We wish all of our friends a Happy and Healthy New Year!
This letter contains important tax related information that you may need for 2014 and 2015. As always, please contact us if you have any questions.
ESTIMATED TAXES FOR INDIVIDUALS.
INDIVIDUAL INCOME TAX RATES.
Federal Individual Rates.
Capital Gain, Dividend, and Qualified Five-year Property Income Tax Rates.
Unearned Income Medicare Contribution Tax.
FEDERAL TAX PROVISIONS.
Alternative Minimum Tax (AMT) patch.
Child Tax Credit
Dependent Care Credit
American Opportunity Tax Credit (Formerly known as the Hope Credit)
Lifetime Learning Credits.
Coverdell Education Savings Program..
Employer Provided Educational Assistance.
Student Loan Interest on Education Loans.
Savings Bond/Higher Education Expense Exclusion.
AUTOMOBILE MILEAGE RATES.
FLEXIBLE SPENDING ACCOUNT CHANGES.
MAXIMUM LONG-TERM CARE INSURANCE PREMIUM DEDUCTION PER PERSON.
AUDIT SUBSTANTIATION OF EXPENSES & DEDUCTIONS.
FEDERAL WITHHOLDING REQUIREMENTS ON RETIREMENT PLAN DISTRIBUTIONS.
RETIREMENT PLAN BENEFITS AND LIMITS.
Section 179 Expensing.
Employer Provided Child Care.
Small Business Healthcare Tax Credit
Excise Tax on Sale of Medical Devices.
1099 REPORTING REQUIREMENTS.
FEDERAL & STATE TAX FILINGS AND PAYMENTS FOR BUSINESS TAXPAYERS.
REPORTING REQUIREMENTS FOR EMPLOYERS AND HEALTH PLANS.
2015 PAYROLL TAX RATES.
2014 Federal Unemployment (FUTA) Tax Rates by State.
Additional Medicare Tax on Wages & Self-Employment
ESTATE AND GIFT TAX PROVISIONS.
Internal Revenue Service:
United States Department of Treasury: www.irs.gov
Electronic Federal Tax payments (EFTPS): https://www.eftps.gov/eftps/
Division of Taxation: www.state.nj.us/treasury/taxation/index.shtml
Annual Report & other miscellaneous business filings: http://www.nj.gov/treasury/revenue/
Electronic Services: http://www.state.nj.us/treasury/taxation/eservicesother.shtml
New hires: www.nj-newhire.com
Department of Revenue: www.revenue.state.pa.us/
e-TIDES (Electronic tax payments): https://www.etides.state.pa.us/
New hires: https://www.cwds.state.pa.us/
Social Security Administration: www.ssa.gov
All estimated tax payments for 2015 are due on the following dates:
April 15, 2015 September 15, 2015
June 15, 2015 January 15, 2016
- Required if tax liability is greater than $1,000
- Estimated tax payments may be made by personal or cashier’s check, money order, credit or debit cards, or electronic funds withdrawal. Checks should be made payable to the “United States Treasury.” The memo section should include the year, form and social security numbers (example: 2015 Form 1040ES, 123-45-6789). Payments should be mailed to:
New Jersey residents: Delaware/Pennsylvania/New York residents:
Internal Revenue Service Internal Revenue Service
P.O. Box 931100 P.O. Box 37007
Louisville, KY Hartford, CT
- Payments can be made electronically via:
- Electronic Federal Tax Payment System (EFTPS)
- Electronic funds withdrawal
- Debit and credit card payments (subject to a convenience fee that may be deductible)
For more information on paying your taxes electronically, go to www.irs.gov/e-pay
Required if tax liability is greater than $400
If prior year taxable gross income is:
|Less than $150,000, then must pay lessor of:||100%||80%|
|Greater than $150,000, then must pay lesser of:||110%||80%|
- Estimated tax payments may be made by check or money order, electronic check (e-check), credit or debit card (additional fee required). Checks should be made out to “State of NJ – Division of Taxation.”
Estimated tax payments should be mailed to:
State of NJ – Division of Taxation
Revenue Processing Center
PO Box 222
Trenton, NJ 08646-0222
For payments using an electronic method, log on under the Individual Taxpayer Account website:
- Required if tax liability is greater than $245 (which equates to $8,000 of taxable income not subject to employer withholding)
- Generally, in order to avoid paying a penalty for underpayment of income tax, all individual taxpayers must pay at least 90% of the tax shown on their current year’s income tax return or a 100% of the tax shown on the prior year’s income tax return.
- You may file your estimated payments electronically and have them withdrawn from a checking or savings account, or you may pay by credit or debit card.
- Estimated tax payments should be mailed to:
PA Department of Revenue
PO Box 280403
Harrisburg, PA 17128-0403
- For payments using an electronic method, go to: http://www.doreservices.state.pa.us/Individual/CreditCardPIT.htm
The following are the individual income tax brackets and rates in place for 2015 and 2014.
|ORDINARY INCOME TAX BRACKETS
|$0 – $9,075||10%||$0 – $9,225||10%|
|$9,075 – $36,900||15%||$9,225 – $37,450||15%|
|$36,900 – $89,350||25%||$37,450 – $90,750||25%|
|$89,350 – $186,350||28%||$90,750 – $189,300||28%|
|$186,350 – $405,100||33%||$189,300 – $411,500||33%|
|$405,100 – $406,750||35%||$411,500 – $413,200||35%|
|Over $406,750||39.6%||Over $413,200||39.6%|
MARRIED FILING JOINT
|ORDINARY INCOME TAX BRACKETS||$0 – $18,150||10%||$0 – $18,450||10%|
|$18,150 – $73,800||15%||$18,450 – $74,900||15%|
|$73,800 – $148,850||25%||$74,900 – $151,200||25%|
|$148,850 – $226,850||28%||$151,200 – $230,450||28%|
|$226,850 – $405,100||33%||$230,450 – $411,500||33%|
|$405,100 – $457,600||35%||$411,500 – $464,850||35%|
|Over $457,600||39.6%||Over $464,850||39.6%|
MARRIED FILING SEPARATE
|ORDINARY INCOME TAX BRACKETS||$0 – $9,075||10%||$0 – $9,225||10%|
|$9,075 – $36,900||15%||$9,225 – $37,450||15%|
|$36,900 – $74,425||25%||$37,450 – $75,600||25%|
|$74,425 – $113,425||28%||$75,600 – $115,225||28%|
|$113,425 – $202,550||33%||$115,225 – $205,750||33%|
|$202,550 – $228,800||35%||$205,750 – $232,425||35%|
|Over $228,800||39.6%||Over $232,425||39.6%|
HEAD OF HOUSEHOLD
|ORDINARY INCOME TAX BRACKETS||$0 – $12,950||10%||$0 – $13,150||10%|
|$12,950 – $49,400||15%||$13,150 – $50,200||15%|
|$49,400 – $127,550||25%||$50,200 – $129,600||25%|
|$127,550 – $206,600||28%||$129,600 – $209,850||28%|
|$206,600 – $405,100||33%||$209,850 –$411,500||33%|
|$405,100 – $432,200||35%||$411,500 – $439,000||35%|
|Over $432,200||39.6%||Over $439,000||39.6%|
For 2014 & 2015, the capital gain and qualified dividend rate will remain the same for all taxpayers except those in the 39.6% income tax brackets
Long-term Capital Gains/Qualified Stock Held 5 Years/Qualified Dividends
|Maximum Rates||2014||2015||Maximum (with new 3.8% tax)|
|Taxpayers in 15% tax bracket or less||0%||0%|
|Taxpayers in 25% – 35% tax brackets||15%||15%||18.8%|
|Taxpayers in 39.6% tax bracket||20%||20%||23.8%|
The new 3.8% Medicare contribution tax on certain unearned income of individuals, trusts, and estates is in effect for tax years 2013 and later. For purposes of this tax, investment income includes:
- Capital gain income
- Income from trades or businesses that are passive activities or that trade in financial instruments and commodities.
- Net gains from the disposition of property held in a trade or business that is a passive activity or that trades in financial instruments.
Investment income excludes distributions from qualified retirement plans and excludes any items that are taken into account for self-employment tax purposes. The tax is applied to lessor of net investment income or:
|Modified adjusted gross income that exceeds:||2014||2015|
|Married Filing Joint||$250,000||$250,000|
|Married Filing Separate (MFS)||$125,000||$125,000|
|Married Filing Joint||$12,400||$12,600|
|Married Filing Separate (MFS)||$6,200||$6,300|
|Head of Household||$9,100||$9,250|
Higher income taxpayers are subject to the Pease limitation on itemized deductions. The Pease limitation reduces itemized deductions by 3% of the amount of the taxpayer’s AGI in excess of the specified threshold amount, but not more than 80% of the itemized deductions allowable for the tax year. Limitations for itemized deductions do not include medical expenses, investment interest expenses, casualty or theft losses, or allowable wagering losses. The AGI thresholds are:
|Married Filing Joint||$305,050||$309,900|
|Married Filing Separate (MFS)||$152,525||$154,950|
|Head of Household||$279,650||$284,050|
Unreimbursed medical expense deductions must exceed 10% of adjusted gross income (AGI), up from 7.5% in 2012. If the individual or the individual’s spouse is a least 65 years old by the end of the tax year, the AGI threshold for medical expenses will remain at 7.5% for regular tax purposes.
Personal exemption is $4,000 for 2015 and $3,950 for 2014.
Higher income taxpayers will be subject to the personal exemption phase-out. Total amount of exemptions that can be claimed will be reduced by 2% for each $2,500 by which the taxpayer’s AGI exceeds the threshold. Applicable thresholds are:
|Single||$254,200 – $376,700||$258,250 – $380,750|
|Married Filing Joint||$305,050 – $427,550||$309,900 – $432,400|
|Married Filing Separate (MFS)||$152,525 – $213,775||$154,950 – $216,200|
|Head of Household||$279,650 – $402,150||$284,050 – $406,550|
Alternative Minimum Tax (AMT) patch
Congress has elected to make the AMT patch permanent. The Act also allows certain nonrefundable personal credits to offset the AMT. Maximum AMT exemption amounts are:
|Single or Head of Household||$52,800||$53,600|
|Married Filing Joint||$82,100||$83,400|
|Married Filing Separate (MFS)||$41,050||$41,700|
Non-refundable vs. Refundable
Non-refundable tax credits can reduce tax owed to zero, but cannot be used to get a refund. A refundable credit can reduce your tax below zero and provide you with a refund.
The credit is non-refundable for 2014 and 2015.
|Phase-out threshold starts||$197,880||$201,010|
|Completely phased out over||$237,880||$241,010|
Child Tax Credit
The Child Tax Credit (a refundable credit) is $1,000 per child for 2014 and 2015. The credit is reduced by $50 for each $1,000 of adjusted gross income above the threshold amount.
|Married filing joint||$110,000||$110,000|
|Married filing separately||$55,000||$55,000|
The non-refundable Dependent Care Credit provides a credit to taxpayers who incur expenses for children under age 13 or for incapacitated dependents or spouse. The credit is based on:
Maximum credit of (Families with income less than $15,000):
- 35% of the first $3,000 of eligible expenses for one child, maximum credit of $1,050 (35% x $3,000).
- 35% of the first $6,000 of eligible expenses for more than one dependent, maximum credit of $2,100.
Minimum credit of (Families with income more than $43,000):
- 20% of the first $3,000 of eligible expenses for one child, maximum credit of $600 (20% x $3,000).
- 20% of the first $6,000 of eligible expenses for more than one dependent, maximum credit of $1,200.
The non-refundable energy credit is available for qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and qualified geothermal heat pump property. The energy credit can only be taken on the taxpayer’s primary residence and must be located in the United States. Purchasers of new homes may also be eligible for the credit. These credits are set to expire after 2016. The credit amount is equal to 30% of the costs (maximum amounts apply for certain property).
Maximum credit $2,500 per student. Based on the first four years of secondary education. Tuition credit is based on 100% of first $2,000 of qualified education expenses; 25% of the next $2,000. Credit is 40% refundable (or $1,000).
- Tuition and student-activity fees if the fees are paid to the institution for enrollment and attendance.
- Expenses for books, supplies, and equipment needed for a course of study whether or not the materials are purchased from the educational institution.
The Credit is phased out for 2014 and 2015:
- Single filers with adjusted gross income in excess of $80,000 and completely phased out over $90,000
- Married filers with adjusted gross income in excess of $160,000 and completely phased out over $180,000
Maximum credit of $2,000 per tax return. 20% of first $10,000 of qualified education expenses.
- Tuition and certain related expenses required for enrollment in a course at an eligible educational institution.
- Course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills.
- Student activity fees and expenses for course-related books, supplies, and equipment only if the fees and expenses are paid to the institution as a condition of enrollment or attendance.
2014: The credit will remain the same and the Phase-out begins for Joint filers with modified adjusted gross income in excess of $108,000 ($54,000 for all other filers). The Credit is completely phased out for joint filers with modified adjusted gross income in excess of $128,000 ($64,000 for all other filers).
2015: The credit will remain the same and the Phase-out begins for Joint filers with modified adjusted gross income in excess of $110,000 ($55,000 for all other filers). The Credit is completely phased out for joint filers with modified adjusted gross income in excess of $130,000 ($65,000 for all other filers).
For 2014 & 2015, the maximum annual contribution limit to a Coverdell Education Savings Program is $2,000, subject to phase-out limitations.
For 2014 & 2015, employees can continue to exclude up to $5,250 in employer provided education assistance annually from income and employment taxes. In addition, graduate school tuition will continue to qualify and the education does not need to be job-related.
Maximum interest deduction – $2,500. Credit is phased out with modified gross income of:
2014 & 2015:
- Single filers – $65,000 and completely phased out at $80,000
- Joint filers – $130,000 and completely phased out at $160,000
Permits qualified taxpayers to exclude from their gross income all or part of the interest paid upon the redemption of eligible Series EE and I Bonds issued after 1989, when the bond owner pays qualified higher education expenses at an eligible institution.
- Tuition and fees for courses required as part of degree or certificate granting program.
- Books and room are not qualified expenses.
2014 Phased out:
- Joint filers – Adjusted gross income of $113,950 and completely phased out at $143,950
- All other filers – Adjusted gross income of $76,000 and completely phased out at $91,000
2015 Phased out:
- Joint filers – Adjusted gross income of $115,750 and completely phased out at $145,750
- All other filers – Adjusted gross income of $77,200 and completely phased out at $92,200
2014: $2,500 maximum per employee
2015: $2,550 maximum per employee
All clients who sponsor an FSA should review their plan documents and amend the plan, if applicable, to provide for the new mandatory limit.
Children pay federal income tax at their parent’s tax rate on investment income over a certain threshold. This kiddie tax applies to children under 19 and full-time students under 24, if the child doesn’t have earned income in excess of half of his or her annual support. The following are the limits for 2014 and 2015:
|Child’s unearned income over||$ 2,000||$2,100|
Age 40 or less $ 370 $ 380
Age 41 – 50 $ 700 $ 710
Age 51 – 60 $1,400 $1,430
Age 61 – 70 $3,720 $3,800
Over Age 70 $4,660 $4,750
Due to the increase in audits by the IRS and States, it is important that taxpayers retain all substantiation/documentation of business expenses such as auto, travel, meals and entertainment, inventory, etc. Under the IRS regulations, a taxpayer must retain records in sufficiently usable form and with enough detail to substantiate that the expenditures claimed are eligible expenses. Detailed receipts, mileage logs, and canceled checks are all forms of adequate information. Failure to maintain records in accordance with these rules is a basis for disallowing the expenditures. We suggest a retention period of seven years.
Social Security Cost Of Living Adjustment
Social Security recipients have a 1.5% benefit increase for 2014 and a 1.7% benefit increase for 2015.
Social Security While Continuing To Work
The maximum Social Security Benefit eligibility is based on the following chart:
|Year of Birth||Normal Retirement Age
|1937 and Prior
65 – 66
66 + 2 months
66 + 4 months
|1957||66 + 6 months|
|1958||66 + 8 months|
|1959||66 + 10 months|
|1960 and Later||67|
While you are working, your earnings will reduce your benefit amount only until you reach your normal retirement age (NRA) as indicated in the previous chart. If you are below the NRA, Social Security withholds benefits if your earnings exceed a certain level, called a retirement earnings test exempt amount. The following chart reflects the annual retirement earnings test exempt amounts for 2014 and 2015.
|Year NRA attained||2014||2015||Social Security Benefits Withheld|
|The year reaching full retirement age||$ 41,400
|$1 in benefits for every $3 of earnings in excess of the higher exempt amount, but only for months prior to the reaching of NRA.
|Under full retirement age||$ 15,480
|$1 in benefits for every $2 in earnings in excess of lower exempt amount|
The maximum social security benefit for a worker retiring at full retirement age in 2014 and 2015 is $2,642 and $2,663 per month or $31,704 and $31,956 per year, respectively.
- Withholding is not required for direct transfers of a retirement plan distribution to another eligible plan.
- Withholdings are not required if the distributions are required by law (minimum required distributions are generally required after age 70 ½).
- 20% withholding is required if the recipient receives the funds, even if the funds are transferred within sixty days to another eligible plan.
- Nonperiodic payments (excess contributions, hardship withdrawals, and loans from retirement account) are generally subject to 10% tax withholding. The recipient may elect no withholding or a different amount by filing Form 4-WP with the plan administrator.
- In the case of taxable payments from an employer sponsored pension annuity, profit sharing plan, stock bonus plan or other deferred compensation plan, withholding is required unless the recipient elects not to have taxes withheld.
Full minimum wage information listed by state can be found at:
|Traditional and Roth IRA contribution||$ 5,500||$ 5,500|
|Traditional and Roth IRA catch-up contribution||$ 1,000||$ 1,000|
|SIMPLE IRA and SIMPLE 401(k) salary deferral||$ 12,000||$ 12,500|
|SIMPLE IRA and SIMPLE 401(k) catch-up contribution (50 years old & above)||$ 2,500||$ 3,000|
|401(k), 403(b), 457(b), and SARSEP salary deferral contribution||$ 17,500||$ 18,000|
|401(k), 403(b), 457(b), and SARSEP catch-up contribution (50 years old & above)||$ 5,500||$ 6,000|
|SEP minimum compensation
SEP maximum compensation
|Retirement Savings Contribution Credit|
|Married filing jointly||$ 60,000||$ 61,000|
|Married filing separately and Single||$ 30,000||$ 30,500|
|Head of Household||$ 45,000||$ 45,750|
|Roth IRA eligibility compensation||Married filing jointly||100%||$181,000 or less||$183,000 or less|
|Partial||$181,000 – $191,000||$183,000 – $193,000|
|None||$191,000 or more||$193,000 or more|
|Married filing||Partial||Less than $10,000||Less than $10,000|
|separately||None||$10,000 or more||$10,000 or more|
|100%||$114,000 or less||$116,000 or less|
|Single/Head of Household||Partial||$114,000 – $129,000||$116,000 – $131,000|
|None||$129,000 or more||$131,000 or more|
|IRA deductibility compensation||Married filing jointly||100%||$96,000 or less||$98,000 or less|
|Partial||$96,000 – $116,000||$98,000 – $118,000|
|None||$116,000 or more||$118,000 or more|
|Married filing||Partial||Less than $10,000||Less than $10,000|
|separately||None||$10,000 or more||$10,000 or more|
|100%||$60,000 or less||$61,000 or less|
|Single/Head of Household||Partial||$60,000 – $70,000||$61,000 – $71,000|
|None||$70,000 or more||$71,000 or more|
|Annual addition/contribution limit under a defined contribution plan or SEP IRA||$ 52,000||$ 53,000|
|Annual benefit under a defined benefit plan||$ 210,000||$ 210,000|
|Compensation cap||$ 260,000||$ 265,000|
|Key Employee definition||$ 170,000||$ 170,000|
|Highly compensated employee definition||$ 115,000||$ 120,000|
|Social Security (FICA) wage base||$ 117,000||$ 118,500|
The dollar and phase-out limits under Section 179 are $500,000 and $25,000 (expense) and $2,000,000 and $200,000 (phase-out limit) for 2014 & 2015, respectively.
Employers may continue to qualify for tax credits for making child care available to employees. The Act permanently extends this tax credit. There is a $150,000 per year limit on this tax credit.
Many other business energy incentives are effective for property placed in service before 2017 and include:
- Qualified fuel cell property
- Equipment that uses solar energy to generate electricity
- Equipment that uses solar energy
- Qualified small wind energy
- Microturbine property
- Heat and power system property
- Geothermal heat pump systems
- Public utility property
- And various other qualified energy projects/equipment
The Small Business Healthcare Tax Credit has been enacted and is available for years 2014 & 2015. The employer must cover at least 50% of cost of health care coverage for each of their workers (based on single rates). The following chart details the eligibility requirements:
| Number of full time employees
Maximum annual average wages
| Number of full time employees
Maximum annual average wages
- The average annual wage excludes owners of the business and related parties, such as family members.
- The credit phases out gradually between the receiving the full credit and partial credit for firms with average wages between $25,400 – $50,800 for 2014 and $25,800 – $51,600 for 2015 as indicated above.
There is a 2.3% excise tax imposed on the sale of taxable medical devices. The tax is imposed on the manufacturer, producer, or importer when title to the taxable device passes from the manufacturer to the purchaser. All taxable medical devices are expected to be listed with the FDA as a medical device under FFDCA §510(j).
Clients are required to file Form 1099-MISC (for Miscellaneous Income) if you have paid during the year to an unincorporated business, including LLC’s, the following:
- At least $10 in royalties.
- At least $600 in rents, services, prizes & awards, and other income payments. Report only when payments are made in the course of your trade or business. Personal payments are not reportable.
- At least $600 in fees or gross proceeds paid to an attorney in connection with legal services.
Exceptions are generally:
- Payments made to a corporation (except in the case of gross proceeds or fees paid to an attorney).
- Payments for merchandise, telegrams, telephone, freight, storage, and similar items.
- Payments of rent to real estate agents.
Due dates for 1099’s for the 2014 tax year are as follows:
- You must provide the recipient with their respective Form 1099 by February 2, 2015
- If paper filing, you must file Form 1096 & the 1099’s with the government by March 2, 2015
- If electronic filing, you must file with the government by March 31, 2015
Electronic federal tax payments are mandatory
All business tax deposits (Forms 941, 943, 944, 945 and 1120) are now required to be paid using Electronic Federal Tax Payment System (EFTPS). Form 8109, Federal Tax Deposit Coupon, will no longer be accepted by the IRS.
To enroll, you will need your taxpayer ID number (EIN) and your financial institution information, including routing number, account number, and account type.
To avoid being considered “late” on your payments, you must submit your payment no later than 8pm ET the day prior to the due date.
The IRS provides two options for electronic tax payments.
1) EFTPS online: https://www.eftps.gov/eftps/
2) EFTPS Voice Response System at 1-800-555-3453
All New Jersey tax payments and returns (NJ927, NJ927-W, NJ927-H and WR-30) must be remitted by electronic means.
The following website may be used for various NJ business tax payments:
NOTE: Electronic transfers must be done one (1) day prior to the withdrawal from your account.
New Jersey Annual Reports
Corporate Annual Reports must be filed electronically. Businesses will receive notification by mail of the filing requirements and instructions from the Division of Revenue.
The website for filing the Annual Report is: https://www1.state.nj.us/TYTR_COARS/JSP/page1.jsp
Annual report filing is a prerequisite for maintaining an active business status. In accordance with State law, businesses that fail to file annual reports for two consecutive years will be revoked.
The annual fees are:
- $50.00 for profit corporations, LPs, LLPs, and LLCs
- $25.00 for non-profits
Additional fees may apply to change a registered agent or office for the business.
New Jersey – S Corporation Minimum Tax
The corporate minimum tax per gross receipts for 2014 and 2015 is below.
|Less than $100,000||$500.00|
|$100,000 – $ 249,999||750.00|
|$250,000 – $499,999
$500,000 – $999,999
$1,000,000 or more
Pennsylvania provides two options for electronic payroll and sales and use tax payments.
- TeleFile: 1-800-748-8299.
- e-Tides: https://www.etides.state.pa.us/
- ACH debit, ACH credit, and credit card (additional fees for credit card payments)
- Available for Corporation Taxes (Capital Stock/Franchise Tax, Loans Tax, Corporate Net Income Tax) and numerous other taxes.
PA Cities: All employers in Pennsylvania must withhold the earned income tax for individual cities, if applicable. To find your employees withholding rates by address use the link below or contact your payroll company: http://munstatspa.dced.state.pa.us/FindLocalTax.aspx
W-2 Requirements under PPACA
Under the Patient Protection and Affordable Care Act (PPACA), employers must report the cost of employer-sponsored group health plan coverage on an employee’s Form W-2. Employers will need to include the total reportable cost of applicable employer-sponsored group health plan coverage on Form W-2, in box #12 using code DD. This amount is not taxable and is for disclosure purposes only.
Employers with more than 250 employees must report the value of health insurance on W-2s. An employer that is required to file fewer than 250 Form W-2s qualifies for transition relief and will not be required to report the value of health insurance on W-2’s until the IRS publishes guidance on this matter giving at least six months of advance notice to any change in this relief.
Summary of Coverage Required to be Reported:
- Medical plans – The combined cost of applicable employer-sponsored coverage. Coverage under any group health plan (including a self-insured plan) that is excludable from the employee’s gross income is to be included. The aggregate cost includes both the portion of the cost paid by the employer and employee, regardless of whether the employee paid for the cost through pre-tax or post-tax contributions.
- Prescription drug plans.
- Employee assistance plans, wellness programs, and on-site clinics (required only if the employer charges a COBRA premium).
Additional details and a comprehensive list of all items required to be reported can be found at:
If a company has fewer than 50 employees, they have the option to purchase affordable insurance through the Small Business Health Options Program (SHOP). To learn more visit HealthCare.gov.
Affordable Care Act Tax Provisions for Large Employers
Effective 2015, large employers must file an annual return, to be filed in 2016 based on 2015 data, reporting whether and what health insurance is offered to company’s employees.
Employer penalties will be assessed starting January 1, 2015 for large employers (100+ full time employees) if the company does not offer affordable coverage to full-time employees.
|Jurisdiction and Tax Type||Employee Rate||Employer Rate||Limits, if any|
|N/A||Rates Vary by State
|Maximum wages $7,000
*FUTA taxes by State listed on next page.
|FICA||6.20%||6.20%||Maximum wages $118,500
Max deduction: $7,347
*New 0.9% Medicare tax on High-Income earners. See section below for a more detailed discussion.
|1.45%||No wage base limit
Additional 0.9% tax on wages above specified threshold.
|Federal Income Tax||Based on Circular E||N/A||Rates vary (0%-39.6%)|
|NJ State Unemployment
(Work Force Development/Supplemental Workforce)
(0.6% – 6.4%)
|Maximum wages $32,000 Maximum deduction $136.00 per taxpayer.
Standard New Employer Rate is 3.4%
|NJ Disability Rate||0.25%||Rates Vary||Maximum wages $32,000
Max deduction: $80.00
Standard New Employer Rate is 0.5%
|NJ Paid Family Leave Rate||0.09%||N/A||Maximum wages $32,000
Max deduction: $28.80
|NJ Income Tax||See Withholding Charts||N/A||Rates vary (1.4%-8.97%)|
|PA State Unemployment||0.07%||Rates Vary
|Maximum wages for employers $9,000. No limit for employees.
New Employer Rate 3.6785%
|PA Income Tax||3.07%||N/A|
|Philadelphia Wage Tax (Residents)||3.920%||N/A||Effective July 1, 2014|
|Philadelphia Wage Tax (Non Residents)||3.4915%||N/A|
All states not listed have a 0.6% FUTA tax rate and are not subject to an increased rate. New Jersey and Pennsylvania are both at a 0.6% rate on the first $7,000 of taxable wages, maximum of $42 per employee.
|State||FUTA Reduction||FUTA Tax Rate|
|California, Kentucky, New York, North Carolina, Ohio and the Virgin Islands||1.2%||1.8%|
Additional Medicare Tax on Wages & Self-Employment
The Medicare payroll tax will increase by 0.9% to 2.35% on wages above $200,000 for individuals & head of household, $250,000 for joint filers, and $125,000 for married filing separately. There is no employer match for this additional Medicare tax but the employer does have an obligation to withholding and remit the additional 0.9% tax on all wages over $200,000 regardless if they are married filing joint. Self-employment income is also subject to the additional 0.9% tax increase.
In 2014, the maximum estate tax rate is 40% with a $5,340,000 exclusion ($10.68 million per married couple).
In 2015, the maximum estate tax rate is 40% with a $5,430,000 exclusion ($10.86 million per married couple).
The provisions allow a surviving spouse to elect to use the unused portion of the estate tax exclusion of a deceased spouse, which provides the surviving spouse a larger exclusion. This is known as portability. This election must be made on the deceased spouse’s estate tax return that is timely filed, including extensions.
New Jersey estate tax exemption is $675,000.
Gift Tax & Generation Skipping Tax
The 2014 and 2015 Federal gift tax exemption is $14,000 per beneficiary.
Gift Tax and Generation Skipping Tax (GST) is subject to a top rate of 40% with a $5,340,000 exclusion for 2014 and 40% with a $5,430,000 exclusion for 2015.
New Jersey has no gift or GST tax.