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    Federal Payroll: Changes for Year-End 2013 & Preparing for 2014

    Article ID: 2001660

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    Preparing for Changes

    There are several federal payroll-related tax changes that may affect you as an employer for tax year ending 2013 and tax year beginning 2014. Being aware of these constant changes can help you plan and prepare for the upcoming tax season.

    What to know for Year-End 2013

    Federal Unemployment Tax Act (FUTA)  & Credit Reduction States for 2013

    • The federal unemployment tax (FUTA) rate is 6.0% for 2013.
    • The taxable wage base is the first $7,000 paid in wages to each employee during the calendar year.
    • There are 14 states subject to FUTA credit reduction for tax year 2013. 

    Learn more about the FUTA Credit Reduction States here.

      Form W-2 and Form W-3

      For the 2013 tax year, the IRS has implemented several changes in Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements. You can view the instructions for Forms W-2 and W-3 at the IRS website or download a PDF file.

      Employee/Employer Social Security Tax Withholding

      The 2013 Social Security tax rate is 6.2% (for each employee and employer), for the first $113,700 in wages. The amount reported in box 4 should not exceed $7,049.40 ($113,700 x 6.2%).

      Reporting of the Cost of Coverage of Group Health Insurance

      Many employers will be required to report the cost of their employer sponsored group health plan coverage, on employees' 2013 Form W-2.  This reporting is infomational only, showing the value of the employee's healthcare benefits, and does not affect the employee's tax liability.

      Who must report. Employers who filed 250 or more Form W-2's for the 2012 calendar year will be subject to the reporting requirement on W-2's for 2013.

      Tracking the cost in QuickBooks. Intuit QuickBooks includes a tax tracking type, Health Coverage Cost, to support this reporting requirement. By using this tax tracking type, you can track the cost of coverage to be reported on your employees' 2013 Form W-2 in box 12, code DD.

      How to obtain additional information. Our team has created a step-by-step guide, the Health Coverage Reporting User Guide for QuickBooks, to help you setup a payroll item for tracking the cost for your employees.

      Additional Medicare Tax

      Beginning January 1, 2013, employers have been required to withhold a 0.9% Additional Medicare Tax on an employee's compensation exceeding $200,000 in a calendar year. The Additional Medicare Tax is paid by the employee; no employer share of the Additional Medicare Tax is required. The Medicare Tax reported on the 2013 Form W-2, in Box 6 will be a combined total of the employee Medicare tax, and Additional Medicare Tax (if applicable).

      Information on this new payroll tax item has been provided throughout 2013, including setup details for our Intuit QuickBooks Payroll customers. More information can be found in our Additional Medicare Tax User Guide, or here.

      What to expect for 2014

      Form W-4, Employee's Withholding Allowance Certificate

      It is recommended that employees review their withholding every year and if necessary, fill out a new Form W-4. Employees who claimed exempt on their 2013 Form W-4 will need to complete a new Form W-4 for tax year 2014 by February 17, 2014, in order to maintain their exempt status.

      Federal Tax Withholding Tables for 2014

      On November 27, 2013, the IRS released Notice 1036, which is an early release of the tax withholding tables for 2014.

      What's changing?
      • The personal exemption amount has increased to $3,950.
      • Tax withholding rates for both single and married remain unchanged, however wage brackets for these rates have change.
      • The new tax tables are effective January 1, 2014 - December 31, 2014.

      Social Security Taxes

      • The wage base for the Social Security Old Age Survivor's and Disability Insurance (OASDI) tax will increase in 2014 to $117,000 from $113,700.

      Additional Medicare Tax

      Under the Affordable Care Act (ACA), effective January 1, 2013, employers are required to withhold an additional 0.9% on employee wages that exceed $200,000. Employers are NOT subject to the Additional Medicare Tax.

      As an employer, you must activate this tax tracking type in Intuit QuickBooks Payroll. For complete details, click here.

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