2015 Federal Payroll Tax Rate Changes
Note: The 2016 rates have now been posted!
Here is a handy summary of the 2015 Federal payroll tax changes including Social Security, Medicare, Unemployment Tax, Minimum Wage, 401k limits and much more.
Social Security / Medicare
The wage base increases to $118,500 for Social Security and remains UNLIMITED for Medicare. For Social Security, the tax rate is 6.20% for both employers and employees (Maximum Social Security tax withheld from wages is $7,347.00 in 2015). For Medicare, the rate remains unchanged at 1.45% for both employers and employees.
Additional Medicare Tax
A 0.9% additional Medicare tax must be withheld from an individual’s wages paid in excess of $200,000 in a calendar year. There is no employer match for the additional Medicare tax.
Federal Unemployment Tax
The wage base remains at $7,000.
The effective tax rate for 2014 is 0.6%.
Earnings Under Social Security
A social security beneficiary under full retirement age can earn $15,720 before benefits are reduced. For every $2 a person under full retirement age earns over $15,720, $1 is withheld from benefits. In the year an employee reaches full retirement age, $1 in benefits will be withheld for each $3 they can earn above $41,880 until the month the employee reaches full retirement age. Once the employee reaches full retirement age or older, their benefits are not reduced regardless of how much they earn.
The federal minimum wage rate per hour for 2015 is $7.25, effective 7/24/09
Top 5 Small Business Tax Deductions
401(K) Plan Limits
The maximum employee pre-tax contributions increases to $18,000 in 2015. The “catch-up” contribution limit increases to $6,000 in 2015 for individuals who are age 50 or older.
SIMPLE Plan Limits
The maximum salary deferral contribution remains at $12,500 in 2015. The “catch-up” contribution limits increases to $3,000 in 2015 for individuals who are 50 or older.
Electronic Federal Tax Payment System (EFTPS)
Employers must pay their Federal Tax Liabilities through the Electronic Federal Tax Payment System unless they pay less than $2,500 in quarterly payroll tax liabilities and pay their liability when filing their employment tax returns (Forms 941 and 944).
Forms W-4, I-9 and W-9
All new employees are required to file Forms W-4 and I-9 which are to be kept on file by the employer. A new Form W-4 should be obtained when an employee’s filing status or exemption changes.
Be sure to request and keep on file a completed form W-9 from all non-corporate taxpayers to whom your company pays commissions, interests, rents etc. totaling $600 or more and also payments made to incorporated entities such as attorneys for legal services and providers of medical and health care services.
Filing of Form W-2 and 1099
Social Security has eliminated the use of magnetic tapes, cartridges and diskettes as a means of filing W-2 reports to SSA. Reports containing 250 or more W-2’s must be filed electronically via the Social Security Business Services Online (BSO).
Employers filing 250 or more Form 1099s with the IRS also must file electronically. Form 1099 must provide payer telephone number or will be subject to penalties.
Health Benefits W-2 Reporting
Employers are required to include the aggregate cost of employer sponsored health benefits on the 2014 W-2’s in Box 12 with code DD. It is for informational purposes only and will not be included in taxable income. Small employers who file fewer than 250 Forms W-2 are exempt.
Benefits (aggregate cost) to be included for W-2 reporting
- Medical plans
- Prescription plans
- Dental, unless “stand alone” plans
- Vision, unless “stand alone” plans
- HFSA that exceed the employee’s pre-tax HFSA Contribution
- Employee assistance programs
- On-site clinics if they provide more than the minimum care
- Domestic Partner coverage included in gross income
Benefits exempt from W-2 reporting:
- Disability income or accident policies
- Specific disease or illness policies
- HSA, MSA or HRA contributions
- FSA Health Salary Reduction Contributions
- Long Term Care Coverage
Household Employment – Domestic Workers
Household employers are required to withhold and pay FICA for domestic workers (aged 18 years and older) if paid cash wages of $1,900 or more in 2015. The $1,000 per calendar quarter threshold continues to apply for FUTA. These taxes are reported on Schedule H of the employer’s personal tax return (form 1040), but must be remitted through withholding or estimated payments during the year.
For PA and NJ, unemployment coverage applies for domestic service in an employer’s private home for cash wages of $1,000 or more in a calendar quarter in the current preceding calendar year.
New Hire Reporting Requirements
All employers in New Jersey and Pennsylvania are required to report basic information about employees who are newly hired, re-hired, who return to work after separation of employment, or who are returning from a required leave of absence without pay greater than 30 days. Employers can report this information via the internet at www.nj-newhire.com and at www.cwds.pa.gov. Failure to report a new employee could result in a fine up to $25 per violation. New employers should receive instruction booklets upon registration with the state. Basic employee information which must be provided:
(1) Employee’s name
(2) Employee’s address
(3) Employee’s social security number
(4) Employee’s date of hire and birth
(5) Employer’s name and address
(6) Employer’s federal identification number
For further information contact us or call the State of New Jersey at 1-877-654-4737 or Pennsylvania at 1-888-724-4737
2014 Federal Wage Tax Rate Summary
|2015 Current Year||2014 Prior Year|
|FICA / OASDI
Maximum liability – employee
Maximum liability – employer
Employee and Employer rate
Maximum deduction / liability (each)
Additional employee rate on wages exceeding $200,000
|Social Security Benefits
Earned income may be received without forfeiting benefits:
Under full retirement age
After full retirement age