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American Payroll Association 
   

2014 Federal & CA Updates

Social Security and Medicare Tax for 2014

The social security wage base for 2014 is $117,000. The social security tax rate remains at 6.2% for employers and for employees and 1.45% for Medicare tax for employees and employers. There is no wage base limit for Medicare tax.

An additional 0.9% Medicare tax rate will apply 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, therefore, the total Medicare tax rate will be 2.35%.

Social Security Recipients allowable wage without forfeiting SS benefits

Tax Rate

2013

2014

Employee

7.65%

7.65%

Self-Employed

15.30%

15.30%

NOTE: The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion (OASDI) is 6.2% on earnings up to the applicable taxable maximum amount. The Medicare portion is 1.45% on all earnings.

Maximum Earnings Taxable:

2013

2014

Social Security (OASDI only)

$113,700

$117,000

Medicare

No Limit

Federal Unemployment Tax (FUTA)

The FUTA tax rate is 6.0% of taxable wages.

The taxable wage base is the first $7,000 paid in wages to each employee during a calendar year. Employers who pay the state unemployment tax, on a timely basis, will receive an offset credit of up to 5.4% regardless of the rate of tax they pay the state. Therefore, the net federal tax rate is generally 0.6% (6.0% - 5.4%). This would equate to a maximum of $42.00 per employee, per year (.006 X $7,000. = $42.00) in federal tax. State tax rates are based on requirements of state law.

Federal Minimum Wage:

Federal Minimum Wage: $7.25

Standard Mileage Rates

Effective January 1, 2014, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:

56 cents per mile for business miles driven

23.5 cents per mile driven for medical or moving purposes; and

14 cents per mile driven in service of charitable organizations

Per Diem Rates Change

The new per diem rates are available on their website at:

http://www.gsa.gov/portal/category/21287

FSA (Flexible Spending Account)

The IRS has modified the “use-or-lose” rule for health flexible spending arrangements (FSAs) to give employers the option to allow employees to carry over up to $500 of unused amounts remaining in their health FSAs at the end of the year. Under this new guidance, an employer can amend its cafeteria plan document to allow employees to carry over up to $500 into the next plan year.

Pension Plans (for year 2014)

The Internal Revenue Service announced cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2014. Some pension limitations such as those governing 401(k) plans and IRAs will remain unchanged because the increase in the Consumer Price Index did not meet the statutory thresholds for their adjustment. However, other pension plan limitations will increase for 2014. Highlights include the following:

·        The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $17,500.

·        The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $5,500.

·        The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

·        The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $60,000 and $70,000, up from $59,000 and $69,000 in 2013. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $96,000 to $116,000, up from $95,000 to $115,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $181,000 and $191,000, up from $178,000 and $188,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

·        The AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly, up from $178,000 to $188,000 in 2013. For singles and heads of household, the income phase-out range is $114,000 to $129,000, up from $112,000 to $127,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

·        The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $60,000 for married couples filing jointly, up from $59,000 in 2013; $45,000 for heads of household, up from $44,250; and $30,000 for married individuals filing separately and for singles, up from $29,500.

Effective January 1, 2014, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $205,000 to $210,000.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $255,000 to $260,000.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $17,500.

California Employment Tax Rates for 2014

The UI rate schedule in effect for 2014 is Schedule “F+.” This is Schedule F plus a 15 percent emergency surcharge, rounded to the nearest tenth. Schedule “F+” provides for UI contribution rates from 1.5 percent to 6.2 percent. Exception: Employers subject to Section 977(c) of the CUIC must pay at the highest rate provided by law plus an additional 2 percent, see SUTA Dumping (AB 664). The taxable wage limit is $7,000 per employee.

State Disability Insurance (SDI)

The 2014 SDI withholding rate is 1.0 percent (.01). The rate includes Disability Insurance (DI) and Paid Family Leave (PFL).

The SDI taxable wage limit is $101,636 per employee, per year.

The 2014 DI/PFL maximum weekly benefit award is $1,075

2014 SDI/PFL Benefit Amounts

DE 2588 - Rev. 4 (1-08) - State Disability Insurance (SDI) and Paid Family Leave (PFL) Weekly Benefit Amounts

DE 2589 - Rev. 1 (1-08) - State Disability Insurance (SDI) and Paid Family Leave (PFL) Weekly Benefit Amounts in Dollar Increments

California Minimum Wage

California Minimum Wage: $8.00 per hour

Effective July 1, 2014: $9.00 per hour

Effective January 1, 2016: $10.00 per hour

 

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