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    Federal Payroll: 2014 Year-End Preparation and Planning for a New Tax Year

    Article ID: 2001660


    Preparing for Changes

    There are several federal payroll-related tax changes that may affect you as an employer for tax year ending 2014 and tax year beginning 2015. Being aware of these constant changes can help you plan and prepare for the upcoming tax season.

    What to know for Year-End 2014

    Federal Unemployment Tax Act (FUTA)  & Credit Reduction States for 2014

    • The federal unemployment tax (FUTA) rate is 6.0% for 2014.
    • The taxable wage base is the first $7,000 paid in wages to each employee during the calendar year.
    • There are eight (8) states subject to FUTA credit reduction for tax year 2014. 

    Learn more about the FUTA Credit Reduction States here.

      Form W-2 and Form W-3

      For the 2014 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 2014 Social Security tax rate is 6.2% (for each employee and employer), for the first $117,000 in wages. The amount reported in box 4 should not exceed $7,254.00 ($117,000 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' 2014 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 2013 calendar year will be subject to the reporting requirement on W-2's for 2014.

      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' 2014 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 2014 Form W-2, in Box 6 will be a combined total of the employee Medicare tax, and Additional Medicare Tax (if applicable).

      Since its introduction, information on this new payroll tax item has been provided throughout, 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 2015

      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 2014 Form W-4 will need to complete a new Form W-4 for tax year 2015 by February 17, 2015, in order to maintain their exempt status.

      Federal Tax Withholding Tables for 2015

      Federal Withholding On December 3, 2014, the IRS posted updated withholding guidance for 2015, which includes new withholding rates for the new year and supersedes the tables in place for 2014.

      The newly revised version of Notice 1036, Early Release Copies of the 2015 Percentage Method Tables for Income Tax Withholding, contains the percentage method tables for income tax withholding effective January 1, 2015, and related information employers need to implement these changes.

      The updated withholding tables will available to download in our 21501 payroll update, which is scheduled for release in mid December.

      Social Security and Medicare Taxes

      • The wage base for the Social Security Old Age Survivor's and Disability Insurance (OASDI) tax will increase in 2015 to $118,500 from $117,000.

      Additional Medicare Tax

      Under the Affordable Care Act (ACA), effective January 1, 2013, in addition to withholding Medicare tax at 1.45%, employers must withhold a 0.9% Additional Medicare Tax from wages paid to an employee once earnings reach $200,000 in a calendar year. Employers are required to begin withholding Additional Medicare Tax in the pay period in which employee wages reach $200,000 and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold.

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

      Affordable Care Act: New Employer Mandates go into effect January 1

      Many provisions have been enacted since the signing of the Affordable Care Act. However, two of the most anticipated, yet complex mandates will go into effect starting January 1, 2015. Read the complete details  here.

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