2023 PAYROLL UPDATE

FEDERAL CHANGES:

IRS W-4 Form for 2023

• 2023 W-4 form (English):  https://www.irs.gov/pub/irs-pdf/fw4.pdf

·         The IRS’ Understanding the 2020 Form W-4 and How to Use it to Calculate Withholding webinar is now posted to the IRS video portal. This hour-long webinar covers:

o   Reasons for a new design of the W-4

• o   Explanation of Steps 1-5 of the Form W-4
• o   Explanation of who must use it
• o   Illustration of how to complete two of the five worksheets from
  Publication 15-T
• o   Recorded Q&A session from the live event

IRS Releases Publication 509 for 2023:  https://www.irs.gov/pub/irs-pdf/p509.pdf

2023 Federal holidays are as follows:

• ·         January 2, 2023- New Year’s Day (Observed)
• ·         January 16, 2023- Birthday of Martin Luther King Jr
• ·         February 20- Birthday of George Washington (President’s Day): 
• ·         May 29- Memorial Day
• ·         June 19- Juneteenth National Independence Day
• ·         July 4- Independence Day
• ·         September 4- Labor Day
• ·         October 9- Columbus Day
• ·         November 10- Veterans Day (Observed)
• ·         November 23- Thanksgiving Day
• ·         December 25- Christmas Day (Observed)

*Remember that a statewide legal holiday does not delay a due date for making a federal tax deposit. 

IRS Releases 2022 Form 940:  https://www.irs.gov/pub/irs-pdf/f940.pdf

• Publication 15, The Circular E. It is now available on the IRS website: https://www.irs.gov/pub/irs-pdf/p15.pdf

IRS Releases 2023 Standard Mileage Rates

The IRS released Notice 2023-003 https://www.irs.gov/pub/irs-drop/n-23-03.pdf providing the 2023 standard mileage rates. Beginning January 1, 2023, the standard mileage rates for the use of a car (vans, pickups or panel trucks) will be:

• 65.5 cents per mile for business miles driven, up from 62.5 cents for 2022
• 22 cents per mile driven for medical or moving purposes, unchanged from the midyear update for 2022 
• 14 cents per mile driven in service of charitable organizations, unchanged from 2022

IRS Releases 2023 Pension Plan Limits:

§  Highlights of Changes for 2023

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $22,500, up from $20,500 for 2022. The additional catch-up contribution limit for individuals aged 50 and over increased to $7,500, up from $6,500 in 2022.

The limit on annual contributions to an IRA increased to $6,500, up from $6,000 in 2022. 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 income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the saver’s credit all increased for 2023.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2023:

• For single taxpayers covered by a workplace retirement plan, the phase-out range is $73,000 to $83,000, up from $68,000 to $78,000.
   
• For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $116,000 to $136,000, up from $109,000 to $129,000.
   
• 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 $218,000 and $228,000, up from $204,000 and $214,000.
   
• 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 income phase-out range for taxpayers making contributions to a Roth IRA is $138,000 to $153,000 for singles and heads of household, up from $129,000 to $144,000. For married couples filing jointly, the income phase-out range is $218,000 to $228,000, up from $204,000 to $214,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $73,000 for married couples filing jointly, up from $68,000; $54,750 for heads of household, up from $451,000; and $36,500 for singles and married individuals filing separately, up from $34,000.

Social Security Wage Base Increases to $160,200 for 2023

On October 13, the Social Security Administration (SSA) announced that the 2023 social security wage base will be $160,200, an increase of $13,200 from $147,000 in 2022 [SSA, Press Release, 10-13-22].

The FICA tax rate remains 7.65% for 2023 up to the social security wage base (see the Social Security Fact Sheet: 2023 Social Security Changes). The maximum social security tax employees and employers will each pay in 2023 is $9,932.40, an increase of $818.40 from $9,114.00 in 2022.

2023 Income Tax Withholding Tables: https://www.irs.gov/pub/irs-pdf/p15t.pdf

Minimum Wage:

• ·         Federal Minimum Wage remains at $7.25 per hour
• ·         Federal Minimum Salary remains at $684 per week, or $35,568 annually
• ·         Federal Minimum Salary for employees exempt under the “highly compensated” employee exemption increased to $150,000, up from $135,000 in 2022.

STATE CHANGES:

2023 California Employer’s Guide (DE 44): https://edd.ca.gov/pdf_pub_ctr/de44.pdf

Schedule for California Minimum Wage rate 2023.

Minimum Salary: The exempt salary threshold increases for January 1, 2023 are as follows:
All employers, regardless of size: $1,240 weekly, $5,373.33 monthly, or $64,480 yearly

2023 Minimum Wage by State: