2018 PAYROLL REFERENCE SHEET COMPILED FOR YOU BY BARATZ & ASSOCIATES, P.A.
WE TAKE PRIDE IN KEEPING YOU INFORMED OF TAX CHANGES. FEDERAL
Payroll Information Baratz & Associates has compiled this 2018 Payroll Tax Reference Sheet as a good starting point for our clients in the region. Following is a list of scheduled payroll tax, pension plan, and new hire reporting changes effective in 2018. As additional changes are released, we will update this information and keep you posted.
New - Social Security: The wage base increases to $128,400. 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. Federal Unemployment Tax Act (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
As you are aware, it is important to be familiar with changes in payroll taxes each year to accurately process payroll. The information on this page is subject to change at any time based on tax regulation updates. To stay current on payroll processing issues and payroll tax news, please subscribe to our newsletter and contact your CPA. You may contact us via email at
[email protected].
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 2017, 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 2017. The rate for 2018 will be announced in November 2018. Federal minimum wage remains at $7.25 per hour.
NEW JERSEY 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 $33,700 and the employee contribution rate decreases to 0.705% (0.3825% unemployment fund, 0.0425% workforce development, 0.19% disability, 0.09% family leave insurance). The maximum employee contribution is $237.59 annually. New - New Jersey minimum wage increases to $8.60 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 or contact your CPA for further information. New - Please be advised that on February 1, 2017 a new state law went into effect that established 19 as the age at which New Jersey child support obligations terminate. The law will allow for child support to be continued up to age 23 if certain circumstances are met. As the law is implemented employers may receive an increased amount of Amended Income Withholding Orders and/or changes to Medical Coverage notices shortly after May 1, 2017
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and August 1, 2017. For more information, please visit www.njchildsupport.org or call 1-877655-4371.
STATE CHANGES CONTINUED...
PENNSYLVANIA The withholding rate continues to be 3.07%. Pennsylvania minimum wage remains at $7.25 per hour.
Payroll Information Baratz & Associates has compiled this 2018 Payroll Tax Reference Sheet as a good starting point for our clients in the region. Following is a list of scheduled payroll tax, pension plan, and new hire reporting changes effective in 2018. As additional changes are released, we will update this information and keep you posted.
New - Employer unemployment tax wage increases to $10,000. New - Employee unemployment contribution rate decreases to 0.06% of total wages. 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
As you are aware, it is important to be familiar with changes in payroll taxes each year to accurately process payroll. The information on this page is subject to change at any time based on tax regulation updates. To stay current on payroll processing issues and payroll tax news, please subscribe to our newsletter and contact your CPA. You may contact us via email at
[email protected].
New - The current wage tax withholding rates are 3.8907% for the City residents and 3.4654% for the City non-residents. We will keep you informed of any rate changes announced by the City for the year 2018.
DEFERRAL LIMITATIONS AND PENSION CONTRIBUTIONS FEDERAL ELECTIVE DEFERRAL LIMITATIONS New - 401(k) maximum annual deferral increases to $18,500 and special catch up provision for those 50 and older remains $6,000 for 2018. 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 2018. PENSION CONTRIBUTIONS Simple Employee Plan (SEP): maximum contribution is the smaller of $55,000 or 25% of participant's compensation.* Defined Contribution Plan: profit sharing - maximum contribution is the smaller of $55,000 or 25% of participant's compensation.* Defined Contribution Plan: money purchase - maximum contribution is the smaller of $55,000 or 25% of participant's compensation.* Defined Benefit Plans: maximum contribution is the amount needed to provide an annual benefit no larger than the smaller of $220,000 or 100% of the participant's average compensation for his or her highest three consecutive calendar years. *Compensation is generally limited to $275,000.
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REVIEW THE RULES NOW AND PREPARE FOR THE NEW YEAR. DEPOSIT FRQUENCY
DETERMINING FACTOR
DEPOSIT REQUIREMENTS PAY DATE
Monthly
If the accumulated tax Any Day liability is less than or equal to $50,000 for the annual base period
Semi-weekly
If the accumulated tax liability is greater than $50,000 for the annual base period
Tax Liability Amount
$2,500 Rule
If the accumulated tax liability is less than $2,500 for the entire quarter
$100,000 Rule
If the accumulated tax liability is $100,000 or more on any single day
Deposit monthly by the 15th of the following month.
Wednesday, Deposit the following Thursday or Wednesday. Friday Saturday, Sunday, Monday or Tuesday
Exception Rules
DEPOSIT DATE
Deposit the following Friday.
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. 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 Federal deposit schedule determination is made by examining employment taxes reported for the previous 12-month period of July 1 of the second preceding calendar year through June 30 of the year prior. A CPA can advise you if you have difficulty in deciding which schedule applies. 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.
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New Hire Reporting and I-9 Requirements 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 the 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.nj-newhire.com. Form I-9 Requirements New - 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. Any employees hired after September 18, 2017 must complete the new I-9 Form that was released on July 17, 2017. 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.
