by Afilliated HR & Payroll | Jan 30, 2024 | Career Planning, Regulatory Compliance
Workers who are considered employees do not have to pay their own taxes during the year. Instead, employers withhold income tax from their employees’ paychecks and pay it to the IRS on behalf of the employee.
Now, if not enough tax is withheld from each employee’s paycheck, then the employee might end up receiving an unexpected tax bill come tax season. They might even come face-to-face with penalties when filing their tax returns in the next year.
On the other hand, if employees end up overpaying taxes as a result of having too much tax withheld from their paychecks throughout the year, the employee may receive a tax refund. That’s never a bad thing, but adjusting the tax that is withheld upfront may mean your employee will receive bigger paychecks throughout the year rather than a lump sum come tax season.
Ultimately, the amount of tax that is withheld from employee paychecks is determined by what employees do when they enter the workforce or change jobs. It all starts with the way employees fill out their W-4 form, the Employee’s Withholding Certificate.
This information tells employers how much money they should withhold from an employee’s paychecks for federal income tax. The information that employees submit is out of the employer’s hands, but if your employee notices that something is off with the tax being withheld in their name, you can refer your employee to the information they submitted.
Get the forms right
If need be, employees can submit new W-4 forms when their personal or financial situation changes. That way, their current situation can be reflected in their withholding amounts.
Also, if your employees are not sure whether the right amount of tax is being withheld from their paychecks, the IRS offers a Tax Withholding Estimator tool on the official IRS.gov website. This tool can help people estimate their federal income tax withholding amounts while seeing how it may affect their refund, take-home pay or tax owed.
Keep in mind that all of this information applies only to workers whom you employ. If you pay contractors or freelancers to do work for you, remember that they are responsible for paying their own taxes directly to the IRS. You do not have to automatically withhold any of those taxes from their income because it is their responsibility, not yours.
That said, all taxpayers are encouraged to keep copies of their tax-related documents. Store them in a safe place to ensure that they can be easily found or remain readily available when it comes time for you to file an accurate return.
by Afilliated HR & Payroll | Jan 26, 2024 | Alert, Regulatory Compliance
As of February 6, 2024, Texas will prohibit employers of all sizes from adopting or enforcing a policy that requires applicants or employees to receive a COVID-19 vaccination.
Additionally, employers can’t take any adverse action against an employee or applicant for their refusal to be vaccinated against COVID-19. However, a healthcare facility, healthcare provider, or physician can have a reasonable policy that includes requiring unvaccinated employees to use protective medical equipment if they pose a risk to patients based on their routine, direct exposure to them.
Action Item
Eliminate any policy or practice of requiring COVID-19 vaccination for applicants or employees. Pay special attention to job ads, job descriptions, or other documentation that may not get frequent review.
by Afilliated HR & Payroll | Jan 9, 2024 | Benefits & Compensation, HR Administration, Recruiting and Developing Talent, Regulatory Compliance
Are we required to update our I-9s when the documentation used for them expires?
You would only update a Form I-9 if the expired document pertains to a limited period of employment authorization. You should never reverify U.S. citizens and, in most cases, lawful permanent residents (Green Card holders). However, if a lawful permanent resident presents their employer with temporary evidence of lawful permanent resident status for Section 2 (instead of an unexpired permanent resident card), then reverification may be necessary.
We recommend that you set up a tracking system for the I-9s that will require reverification. Consider setting a calendar reminder for 90 days before the expiration of the document or the expiration date listed by the employee in Section 1 of the I-9, whichever is sooner. Then provide the employee written notice of the need to reverify, the deadline to do so, and the I-9 list of acceptable documents they may use for reference.
Once the employee has presented acceptable documents, you should review and complete the reverification section of the Form I-9 (Supplement B of the Form I-9 version dated 8/1/23).
If the Form I-9 version that the employee originally completed is no longer valid, complete Supplement B of the Form I-9 version dated 8/1/23 to reverify the employee. To do this, an employer should:
- Enter the employee’s name at the top of each Supplement B page you use (and use the New Name field to record any name change the employee reports at the time of reverification or rehire);
- Use a new section of Supplement B for each instance of a reverification or rehire;
- Use the Additional Information fields if the employee’s documentation presented for reverification requires future updates; and
- Sign and date that section when completed and attach it to the employee’s completed Form I-9.
This Q&A does not constitute legal advice and does not address state or local law.
by Afilliated HR & Payroll | Jan 3, 2024 | Alert, Benefits & Compensation, Regulatory Compliance
Below are federal payroll tax rates and benefits contribution limits for 2024.
Social Security tax
In 2024, the Social Security tax rate is 6.2% for employers and employees, unchanged from 2023. The Social Security wage base is $168,600 for employers and employees, increasing from $160,200 in 2023. Self-employed people must pay 12.4% on the first $168,600.
Medicare tax
In 2024, the Medicare tax rate for employers and employees is 1.45% of all wages, unchanged from 2023. Self-employed people must pay 2.9% on all net earnings.
Additional Medicare tax
In 2024, the additional Medicare tax remains unchanged at 0.9%. This tax applies to wages and self-employment income over certain thresholds ($200,000 for single filers and $250,000 for joint filers).
401(k) limits
In 2024, the maximum contributions to traditional and safe harbor plans are as follows:
- Employee (age 49 or younger): $23,000, up from $22,500 in 2023.
- Employee catch-up (age 50 or older): $7,500, unchanged from 2023.
- Employee and employer (age 49 or younger): $69,000, up from $66,000 in 2023.
- Employee and employer (age 50 or older): $76,500, up from $73,500 in 2023.
Employees can contribute up to $16,000 to a SIMPLE 401(k) plan, up from $15,500 in 2023.
Health savings account and high-deductible health plan limits
In 2024, the maximum contributions to an HSA are as follows:
- Employer and employee: $4,150 (self only) and $8,300 (family).
- Catch-up amount (age 55 or older): $1,000.
In 2024, the limits for an HDHP are as follows:
- Minimum deductibles: $1,600 (self only) and $3,200 (family).
- Maximum out-of-pocket amounts: $8,050 (self only) and $16,100 (family).
Flexible spending account limits
In 2024, employees can contribute:
- Up to $3,200 to a health care FSA, increasing from $3,050 in 2023.
- Up to $5,000 to a dependent care FSA if filing single or jointly and up to $2,500 if married but filing separately.
Qualified Small Employer Health Reimbursement Arrangement limits
In 2024, employers with a QSEHRA can reimburse employees for health care expenses as follows:
- $6,150 (self only), up from $5,850 in 2023.
- $12,450 (family), up from $11,800 in 2023.
Commuter benefits limit
In 2024, employees can contribute up to $315 per month for qualified commuter benefits (e.g., mass transit and parking), up from $300 per month in 2023. This limit includes any employer contributions.
Adoption assistance exclusion limit
In 2024, up to $16,810 in employer-sponsored adoption assistance may be excluded from an employee’s gross wages, increasing from $15,950 in 2023.
Remember, these are all federal rates and limits. Be sure to check with the necessary agencies for state and local rates.
Note that this is a summary of some very complex provisions. Don’t make any assumptions about your situation until you’ve spoken with a qualified tax professional.
by Afilliated HR & Payroll | Dec 20, 2023 | HR Administration, Regulatory Compliance
Workplace experts are advising businesses to check on the required federal posters they display at their businesses. Some recent regulatory changes have led to poster modifications this year, and HR departments need to review the rules and post the latest notices.
According to the Society for Human Resource Management, the Know Your Rights: Workplace Discrimination Is Illegal poster now includes the Pregnant Workers Fairness Act in effect as of June 27.
Laws relating to pumping breaks for nursing employees used to apply only to nonexempt workers, says the SHRM. They now apply to exempt workers as well. The Labor Department has updated the relevant FLSA poster to reflect this.
Employers now see a third significant change, with a new FMLA poster that clarifies that even though an FMLA leave is unpaid, companies may require employees to use employer-provided paid leave at the same time, according to the SHRM.
Work closely with us or HR experts to make sure you’re following all the federal and local poster rules, which can be complicated. We’ll ensure you have the proper poster for your particular situation. Some states, for example, may require bilingual posters. Whatever your requirements, be aware that the government can impose stiff penalties for noncompliance.
by Afilliated HR & Payroll | Oct 16, 2023 | Regulatory Compliance, Reminder
The Tax Cuts and Jobs Act largely winds down at the end of 2025. Maybe. Many of its provisions are political, so much depends on who’s in the White House and who has control of the House and Senate at that time.
Before you start planning, glean some understanding of what the TCJA does and what may change at the end of 2025. This is not a complete accounting, but it will give you an idea of some of the most major changes.
Income tax rates
Rate changes are likely to have the most impact. Consider, for example, the tax rate for a married couple earning between $274,401 and $364,200. Their tax rate in 2023 is 24%. But on Jan. 1, 2026, it becomes 33%, if the government doesn’t make any adjustments. In a few brackets, however, the rate may actually go down, or not change at all. However, the net result is likely to be higher rates for the vast majority of people.
Estate and gift taxes
The TCJA doubled the 2011 estate and gift tax exemption, which was just $5 million. After adjustments for inflation, the threshold is now $12.92 million per individual and $25.84 million for couples. Look for a major cut as levels fall to pre-TCJA levels. This change won’t affect most families, but it could mean a great deal to those with a high net worth. To prepare, some families may want to accelerate their giving in the next year or two.
Other changes
Most will see a decrease in the child tax credit as well as a cut in the standard deduction. Some advisers are noting that this will make itemized deductions more attractive for more taxpayers.
A key change for businesses will be the ending of the Qualified Business Income Deduction. Also called the Section 199A deduction, this generally allows sole proprietorships, partnerships, S corporations, trusts and estates to deduct up to 20% of their qualified business income. It does not apply to C corporations. Since the QBID is so popular with small businesses, there will be a lot of pressure to keep it going, but nothing is final yet.
What to do now?
No one can be sure what may change years in the future. For now, stay in close touch with tax and financial professionals. Many advisers are recommending that no one tie their plans too closely to guesses of what might happen to the TCJA. That is, be prepared to jump either way. Give us a call and we’ll help you steer a prudent course in the coming months.
