee's household income, according to the Internal Revenue Service (IRS) table of Required Contribution Percentages. In comparison, the 2024 plan year level is 8.39%. The Affordable Care Act (ACA) threshold determines eligibility for federally subsidized coverage from a public exchange and impacts employers' potential liability for play-or-pay assessments. Employers who anticipate they will meet the ACA's limit under the safe harbor provisions should review the new required contribution rate for coverage effective January 1, 2025.
IRS Launches Eligibility Information Page for Employer-Provided Childcare Credit
Employers may qualify for an annual tax credit of up to $150,000 to help cover a portion of facility, resource, and referral costs associated with providing child care services for their employees. For more information about claiming the credit and requirements for qualification, refer to the Employer-Provided Childcare Tax Credit page on the IRS.gov website.
IRS Announces Employee Retention Tax Credit Voluntary Disclosure Program (ERC-VDP)
A new program will assist employers who erroneously benefitted from the ERC. The ERC was part of the CARES Act, providing a refundable tax credit against employment taxes to offset the economic downturn during the pandemic. Employers who apply and qualify for the Voluntary Disclosure Program receive a discount on the repayment for credits mistakenly received and will not be subject to interest and penalties. Refer to the FAQ page on the IRS website for details and program application form. Deadline to participate in the program is March 22, 2024.
Canada
Nova Scotia TD1 Form Update – July 2025
The Canadian province of Nova Scotia recently updated its TD1 Personal Tax Credit Form. This version of the form is effective for 2025. Avionté has updated the Adobe template of the form TD1-NS within this Knowledge Base article for your use. For more information, refer to the Canada Revenue Agency website.
Manitoba TD1 Form Updated
The Canadian province of Manitoba recently updated its TD1 Personal Tax Credit Form. This version of the form is effective for 2025. Avionté has updated the Adobe template of the form TD1-MB within this Knowledge Base article for your use. For more information, refer to the Canada Revenue Agency (CRA) website.
Avionté Adds Provincial Tax to Canadian Paystubs
Clients can now create a calculated value for Provincial tax for display on pay statements. This new configuration option improves oversight of the provincial taxes and assists clients in accurate and thorough tax reporting. Provincial tax details are displayed for informational purposes only. For more details of how this can be configured, please refer to our Release Notes.
Canada's TD1 Form Updates for 2025 Classic Edocuments
Updates to TD1 (Personal Tax Credit Return) forms supported by Avionté for clients who operate in Canada have been completed. TD1 forms are completed by employees to help their employers know how much income tax should be deducted from their paycheck. TD1 forms for pay received on January 1, 2025 or later can be found in this Knowledge Base article.
- Federal TD1
- Alberta TD1AB
- British Columbia TD1BC
- Ontario TD1ON
Employer Health Tax (EHT) Return - British Columbia
Employers in British Columbia with remuneration exceeding the exemption threshold for the calendar year are required to register for the employer health tax based on the following tax rates and exemptions for 2024:
- Exempt: Employers with B.C. remuneration of $1,000,000 or less.
- Reduced Tax Rate: Employers with B.C. remuneration between $1,000,000.01 and $1,500,000 pay a reduced tax, calculated as:
- 5.85% x (B.C. remuneration - $1,000,000)
- Standard Tax Rate: Employers with B.C. remuneration greater than $1,500,000 pay the standard tax, calculated as:
- 1.95% x total B.C. remuneration
Avionté has made this update to ensure compliance with the latest employer health tax regulations. For further information, contact your Canadian tax authority. Additional configuration details within Avionté can be found in this Knowledge Base article and in our December 2024 Release Notes.
Alabama
Alabama's Tax Exemption for Overtime Expired
As of July 1, 2025, Alabama employers must resume withholding state income tax from overtime wages paid to non-exempt employees. The state's temporary exemption for overtime pay under Act 2024-437 was not renewed and is no longer effective for hours worked after June 30, 2025.
Alabama Overtime Exemption Update for W2 Reporting
As mentioned in our release notes, Avionté Classic has been improved to update end-of-year report logic for Alabama exempt overtime wages. The overtime wages are mapped for reporting in Box 14 [item pay for AL standard OT/DT] for end-of-year reporting logic using the label of "EX OT WAGES." For more information on this compliance update, refer to Alabama's Reporting Guidance and FAQs.
Vermont
Vermont Child Care Contribution Tax
Effective 7/1/24, Vermont employees will have an additional payroll income tax for child care contributions. According to Act 76 of 2023, related to child care and early childhood education, the Department of Taxes will implement and administer a new Child Care Contribution (CCC). Vermont employers will be required to pay a 0.44% payroll tax on all employee wages earned, and employers may deduct and withhold a maximum of 25% of the required contribution (i.e., 0.11%) from employee wages. This tax will be used to fund investments in Vermont's child care system. More details can be found in this tax guide.
Washington
Washington Sales Tax on Staffing Effective October 1
Effective October 1, 2025, most temporary staffing services will be subject to retail sales tax. Note that there is an exception for temporary staffing provided to hospitals. This new Washington state law (SB 5814) expands the current 6.5% sales tax to include temporary staffing along with other types of businesses. As of October, Washington will join several other states that already charge sales tax on staffing services. For more information, refer to the state's Special Notice and their Services newly subject to retail sales tax webpage.
Washington Passes Sales Tax on Staffing Providers
The Washington state bill (SB 5814) that broadens the state's 6.5% sales tax to include temporary staffing along with other types of businesses was signed into law by Governor Bob Ferguson on May 20, 2025. Note that Washington's legislation does exempt staffing at hospitals, so a traveling nurse assigned to a hospital would be tax exempt, while a nurse assigned to a long-term care facility would be taxed. This taxation change will be effective on October 1, 2025. See this updated SIA article and the state's revenue website for more details, and keep in mind that several other states already charge sales tax on staffing services.
Washington Legislature Advances Staffing Sales Tax
A bill in Washington (SB 5814) has passed the legislature that would update the state's excise tax code to apply sales tax to a wide range of business categories and is set to be effective in October 2025. The intention of this change is to reflect the movement toward a more service-based economy and will impact many technology-based businesses such as software development firms, IT support providers, digital services, as well as temporary staffing services. The bill has passed both the Senate and the House as of April 23, 2025, and now awaits signature by Governor Bob Ferguson. More information can be found in this SIA article and on the Washington state revenue website.
Washington D.C.
D.C. Updates Tax Rate for Paid Family Leave
The District of Columbia increased its Paid Family Leave (PFL) tax rate from 0.26% to 0.75% of paid wages for each covered employee as of July 1, 2024. The first payment at the new 0.75% rate for wages reported during the third quarter of 2024 (July 1, 2024 through September 30, 2024) is due October 31, 2024. For more information, visit the DC Paid Family Leave website.
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