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    Federal Payroll: 2015 Year-End Preparation and Planning for a New Tax Year

    Article ID: 2001660


    Preparing for Changes

    With 2015 year-end tax activities under way, gearing up for the new tax year can be equally as important for employers. There are various changes on the Federal payroll level, recently announced, that may potentially impact you, as an employer. Knowing of these changes can help you determine, and plan accordingly.

    What to know for Year-End 2015

    Federal Unemployment Tax Act (FUTA)  & Credit Reduction States for 2015

    • The federal unemployment tax (FUTA) rate is 6.0% for 2015.
    • The taxable wage base is the first $7,000 paid in wages to each employee during the calendar year.
    • There are four (4) states subject to FUTA credit reduction for tax year 2015: California, Ohio, and U.S. Virgin Islands each at 1.5%, while Connecticut at 2.1%. 

    Learn more about the FUTA Credit Reduction States here.

      Form W-2 and Form W-3

      For the 2015 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 2015 Social Security tax rate is 6.2% (for each employee and employer), for the first $118,500 in wages. The amount reported in box 4 should not exceed $7,347.00 ($118,500 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' 2015 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 2014 calendar year will be subject to the reporting requirement on W-2's for 2015.

      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' 2015 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 2016

      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 2015 Form W-4 will need to complete a new Form W-4 for tax year 2016 by February 16, 2016, in order to maintain their exempt status.

      Federal Tax Withholding Tables for 2016

      Federal Withholding The IRS has not yet published withholding guidance for 2016, which include updated withholding rates. We will continue to provide updates as new information develops.

      Social Security and Medicare Taxes

      • The wage base for the Social Security Old Age Survivor's and Disability Insurance (OASDI) tax will remain unchanged for 2016 at $118,500.

      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: Information Reporting on Health Coverage by Employers due in 2016

      Many provisions have been enacted since the signing of the Affordable Care Act. However, two of the most anticipated, yet complex mandates went into effect  January 1, 2015, with initial reporting due in 2016. Read the complete details  here.

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