Overview: 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 changes affect withholding in 2013!
2013 Medicare Tax Rate. Beginning with wages paid in 2013, an additional 0.9 percent Medicare tax 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.
Impact of the American Taxpayer Relief Act (ATRA) of 2012. ATRA 2012 had a major impact on payroll by permanently extending certain expiring Bush-era tax provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, P.L. 107-16 (EGTRRA), temporarily extending other payroll related provisions that expired at the end of 2011 and 2012, increasing the top marginal income tax rate on the wealthiest one percent of Americans and the withholding rate on supplemental wages over $1 million. ATRA also allowed the employee portion of the Social Security tax rate to revert to 6.2 percent from 4.2 percent, causing most employees’ net pay to be lower in 2013.
Author: Rena Pirsos, JD, Legal Editor
At the end of each calendar year all employers are responsible for closing out the year's payroll in compliance with all federal, state and local income and employment tax laws and regulations. This involves much coordination and myriad detailed tasks which, if not carefully planned out in advance, can become nothing less than overwhelming. XpertHR's various tools and resources will help employers establish and follow good payroll practices and procedures all through the year to ensure a successful year-end that is free of noncompliance penalties and fines.
A new chart on state income tax withholding on supplemental wages has been added to the Quick Reference tool.
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.
A new Payroll Year-End Practices and Procedures Checklist has been added to the Policies and Documents Tool to help employers close out the year's payroll in compliance. The checklist also provides essential month-by-month practices and procedures that help employers keep their payroll administration organized all year long.
This checklist helps employers successfully close out the year's payroll in compliance with the income and employment tax laws and regulations, and provides essential month-by-month practices and procedures that helps employers keep their payroll processes organized all year long.
In-depth review of the spectrum of Federal employment law requirements HR must follow with respect to New Hire Paperwork.
The Virginia Employer Earned Income Tax Credit poster is required by all employers.
The Payment of Wages: New York section of the Employment Law Manual has been updated with final regulations regarding permissible wage deductions. The regulations are effective as of October 9, 2013.
The Taxation of Employee Benefits: California section of the Employment Law Manual has been updated with the discussion of a new law - the Same-Sex Couple Tax Fairness Act. The new law is effective immediately and applies for tax years beginning on or after January 1, 2013 through December 31, 2018.
In-depth review of the spectrum of New York employment law requirements HR must follow with respect to withholding taxes.
An explanation of the process of payroll withholding of federal, state and local income taxes and Social Security and Medicare (FICA) taxes.