New Post has been published on APS Payroll
New Post has been published on http://www.apspayroll.com/2013-payroll-tax-changes/
What’s in Store for 2013 Payroll Tax Changes?
There are a number of 2013 payroll tax changes that employers must implement to accurately process payroll. This article outlines a list of scheduled payroll tax changes that will affect employers beginning next year.
Please note: The information in this article is current as of the publish date and tax regulations are subject to change at any time. To stay up-to-date on payroll processing issues and payroll tax news coming out of Washington, subscribe to the APS Payroll Blog.
Affordable Care Act Changes
Beginning in 2014, businesses with more than 50 full-time employees will be required to provide health coverage. Although this legislation does not go into effect for another year, now is the time to start planning for this monumental change if your company is affected. For additional information on this requirement, please see IR-201-92 and IR-2011-50 and Notices 2011-73, 2011-36, and 2012-17. To determine parameters for defining full-time workers, please see Notice 2012-58.
Medicare taxes for employees making over $200,000 individually and couples making over $250,000 combined each year in wages will increase by 0.9 percent. This tax increase only applies to the amount earned above the $200,000/$250,000 threshold, see chart below. This will not affect the percentage employers pay, which will stay at 1.45 percent. The statute requires an employer to withhold the additional medicare tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year. Employers are obligated to withhold this tax even though an employee may not be liable for the additional medicare tax (i.e. the employee’s wages and compensation together with that of his or her spouse does not exceed the $250,000 threshold when filing jointly). Any withheld tax will be credited against the total tax liability shown on the employee’s income tax return. Read the Questions and Answers for the Additional Medicare Tax for more information.
Beginning January 1, 2013, medical FSA contributions will be limited to $2,500 for employees. This limit does not apply to employer contributions. The employee contributions will be indexed to account for inflation after 2013.
Employee Withholding Changes
The Bush tax cuts are set to expire at the end of this year. We will provide additional information when the 2013 tax tables are released. To make sure you are getting the most up-to-date information on tax information, subscribe to our blog.
The 2013 limit on the exclusion for pension plans Section 402(g)(3), Section 401(k)-type plans, Section 403(b) plans, and Section 457 will increase from $17,000 to $17,500. There is no change in the catch-up contribution for those 50 or older.
The limit for defined-contribution plans under Section 415(c)(1)(A) will increase from $50,000 to $51,000.
The general annual qualified plan compensation limit will increase from $250,000 to $255,000.
The 2013 foreign-earned income exclusion amount will be $97,600. The amount was $95,100 for 2012.
As of the release of this publication, the employee’s FICA contribution rate is scheduled to return to 6.2 percent on January 1, 2013. It remains to be seen whether the 4.2 percent reduction will be extended or if the rate will in fact increase back to 6.2 percent. APS will update this article if any new information develops.
The Social Security wage base for 2013 will increase to $113,700 from $110,000.
Across the U.S. a large number of states are continuing to deal with solvency issues in their unemployment insurance trust fund. At least 15 state jurisdictions have decided to further increase taxable wage base limits for 2013. States are able to set limits on the wage base that are taxable for unemployment insurance purposes as long as the limit is not less than the current federal standard of $7,000.
Here are the 2013 SUTA wage base changes scheduled so far:
Colorado 11,000 to 11,300
Minnesota 28,000 to 29,000
New Jersey 30,300 to 30,900
New Mexico 22,400 to 22,900
North Carolina 20,400 to 20,900
Oklahoma 19,100 to 20,100
Pennsylvania 8,000 to 8,500
Rhode Island 19,600 to 20,200 (21,700*)
South Dakota 12,000 to 13,000
Washington 38,200 to 39,800
Wisconsin 13,000 to 14,000
*Rhode Island wage base limit of $21,700 for certain negative-rated employers.
At the time of this publication release, some states have not yet reported what their 2013 wage base will be. Illinois is the only state so far that will decrease their wage base from $13,560 to $12,900. Please refer to the 2013 State Unemployment Wage Base Changes article on the APS Blog for updates as additional states report their amounts.
This article is for informational purposes only and new legislation could change some of the information presented in this article.
Source for 2013 SUTA data – American Payroll Association http://www.americanpayroll.org/members/stateui/state-ui-2/
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