FEDERAL TAX RULES Social Security: The wage base remains at $118,500. Both employer and employee contribution rates have remained the same at 6.2%. Medicare: The wage base remains unlimited. The employer contribution rate also remains at 1.45%. However, the employee contribution rate will be 1.45% for the wages up to $200,000 and 2.35% (1.45% plus additional 0.9% tax) for the wages paid in excess of $200,000. Important Note: An individual is liable for the additional 0.9% Medicare tax if the individual s wages and other compensation are above the threshold. The threshold amounts are $250,000 for joint filers and $200,000 for single filers. However, the statute requires an employer to withhold the additional 0.9% Medicare tax on wages it pays to an employee in excess of $200,000, regardless of the employee s filing status. The excess withholding will be credited against the employee s total income tax liability shown on his or her tax return. FUTA: The wage base remains at $7,000. The rate is 6.0% and the maximum credit is 5.4% of the taxable wages. Therefore, the nominal net rate is 0.6%. However, the credit is reduced for a state that borrows money from federal and defaults on the loan. In such case, the credit is reduced by 0.3% for each year the loan remains unpaid. For 2015, New Jersey and Pennsylvania are eligible for the maximum credit. Therefore, the employers in these states will pay FUTA tax at the net rate of 0.6% for 2015. The rate for 2016 will be announced in November 2016. Federal minimum wage remains at $7.25 per hour. NEW JERSEY STATE TAX RULES Withholding rates vary from 1.5% - 7.0% for wages up to $500,000. Wages in excess of $500,000 have a withholding rate of 9.9%. New The unemployment tax wage base increases to $32,600 and the employee contribution rate decreases to 0.705% (0.3825% unemployment fund, 0.0425% workforce development, 0.20% disability, 0.08% family leave insurance). The maximum employee contribution is $229.83. New Jersey minimum wage remains at $8.38 per hour. The State of New Jersey requires all employers to file and pay their Employer s Quarterly Report (Forms NJ-927, NJ-927W, NJ-500), the annual Household Employer s Annual Report (Form NJ-927H) and the Employer Report of Wages Paid (Form WR-30) electronically. Please visit the state website at www.state.nj.us/treasury/taxation to file the reports and for further information.
PENNSYLVANIA STATE TAX RULES The withholding rate continues to be 3.07%. New Employer unemployment tax wage increases to $9,500. Employee unemployment contribution rate remains at 0.07% of total wages. Pennsylvania minimum wage remains at $7.25 per hour. All employers are required to make payments and file quarterly reports electronically effective January 2014. All other filing methods have been discontinued. Please visit E-tides website at https://www.etides.state.pa.us for the employer withholding tax payments (Form PA-501) and the quarterly filings (Form W-3). The State of Pennsylvania Department of Labor & Industry has transitioned the unemployment compensation reporting from E-Tides to a new system called Unemployment Compensation Management System (UCMS). Please visit UCMS website at www.paucemployers.state.pa.us for the quarterly filings of Forms UC-2 and UC-2A. PHILADELPHIA CITY TAX RULES New - The current wage tax withholding rates are 3.9102% for the City residents and 3.4828% for the City non-residents. We will keep you informed of any rate changes announced by the City for the year 2016. 2
ELECTIVE DEFERRAL LIMITATIONS 401(k) maximum annual deferral remains $18,000 and special catch up provision for those 50 and older remains $6,000 for 2016. Simple IRA Plan 408(p) maximum annual deferral remains $12,500 and special catch up provision for those 50 and older remains $3,000 for 2016. PENSION CONTRIBUTIONS Simple Employee Plan (SEP): maximum contribution is the smaller of $53,000 or 25% of participant's compensation.* Defined Contribution Plan: profit sharing - maximum contribution is the smaller of $53,000 or 100% of participant's compensation.* Defined Contribution Plan: money purchase - maximum contribution is the smaller of $53,000 or 100% of participant's compensation.* Defined Benefit Plans: maximum contribution is the amount needed to provide an annual benefit no larger than the smaller of $210,000 or 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. * Compensation is generally limited to $265,000. 3
FEDERAL TAX DEPOSITORY RULES DEPOSIT FREQUENCY Monthly DETERMINATING FACTOR liability is less than or equal to $50,000 for the annual base period DEPOSIT REQUIREMENTS PAY DATE DEPOSIT DATE Any Day Deposit monthly by the 15 th of the following month. Semi Weekly liability is greater than $50,000 for the annual base period Wednesday, Thursday or Friday Saturday, Sunday, Monday or Tuesday Deposit the following Wednesday. Deposit the following Friday. EXCEPTION RULES $2,500 Rule $100,000 Rule TAX LIABILITY AMOUNT liability is less than $2,500 for the entire quarter liability is $100,000 or more on any single day DEPOSIT REQUIREMENTS Remit the liability with the quarterly tax return. Deposit the liability on the next business day. The Internal Revenue Service established an Electronic Federal Tax Payment System (EFTPS) in 2008. U.S. Department of Treasury has eliminated paper Form 8109 - federal tax coupons. All employers are required to make federal tax payments electronically using EFTPS. Failure to do so could result in 10% penalty. Visit https://www.eftps.gov/eftps/ to enroll with the EFTPS. New Jersey Electronic Filing New Jersey, under its Electronic Funds Transfer (EFT) program, has a threshold of $10,000. New Jersey requires that a taxpayer with a prior year's tax liability of $10,000 or greater in any one tax to remit all tax payments to the Division of Revenue using EFT. Visit http://www.state.nj.us/treasury/revenue/enrolleft.shtml to enroll with EFT. Annual Base Period The determination of which federal deposit schedule applies will be made by looking back at the employment taxes reported for a 12-month look back period, July 1 of the second preceding calendar year through June 30 of the prior year. Safe Harbor An employer who under deposits will not be penalized if the shortfall is less than or equal to $100, or less than 2% of the amount which should have been deposited, whichever is greater. 4
New Hire Reporting A Federal Regulation mandates that all employers are to report information for any new hire or rehire within 20 days of their start date. You must report employee's name, address, social security number, date of birth, and hire date along with your employer's name, address and Federal identification number. Information should be mailed or faxed within the 20 day period to: New Hire Directory, P.O. Box 4654, Trenton, New Jersey 08650-4654. The fax number is (800) 304-4901. Information can also be reported online at www.njnewhire.com. Most payroll services will handle the new hire reporting automatically, and therefore, it will not be any burden for those utilizing their services. For those not using an outside payroll services, please note the requirements in order to avoid any compliance penalties. Form I-9 Requirements Federal Form I-9 was developed by the U.S. Department of Justice, Immigration and Naturalization Services. The purpose of the form is to document the verification of an individual s eligibility to work in the U.S. All employees, citizens and non-citizens, hired after November 6, 1986 must complete and sign Section 1 of the form at the time of hire. The employer is responsible for ensuring that Section 1 is timely and properly completed. Employers are responsible for completing Section 2 of the form by examining evidence of the applicant s identity and employment eligibility within three business days of the date employment begins. If the applicant is unable to produce the required documents within three business days they must present a receipt for the application of the required documents within three business days and the actual documents within ninety days. Employers must complete Section 3 of the form when updating or re-verifying the I-9 information. Employers must re-verify employment eligibility of their employees on or before the document expiration date recorded at the time of hire. Employers must retain completed I-9s for three years after the date of hire or one year after the date employment ends, whichever is later. Visit our website at www.baratzcpa.com for any future updates. Feel free to contact us should you have any questions. Baratz & Associates, P.A. 7 Eves Drive, Suite 100 Marlton, NJ 08053 Phone: 856.985.5688 Fax: 856.985.8340 Email: info@baratzcpa.com 5