2013 FUTA Credit Reduction
Federal law provides for a reduction in the FUTA tax credit when a state has outstanding federal loans for two years that have not been repaid by November 10,2013. The reduction in the FUTA tax credit is 0.3% for the first year and an additional 0.3% for each succeeding year until the loan is repaid. There are 15 states that have outstanding loans from the federal government and will now be subject to a reduction in the credit for unemployment taxes that can be applied to their annual IRS Form 940. Delaware has a 0.6 percent credit reduction. States with a 0.9 percent credit reduction are Arkansas, California, Connecticut, Georgia, Kentucky, Missouri, New York, North Carolina, Ohio, Rhode Island and Wisconsin. Indiana now has a 1.2 percent reduction that will require employers to pay an additional $84 in FUTA costs per employee for 2013.
Employer Sponsored Group Health
The Affordable Care Act (ACA) requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on the W2 does NOT mean that the coverage is taxable. This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage.
Reporting is required for all employers who file 250 or more W2’s and is optional for those with less than 250 (transition relief).
The value of the health care coverage will be reported in Box 12 of the W2, with code DD to identify the amount. There is no reporting of these amounts on the W3.
Third Party Sick Pay
If a third party (your insurance carrier) has been making third party sick payments to any of your employees, the insurance company should provide a listing to you by January 2, 2014 indicating all payments made during the 2013 calendar year.
The third party sick pay amounts must be reported on your tax returns. It has been our experience that clients report these amounts through the year, but discover at year-end they may not have reported all payments to us.
Subchapter S Health Insurance
When an S-corporation pays health and accident insurance premiums on behalf of the 2% shareholder, these amounts need to be reported for W2 purposes. If the premiums are paid under a plan that does not discriminate (offered to all employees) the premiums are exempt from FICA. If the premiums arc available only to the 2% shareholders, they will be treated like normal compensation and as such are subject to FICA.
Group Term Life
When premiums are paid for group term life insurance for an employee, premiums for coverage in excess of $50,000 arc subject to FICA.
Personal Usc of Auto
The personal use of an employer-provided auto is subject to FICA.
Changes 2014 Payroll Year
The FICA rates effective January 1, 2014 are as follows:
Social Security portion is 6.2% on wages up to $117,000
Medicare portion is 1.45% on all wages. (Additional 0.9% on wages greater than $200,000 for employee)
In addition, the following contribution limits have been announced for 2014.
|Catch-up Amount||Catch-up Limit|
Mandated EFTPS Filers
If a business exceeds $200,000 in aggregate deposits in a calendar year, the business is required to use EFTPS starting January 1 of the second succeeding year. The threshold is determined by aggregate deposits; therefore, businesses must consider all types of federal taxes deposited during the year to determine if they are required to use EFTPS. If mandated, failure to comply with EFTPS regulations will result in a non-compliance penalty.
As always, any questions or issues please feel free to contact us. May 2014 be a prosperous year for you.