The purpose of this article is to apprise you of pending changes from tax authorities, such as new tax jurisdictions, agency updates, rate changes, and more.  To keep you informed of ongoing tax compliance measures we are providing the following details regarding upcoming/ongoing changes. 

• NEW and/or ACTION REQUIRED: The items highlighted below require additional attention.

Federal and State Tax Updates:

• Alabama Withholding
  • If a filing status for the EE is not provided isolved will default to Single Claiming no Personal Exemptions.
• *NEW* - Arizona Unemployment
  • The AZ state legislature established a new Unemployment insurance Operating Fund to fund administrative costs associated with the state's UI program. The new fund will not impact UI rates but will change the amount of certifiable FUTA credit on IRS form 940. This change will be implemented within isolved effective 1/1/2027. For more information please visit: AZ DES
• *NEW* - Arkansas Withholding
  • The taxability of Qualified Moving Expense reimbursements has changed from taxable to exempt effective 1/1/26. Employees impacted by this change may claim credit for any overpayment of taxes on their 2026 state tax return.
  • The annual deduction limit for Dependent Care expenses for regular and supplemental wages has been decreased from $7,500.00 to $5,000.00 effective 1/1/26. Clients impacted by this change have been notified.
• *NEW* - California Withholding
  • The annual deduction limit for Dependent Care expenses for regular and supplemental wages has been decreased from $7,500.00 to $5,000.00 effective 1/1/26. Clients impacted by this change have been notified.
• *NEW* - Colorado Unemployment
  • 2027 Experience Rate notices are expected to made available the week of October 25th 2026; rates will only be provided to employers electronically. Visit MyUI Employer+ to retrieve your rate notice.
• *NEW* - Colorado Paid Family Leave
  • Decreasing the premium rate from 0.88% to 0.86% of wages effective 1/1/2027. For more information visit: CO FAMLI
• Florida Unemployment
  • The state is implementing a new system for reporting UI Tax.  Employdrive is working with the agency to ensure a smooth transition to the new service which is scheduled to go live for the Winter of 2026.
• *UPDATE* - Georgia Unemployment
  • The state is updating its system for reporting UI Tax.  Employdrive is working with the agency to ensure a smooth transition to the new service which is scheduled to go live for Spring 2027.
• Indiana Unemployment
  • Indiana is requiring employers to submit additional information regarding employees with the 4Q26 filings.  This information includes job title, hours paid, reporting unit info and apprenticeship/internship employment. We are currently working with isolved to confirm this information will be added to the reports for 4Q26 and will provide additional information on how to confirm your employees data includes the required information.
• Maryland Paid Leave
  • Maryland Paid Leave contributions will commence 1/1/2027, in anticipation of this change Employers with EE's working in Maryland should register for a Paid Leave Account and review the EE Notice requirements.
  • Employdrive will begin sending portal invitations to clients in November.
• Massachusetts Paid Leave
  • The state has passed legislation to shift ER contributions from Medical Leave to Family Leave effective 1/1/27.  This change in structure was designed to mitigate the impact of recent IRS Revenue Ruling 2026-6 on the tax treatment of PFML benefits. For more information visit: MA PFML
• *NEW* - Michigan
  • Michigan Treasury Online (MTO) will update it's filing system on 10/30/2026. The current system will be unavailable from 5PM 10/30/2026 until midnight.
• *NEW* - Mississippi Withholding
  • The taxability of Vanpool and Transit Passes as well as Qualified Parking has changed from taxable to exempt effective 1/1/26. Clients impacted by this change have been notified.
• *NEW* - Washington PFL
  • The state has passed legislation to shift ER contributions from Medical Leave to Family Leave effective 1/1/27.  This change in structure was designed to mitigate the impact of recent IRS Revenue Ruling 2026-6 on the tax treatment of PFML benefits. For more information visit: WA PFML
• *NEW* - Wisconsin Withholding
  • The annual deduction limit for Dependent Care expenses for regular and supplemental wages has been decreased from $7,500.00 to $5,000.00 effective 1/1/26. Clients impacted by this change have been notified.

Local Tax Updates:

• *NEW* - Indiana
  • Boone County
    • Increased the resident and non-resident tax rate from 1.70% to 1.71%
• *NEW* - Kentucky
  • Whitesville, Daviess County
    • Added an Occupational License Fee of 1.15% effective 10/1/26. Clients impacted by this change have been notified.
• *NEW* - Michigan
  • City Withholding (except Flint)
    • Michigan Treasury Online (MTO) will transition to a new filing system for local returns beginning 11/12/206. No change to file formatting.
  • Flint Withholding
    • Withholding for Flint MI will begin being reported via the new MTO portal effective 1/1/2027.
• *NEW* - Ohio
  • South Lebanon, Warren County
    • Decreased the credit percentage from 100% to 50%, effective 1/1/26.
    • Increased the credit limit from 0.5% to 1.0%, effective 1/1/26.
    • Changed the taxability of 409A deferrals from taxable to exempt for regular and supplemental wages effective 1/1/26.
    • Clients impacted by these changes have been notified.