HR Support on Tax and Payroll Withholding Rules

Editor's Note: Avoid penalties by properly withholding and remitting income and employment taxes.

Rena PirsosOverview: The most important payroll process for all employers is undoubtedly withholding for federal, state and local income and employment taxes and timely remitting the amounts collected to the appropriate government agencies. In turn, proper withholding leads to correct employee paychecks, and timely remitting of withheld taxes avoids serious employer penalties.

The income and employment tax withholding process requires an employer to understand: the importance of obtaining and correctly recording employee Social Security Numbers; how to determine the amount of federal income and Social Security and Medicare (FICA) tax to withhold; the various federal income tax withholding and payment methods; federal recordkeeping requirements; and the penalties that are imposed for noncompliance.

Trends: The following important information affects withholding in 2014!

Additional Medicare Tax Rate. An additional 0.9 percent Medicare tax (AMT) rate applies to single employees who earn more than $200,000 and to married couples who file joint tax returns and earn more than $250,000. For high earners, the total Medicare tax rate is 2.35 percent. For all other employees, the rate is 1.45 percent. The AMT took effect January 1, 2013 under the Patient Protection and Affordable Care Act (PPACA).

Final IRS Regulations. The IRS issued final regulations, which apply starting January 1, 2014, governing the implementation of the AMT. The final regulations detail an employer's withholding obligation, and how it should treat repayment by an employee of wage payments received in a prior year for AMT purposes (e.g., sign-on bonuses paid to employees that are subject to repayment if certain conditions are not satisfied).

Author: Rena Pirsos, JD, Legal Editor

Latest items in Withholdings

  • State Internal Revenue Code Conformity - Chart

    Type:
    Quick Reference

    Some states that require employers to withhold income taxes from employees' wages tie their definitions of "wages" to the federal Internal Revenue Code (IRC). However, many states update their IRC references to a specific date every year or so, while others roll their references into the current version of the IRC. Even with IRC conformity, some states have important exceptions. This Quick Reference Chart summarizes each state's IRC conformity reference.

  • Wisconsin Supplemental Wage Tax Rates Lowered: Employment Law Manual, Quick Reference Chart Updated

    Date:
    17 April 2014
    Type:
    Editor's Choice

    The Employment Law Manual and a Quick Reference Chart have been updated to reflect Wisconsin's lowered supplemental wage tax rates.

  • State Taxation of Supplemental Wages - Chart

    Type:
    Quick Reference

    This Quick Reference Chart provides employers with an overview of the current method required to be used in each state to withhold state income taxes from supplemental wage payments made to employees.

  • Depositing and Reporting Withheld Taxes

    Type:
    Employment Law Manual

    One of the most important payroll related tasks is ensuring that taxes withheld from employees' pay are deposited and reported properly and on time. This section reviews tax deposit schedules, the Electronic Federal Tax Payment System (EFTPS) and other electronic filing requirements, potential penalties for noncompliance, and important tax forms (e.g., 941, W-2, W-3, 1099).

  • Withholding Taxes: Ohio

    Type:
    Employment Law Manual

    In-depth review of the spectrum of Ohio employment law requirements HR must follow with respect to withholding taxes

  • IRS Identifies Common Errors to Avoid in Form W-2, W-3 Retirement Plan Codes

    Date:
    22 January 2014
    Type:
    News

    The Internal Revenue Service (IRS) has identified the most common errors employers make when entering codes for retirement plan information on Form W-2, Wage and tax Statement, and Form W-3, Transmittal of Wage and Tax Statements. The IRS cautions employers to avoid these errors and ensure that the forms they issue to employees contain correct retirement plan information

  • Three New Multi-State Charts Added to Payroll Content

    Date:
    21 January 2014
    Type:
    Editor's Choice

    Three new multi-state charts have been added to the Quick Reference Tool to assist employers in properly withholding, depositing and reporting employment taxes: State Payroll Annual Reconciliation Return Forms and Deadlines; State Form W-2 Electronic-Filing Requirements; and State Internal Revenue Code Conformity.

  • When does an employer have to comply with the Affordable Care Act's Form W-2 health care reporting requirement?

    Type:
    FAQs

  • State Form W-2 Electronic Filing Requirements - Chart

    Type:
    Quick Reference

    The Internal Revenue Service requires employers filing 250 or more Forms W-2 to file them electronically by March 31st of every year, and many states have adopted this standard. However, while most states require employers filing Forms W-2 to file them electronically, filing thresholds, due dates and acceptable media vary. This Quick Reference Chart summarizes each state's e-filing requirements.

  • Idaho Content Updated to Reflect New Tax Filing and Depositing Schedule

    Date:
    07 January 2014
    Type:
    Editor's Choice

    The Depositing and Reporting Withheld Taxes: Idaho section of the Employment Law Manual has been updated to reflect the elimination of split-monthly filing and depositing as of January 1, 2014.