The Social Security Rate for employees and employers remains 6.2% in 2014 but the taxable wage base has increased to $117,000 (up from $113,700 in 2013).
The Medicare employee and employer rate remains 1.45% with no maximum taxable earnings. The Additional Medicare Tax that began on 1/1/13 also remains the same with a 0.9% Additional Medicare Tax withheld on individual’s wages and compensation paid in excess of $200,000 in a calendar year. Our payroll software is setup to withhold this Additional Medicare Tax.
Employers are responsible for withholding the 0.9% Additional Medicare Tax on an individual’s wages and compensation paid in excess of $200,000 in a calendar year and are required to begin this in the pay period in which wages and compensation exceeds $200,000 to an employee. An employer has this withholding obligation even though an employee may not be liable for the Additional Medicare Tax because, for example, the employee’s wages or other compensation together with that of his or her spouse (when filing a joint return) does not exceed the $250,000 liability threshold. Any overages in withheld Additional Medicare Tax will be credited against the total tax liability shown on the individual’s income tax return (Form 1040). There is no employer match for the Additional Medicare Tax.
For more information, see the IRS questions and answers.
Standard Mileage Rate for 2014:
The standard mileage rate for 2014 was decreased to 0.560 cents per mile (down from 0.565 in 2013). This is an optional standard rate which is widely used by employers to calculate mileage reimbursement for employees who use their personal vehicles for company business.
FUTA Credit Reduction Impacts 14 States:
Employers in 14 states will owe additional Federal Unemployment Tax (FUTA) with the 2013 quarter 4 returns (due in January 2014). The amounts due will be collected via ACH debit on Friday, January 24. For additional information, view our full article here: http://truthinpayroll.com/2013/12/futa-credit-reduction-impacts-14-states/.
IRS Changes “Use-It-Or-Lose-It Rule” for Flexible Spending Accounts:
The U.S. Department of the Treasury and the IRS issued a notice modifying the longstanding “use-or-lose” rule for health flexible spending arrangements (FSAs). An employer that sponsors a health FSA can choose to allow its employees to carry over unused amounts of up to $500 to use to reimburse qualified medical expenses incurred during the following year. Plan sponsors now have the choice of either allowing employees a carryover of up to $500 or allowing them a grace period of up to two and a half months (though employers are not required to allow either). A health FSA cannot, however, have both a carryover and a grace period. Our full article can be found here: http://truthinpayroll.com/2013/12/use-or-lose-rule-modified-for-health-flexible-spending-arrangements/
Retirement Plans COLA:
COLA increases for dollar limitations on retirement plan contributions have been released by the IRS for 2014. The max deferral amount for 401k, 403b, 408k and 457b plans remain at $17,500 with the catch-up contribution amount for those over 50 years of age remaining at $5,500. Simple plan limits also remain at $12,000 with the catch-up contribution limit remaining at $2,500 for any person over 50 years old. More information from the IRS on the new limits can be found here: http://www.irs.gov/Retirement-Plans/COLA-Increases-for-Dollar-Limitations-on-Benefits-and-Contributions.
Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.