Following is a summary of employer payroll information for 2013 and 2014:
Form 940 FUTA Tax
The Department of Labor did not include Pennsylvania on the list of credit reduction states for 2013. As a result, Pennsylvania employers will not be assessed a surtax on their 2013 Form 940 for Federal Unemployment Tax. Therefore, the 2013 effective FUTA tax rate for Pennsylvania employers is .006.
Ohio employers, however, must pay a FUTA surtax of .009, in addition to their base rate of .006, because Ohio is on the list of credit reduction states.
The taxable federal taxable wage base for employers remains at $7,000 for 2013 and 2014.
2014 FICA Wage Base Limit
For 2014, FICA (Social Security) tax must be paid by both the employer and the employee on the first $117,000 of wages paid to an employee in 2014. This is an increase of $3,300 over the 2013 wage base of $113,700.
2014 Additional Medicare Tax
The additional Medicare tax on high-income earners which went into effect on January 1, 2013 as part of the 2010 health care legislation continues in 2014.
An individual is liable for the Additional Medicare Tax on any wages, compensation, or self-employment income exceeding the following threshold amounts for the individual’s filing status:
|Married filing jointly||$250,000|
|Married filing separately||$125,000|
|Head of household||$200,000|
Employers must, without exception, withhold an additional Medicare tax of .9% on any wages paid to an individual employee in excess of $200,000. The term wages includes taxable fringe benefits. The additional Medicare tax withheld is reported on line 5d of the employer’s quarterly Form 941. This is an employee-only tax. There is no requirement for the employer to match the tax. However, the employer is liable for the tax if the employer fails to withhold it unless the employee pays the tax with his or her individual income tax return. Even then, the employer is still liable for all applicable penalties for failing to withhold.
There will be no special reporting line for the additional Medicare tax withheld on the Form W-2. The additional tax withheld will be reported in combination with the regular Medicare tax withheld in box 6 of the Form W-2.
The employee will be subject to the additional Medicare tax, subject to the above filing status limitations, on his or her individual income tax return. The employee may be underwithheld if he or she has a second job, or a working spouse, or self-employment income. If that is the case, the employee may need to make estimated income tax payments or request that his or her employer increase his or her federal withholding tax by completing a revised Form W-4.
Pennsylvania Unemployment Compensation Tax
The Pennsylvania taxable wage base for employers has increased from $8,000 to $8,500 for 2013, and from $8,500 to $8,750 for 2014.
The taxable wage base is scheduled to continue to increase by $250 or $500 per year until it reaches a taxable wage base of $10,000 in 2018.
Meanwhile, the withholding rate on employee wages remains at .07% (.0007) for 2014.
Pennsylvania Form 1099MISC
Just a reminder that entities which issue Form 1099MISC for either payments of nonemployee compensation or payments under an oil and gas lease and/or Form 1099R in 2013 must also submit a copy of the Form to the Pennsylvania Department of Revenue.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.