2014 Payroll and Tax Update Letter

Published on January 22, 2014.

 January 2014

 

We wish all of our friends a Happy and Healthy New Year!

 

This letter contains important tax related information that you may need for 2013 and 2014.  As always, please contact us if you have any questions.

 

TOPIC

IMPORTANT WEBSITES.

ESTIMATED TAXES FOR INDIVIDUALS.

INDIVIDUAL INCOME TAX RATES.

Individual Rates.

Capital Gain, Dividend, and Qualified Five-year Property Income Tax Rates.

New Unearned Income Medicare Contribution Tax.

FEDERAL TAX PROVISIONS.

Standard Deductions.

Itemized Deductions.

Personal Exemptions.

Alternative Minimum Tax (AMT) patch.

TAX CREDITS.

EDUCATIONAL PROGRAMS.

AUTOMOBILE MILEAGE RATES.

FLEXIBLE SPENDING ACCOUNT CHANGES.

KIDDIE TAX.

MAXIMUM LONG-TERM CARE INSURANCE PREMIUM

DEDUCTION PER PERSON.

AUDIT SUBSTANTIATION OF EXPENSES & DEDUCTIONS.

SOCIAL SECURITY.

FEDERAL WITHHOLDING REQUIREMENTS ON

RETIREMENT PLAN DISTRIBUTIONS.

RETIREMENT PLAN BENEFITS AND LIMITS.

BUSINESS PLANNING..

Bonus Depreciation.

Section 179 Expensing.

Employer Provided Child Care.

Work Opportunity Tax Credit (WOTC)

Energy Incentives.

Small Business Healthcare Tax Credit

Excise Tax on Sale of Medical Devices.

1099 REPORTING REQUIREMENTS.

FEDERAL & STATE TAX FILINGS AND PAYMENTS

FOR BUSINESS TAXPAYERS.

MINIMUM WAGE.

NEW FORM W-2 REQUIREMENTS.

2014 PAYROLL TAX RATES.

2013 Federal Unemployment (FUTA) Tax Rates by State.

Additional Medicare Tax on Wages & Self-Employment

ESTATE AND GIFT TAX PROVISIONS.

Estate Tax.

Gift Tax & Generation Skipping Tax.

 

 

IMPORTANT WEBSITES

 

Internal Revenue Service:

United States Department of Treasury:  www.irs.gov    

Electronic Federal Tax payments (EFTPS):  https://www.eftps.gov/eftps/

 

New Jersey:

Division of Taxation:  www.state.nj.us/treasury/taxation/index.shtml   

Annual Report & other miscellaneous business filings:  http://www.nj.gov/treasury/revenue/

Business tax payments:  http://www.state.nj.us/treasury/taxation/eservicesother.shtml#corp

New hires:  www.nj-newhire.com

 

Pennsylvania:

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.

 

ESTIMATED TAXES FOR INDIVIDUALS

 

All estimated tax payments for 2014 are due on the following dates:

 

April 15, 2014                  September 15, 2014

June 16, 2014                  January 15, 2015

 

Federal

 

  • 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: 2014 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

40293-1100                                                            06176-0007

 

  • 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.

 

New Jersey

 

  • Required if tax liability is greater than $400

 

  • 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

 

  • Payments made through electronic services (credit card or e-check) can be made by following the links under Gross      Income Tax on the following website:
    • http://www.state.nj.us/treasury/taxation/eservicesother.shtml#git

 

Pennsylvania

 

  • Required if tax liability is greater than $245 (which equates to $8,000 of taxable income)

 

  • 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 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


INDIVIDUAL INCOME TAX RATES

 

Individual Rates

The following are the individual income tax brackets and rates in place for 2013 and 2014. 

 

SINGLE

   

2013

Taxable Income

RATE

2014

 Taxable   Income

RATE

ORDINARY INCOME TAX   BRACKETS

 

$0 – $8,925

10%

$0 – $9,075

10%

$8,925 – $36,250

15%

$9,075 – $36,900

15%

   

$36,250 – $87,850

25%

$36,900 – $89,350

25%

   

$87,850 – $183,250

28%

$89,350 – $186,350

28%

   

$183,250 – $398,350

33%

$186,350 – $405,100

33%

   

$398,350 – $400,000

35%

$405,100 – $406,750

35%

   

Over $400,000

39.6%

Over $406,750

39.6%

 

MARRIED FILING JOINT

   

2013

Taxable Income

RATE

2014

 Taxable   Income

RATE

ORDINARY INCOME TAX   BRACKETS

$0 – $17,850

10%

$0 – $18,150

10%

$17,850 – $72,500

15%

$18,150 – $73,800

15%

   

$72,500 – $146,400

25%

$73,800 – $148,850

25%

   

$146,400 – $223,050

28%

$148,850 – $226,850

28%

   

$223,050 – $398,350

33%

$226,850 – $405,100

33%

   

$398,350 – $450,000

35%

$405,100 – $457,600

35%

   

Over $450,000

39.6%

Over $457,600

39.6%

 

MARRIED FILING SEPARATE

   

2013

Taxable Income

RATE

2014

 Taxable   Income

RATE

ORDINARY INCOME TAX   BRACKETS

$0 – $8,925

10%

$0 – $9,075

10%

$8,925 – $36,250

15%

$9,075 – $36,900

15%

   

$36,250 – $73,200

25%

$36,900 – $74,425

25%

   

$73,200 – $111,525

28%

$74,425 – $113,425

28%

   

$111,525 – $199,175

33%

$113,425 – $202,550

33%

   

$199,175 – $225,000

35%

$202,550 – $228,800

35%

   

Over $225,000

39.6%

Over $228,800

39.6%

 

HEAD OF HOUSEHOLD

   

2013

Taxable Income

RATE

2014

 Taxable   Income

RATE

ORDINARY INCOME TAX   BRACKETS

$0 – $12,750

10%

$0 – $12,950

10%

$12,750 – $48,600

15%

$12,950 – $49,400

15%

   

$48,600 – $125,450

25%

$49,400 – $127,550

25%

   

$125,450 – $203,150

28%

$127,550 – $206,600

28%

   

$203,150 – $398,350

33%

$206,600 –$405,100

33%

   

$398,350 – $425,000

35%

$405,100 – $432,200

35%

   

Over $425,000

39.6%

Over $432,200

39.6%


Capital Gain, Dividend, and Qualified Five-year Property Income Tax Rates

 

For 2013 & 2014, 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

2013

2014

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%

 

New Unearned Income Medicare Contribution Tax

Starting in 2013, a new 3.8% Medicare contribution tax on certain unearned income of individuals, trusts, and estates is taking effect.  For purposes of this tax, investment income includes:

  • Interest
  • Dividends
  • Rents
  • 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:

2013

2014

Individuals

$200,000

$200,000

Married Filing Joint

$250,000

$250,000

Married Filing Separate (MFS)

$125,000

$125,000

 

FEDERAL TAX PROVISIONS

 

Standard Deductions

 

FILING STATUS

2013

2014

Single

$6,100

$6,200

Married Filing Joint

$12,200

$12,400

Married Filing Separate (MFS)

$6,100

$6,200

Head of Household

$8,950

$9,100

 

Itemized Deductions

Beginning January 1, 2013, higher income taxpayers are subject to the return of 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:

 

FILING STATUS

2013

2014

Single

$250,000

$254,200

Married Filing Joint

$300,000

$305,050

Married Filing Separate (MFS)

$150,000

$152,525

Head of Household

$275,000

$279,650

 

Beginning in 2013, 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 Exemptions

Personal exemption is $3,900 for 2013 and $3,950 for 2014.

 

Beginning January 1, 2013, 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:

 

FILING STATUS

2013

2014

Single

$250,000

$254,200

Married Filing Joint

$300,000

$305,050

Married Filing Separate (MFS)

$150,000

$152,525

Head of Household

$275,000

$279,650

 

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:

 

FILING STATUS

2013

2014

Single or Head of Household

$51,900

$52,800

Married Filing Joint

$80,800

$82,100

Married Filing Separate (MFS)

$40,400

$41,050

 

 

 

TAX CREDITS

 

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.

Adoption Credit

 

The credit is non-refundable for 2012 and 2013.

 

2013

2014

Maximum Credit

$12,970

$13,190

Phaseout threshold starts

$194,580

$197,880

Completely phased out over

$234,580

$237,880

 

Child Tax Credit
The Child Tax Credit (a refundable credit) is $1,000 per child for 2013 and 2014.  The credit is reduced by $50 for each $1,000 of adjusted gross income above the threshold amount.

 

Threshold Limits

2013

2014

Single

$75,000

$75,000

Married filing joint

$110,000

$110,000

Married filing separately

$55,000

$55,000

 

Dependent Care Credit

 

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.  For 2013 and 2014, 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.

 

Energy Credits

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).

 

EDUCATIONAL PROGRAMS

 

American Opportunity Tax Credit (Formerly known as the Hope Credit)

 

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).

 

Qualified Expenses:

  • 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 2013 and 2014:

 

  • 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

 

Lifetime Learning Credits

 

Maximum credit of $2,000 per tax return.  20% of first $10,000 of qualified education expenses.

 

Qualified 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.

 

2013:  Phase-out begins for Joint filers with modified adjusted gross income in excess of $107,000 ($53,000 for all other filers).  The Credit is completely phased out for joint filers with modified adjusted gross income in excess of $127,000 ($63,000 for all other filers).

 

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).

Coverdell Education Savings Program

 

For 2013 & 2014, the maximum annual contribution limit to a Coverdell Education Savings Program is $2,000, subject to limitations.

 

Employer Provided Educational Assistance

 

For 2013 & 2014, 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.

 

Student Loan Interest on Education Loans

 

Maximum interest deduction – $2,500.  Credit is phased out with modified gross income of:

 

2013:

  • Single filers – $60,000 and completely phased out at $75,000
  • Joint filers – $125,000 and completely phased out at $155,000

 

2014:

  • Single filers – $65,000 and completely phased out at $80,000
  • Joint filers – $130,000 and completely phased out at $160,000

 

Savings Bond/Higher Education Expense Exclusion

 

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.

 

Qualified Expenses:

  • Tuition and fees for courses required as part of degree or certificate granting program.
  • Books and room are not qualified expenses.

 

2013 Phased out:

  • Joint filers – Adjusted gross income of $112,050 and completely phased out at $142,050
  • All other filers – Adjusted gross income of $74,700 and completely phased out at $89,700

 

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

Tuition and Fees Deduction

 

For 2013, the maximum deduction is $4,000 of qualified education expenses for above the line higher education expenses (subject to limitations).  You cannot claim this deduction and the American Opportunity credit for the same student in the same year.  The deduction is not available for 2014.

 

AUTOMOBILE MILEAGE RATES

 

2013                 

            2014
Business

$0.565/mile

$0.56/mile

Medical/Moving

$0.24/mile

$0.235/mile

Charitable

$0.14/mile

$0.14/mile

 

FLEXIBLE SPENDING ACCOUNT CHANGES

Contribution limits:

2013 & 2014: $2,500 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.

 

KIDDIE TAX

 

The kiddie tax taxes a child’s unearned/investment income, above certain levels, at a parent’s higher tax rate and 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 2013 and 2014.

 

    2013    2014
Child’s   investment income limit $ 2,000 $2,000

 

MAXIMUM LONG-TERM CARE INSURANCE PREMIUM DEDUCTION PER PERSON

 

                                          2013                                  2014

Age 40 or less                  $   360                               $   370

Age 41 – 50                       $   680                               $   700

Age 51 – 60                      $1,360                               $1,400

Age 61 – 70                      $3,640                               $3,720

Over Age 70                     $4,550                               $4,660

 

AUDIT SUBSTANTIATION OF EXPENSES & DEDUCTIONS

 

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

 

Social Security Cost Of Living Adjustment

 

Social Security recipients have a 1.7% benefit increase for 2013 and a 1.5% benefit increase for 2014.

 

 

 

 

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

1938 -1942

1943-1954

1955

1956

65

65 – 66

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 above.   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 2013 and 2014.

 

 Year NRA attained

    2013    2014

Social Security Benefits   Withheld

The year reaching full retirement age

 

 

$ 40,080

$3,340/mo.

$ 41,400

$3,450/mo.

$1 inbenefits 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 $ 15,120

$1,260/mo.

$ 15,480

$1,290/mo.

$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 2013 and 2014 is $2,533 and $2,642 per month or $30,396 and $31,704 per year, respectively.

 

FEDERAL WITHHOLDING REQUIREMENTS ON RETIREMENT PLAN DISTRIBUTIONS

 

  • 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.

 RETIREMENT PLAN BENEFITS AND LIMITS

           

Type

2013

2014

 
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 $                12,000  
SIMPLE IRA and SIMPLE 401(k) catch-up   contribution (50 years old & above) $                  2,500 $                2,500  
401(k), 403(b), 457(b), and SARSEP salary   deferral contribution $                17,500 $                17,500  
401(k), 403(b), 457(b), and SARSEP catch-up   contribution (50 years old & above) $                5,500 $                5,500  
SEP minimum compensation

SEP maximum compensation

$                   550

$             255,000

$                   550

$             260,000

 
Retirement Savings Contribution Credit      
                   Married filing jointly $              59,000 $                60,000  
                   Married filing separately   and Single $                29,500 $                30,000  
                   Head of Household $                44,250 $                45,000  

Roth IRA eligibility compensation

Married filing jointly 100% $178,000 or less $181,000 or less  
  Partial $178,000 – $188,000 $181,000 – $191,000  
  None $188,000 or more $191,000 or more  
Married filing Partial Less than $10,000 Less than $10,000  
 separately None $10,000 or more $10,000 or more  
  100% $112,000 or less $114,000 or less  
Single/Head of Household Partial $112,000 – $127,000 $114,000 – $129,000  
  None $127,000 or more $129,000 or more  

IRA deductibility compensation

Married filing jointly 100% $95,000 or less $96,000 or less  
  Partial $95,000 – $115,000 $96,000 – $116,000  
  None $115,000 or more $116,000 or more  
Married filing Partial Less than $10,000 Less than $10,000  
 separately None $10,000 or more $10,000 or more  
  100% $59,000 or less $60,000 or less  
Single/Head of Household Partial $59,000 – $69,000 $60,000 – $70,000  
  None $69,000 or more $70,000 or more  
Annual addition/contribution limit under a defined contribution plan or SEP IRA  $             51,000  $             52,000  
Annual benefit under a defined benefit plan  $           205,000  $           210,000  
Compensation cap    $           255,000  $           260,000  
Key Employee definition    $           165,000  $           170,000  
Highly compensated employee definition  $           115,000  $           115,000  
Social Security (FICA) wage base    $           113,700  $           117,000  

BUSINESS PLANNING

Bonus Depreciation

For 2013, there is a special 50% first year bonus depreciation for property placed in service before January 1, 2014.  This bonus is not available for 2014.
Property eligible for bonus depreciation includes original use MACRS property with a useful life of 20 years or less, computer software, qualified leasehold improvements and water utility property.  There are dollar limitations on certain automobiles.

Section 179 Expensing

The dollar and phase-out limits under Section 179 are $500,000 (expense) and $2,000,000 (phase-out limit) for 2013.  For 2014, the expensing limit decreased to $25,000 and to $200,000 for the phase-out limit.

Employer Provided Child Care


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.

 

Work Opportunity Tax Credit (WOTC)

2013 Credit:  The WOTC is specifically called the Returning Heroes Tax Credit and the Wounded Warriors Tax Credit.  The effective date applies to those hired after November 21, 2011 through 2013.  Employers that hire veterans may be eligible for this credit if the veteran was looking for employment.  If they were looking for work for:

    • More than six months, the employer could qualify for a credit of up to $5,600 per employee
    • Less than six months, the employer could qualify for a credit of up to $2,400 per employee

 

If they were disabled due to service-connected injuries and were looking for work for more than six months then the employer could qualify for a $9,600 credit per employee.

 

Energy Incentives

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

Small Business Healthcare Tax Credit

 

The Small Business Healthcare Tax Credit has been enacted and is available for years 2013 & 2014.  The qualifications are as follows:

  • Employer must cover at least 50% of cost of health care coverage for each of their workers (based on single rates)
  • The business has to have less than the equivalent of 25 full-time workers
  • The average annual wage has to be below $50,000 and $50,800 for 2013 and 2014, respectively (this average excludes      owners of the business and related parties)
  • Maximum amount of credit is up to 35% for 2013 and 50% for 2014 of premium costs (for non-profits – up to 25%)
  • The credit phases out gradually for firms with average wages between $25,000 – $50,000 for 2013 and $25,400 –      $50,400 for 2014 and for firms with 10 – 25 full-time employees.

 

Excise Tax on Sale of Medical Devices

 

Beginning January 1, 2013, 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).

1099 REPORTING REQUIREMENTS

 

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:

1)      At least $10 in royalties.

2)      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.

3)      At least $600 in fees or gross proceeds paid to an attorney in connection with legal services.

 

Exceptions are generally:

1)      Payments made to a corporation (except in the case of gross proceeds or fees paid to an attorney).

2)      Payments for merchandise, telegrams, telephone, freight, storage, and similar items.

3)      Payments of rent to real estate agents.

Due dates for 1099’s for the 2013 tax year are as follows:

  • You must provide the recipient with their respective Form 1099 by January 31, 2014
  • If paper filing, you must file Form 1096 & the 1099’s with the government by February 28, 2014
  • If electronic filing, you must file with the government by March 31, 2014

 

 

FEDERAL & STATE TAX FILINGS AND PAYMENTS FOR BUSINESS TAXPAYERS

 

Electronic Federal Tax Payments

 

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

 

New Jersey Wage Taxes

 

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 NJ business tax payments:

http://www.state.nj.us/treasury/taxation/eservicesother.shtml#corp

 

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 2013 and 2014 is below.

 

    New Jersey

 Gross Receipts

 

     Minimum Tax

           2013-2014

 

Less than   $100,000

$375.00

$100,000 – $   249,999

562.00

$250,000 -$499,999

$500,000 -$999,999

$1,000,000 or more

750.00

1,125.00

1,500.00

Pennsylvania

 

Pennsylvania provides two options for electronic payroll and sales and use tax payments.

 

1.  TeleFile: 1-800-748-8299.

2.  ETides: https://www.etides.state.pa.us/

a. ACH debit, ACH credit, and credit card (additional fees for credit card payments)

b. Available for Corporation Taxes (Capital Stock/Franchise Tax, Loans Tax, Corporate Net Income Tax) and numerous other taxes.

c. Please see website for additional information.

 

PA Cities:  All employers in Pennsylvania must withhold the earned income tax for individual cities.  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 

 

MINIMUM WAGE

 

Jurisdiction     Minimum Wage

Minimum Wage with Tips

Federal

Delaware

$7.25

$7.25

$2.13

$2.23

New Jersey     – 2013

New Jersey     – 2014

$7.25

$8.25

$2.13

$2.13

Pennsylvania

$7.25

$2.83

 

 

 

 

 

NEW FORM W-2 REQUIREMENTS

IRS updates Form W-2 requirements under PPACA

  • Under the Patient Protection and Affordable Care Act (PPACA), there is now a requirement that 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 in 2013 and future years.  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.

 

Type of Coverage Required to be Reported:

1)      Medical plans – The combined cost of applicable employer-sponsored coverage must be reported.  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.

2)      Prescription drug plans.

3)      Employee assistance plans, wellness programs, and on-site clinics (required only if the employer charges a COBRA premium).

 

Type of Coverage NOT Required to be Reported:

1)      Amounts contributed to any Health Savings Account (HSA), Archer Medical Savings Account (MSA), and the amounts of any salary reduction election to a Flexible Spending Account (FSA) are excluded from this amount since each of these items are already currently reported on the W-2.

2)      Dental and vision cost that are offered under separate plan or insurance policy.  They are not required to be reported but will be optional.

3)      Amounts paid by the employer on behalf of the employee for accident only coverage, disability, long term care, supplemental liability insurance coverage, workers comp, automobile medical payment insurance, and/or credit only insurance.

 

Penalties will be assessed for those employers who are required to, but do not, report the aggregate cost of employer sponsored health coverage on Form W-2.  The maximum penalties for incorrectly filing Form W-2 can be substantial.


2014 PAYROLL TAX RATES

 

Jurisdiction and Tax Type

     Employee Rate

Employer Rate

Limits, if any
Federal Unemployment 

 

 

N/A

Rates Vary by State

(0.6%-1.8%)

Maximum wages $7,000

*FUTA taxes by State   listed on next page.

FICA

6.20%

6.20%

Maximum wages $117,000

Max deduction:  $7,254

Medicare*

*New   0.9% Medicare tax on High-Income     earners.  See section below for a more detailed   discussion.

1.45%/2.35%

1.45%

No wage base limit

Employee:    1.45%

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)

0.425%

Rates Vary

(0.6% – 6.4%)

Maximum wages $31,500 Maximum deduction $133.88   for employee.

 

Standard New Employer Rate is 3.4%

NJ Disability Rate

0.38%

Rates Vary

Maximum wages $31,500

Max deduction: $119.70

 

Standard New Employer Rate is 0.5%

NJ Paid Family Leave Rate 

0.1%

N/A

Maximum wages $31,500

Max deduction: $31.50

NJ Income Tax

See Withholding   Charts

N/A

Rates vary (1.4%-8.97%)
PA State Unemployment

0.07%

Rates Vary

(2.801%-15.0977%)

Maximum wages for employers $8,750.  No limit for employees.

 

New Employer Rate 3.6785%

PA Income Tax

3.07%

N/A

 
Philadelphia Wage Tax (Residents)

3.924%

N/A

Effective July 1, 2013
Philadelphia Wage Tax (Non Residents)

3.495%

N/A

 

 

 

 

 

 

2013 Federal Unemployment (FUTA) Tax Rates by State

 

All states not listed have a 0.6% FUTA tax rate and are not subject to an increased rate.  New Jersey and Pennsylvania are at a 0.6% rate, maximum of $42 an employee.

State

FUTA Reduction

FUTA Tax Rate

Arkansas, California, Connecticut, Georgia,   Kentucky, Missouri, New York, North Carolina, Ohio, Rhode Island, and   Wisconsin

0.9%

1.5%

Delaware

0.6%

1.2%

Indiana 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.

 

ESTATE AND GIFT TAX PROVISIONS

 

Estate Tax

In 2013, the maximum estate tax rate is 40% with a $5,250,000 exclusion ($10.50 million per married couple).

In 2014, the maximum estate tax rate is 40% with a $5,340,000 exclusion ($10.68 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 2013 and 2014 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 $5,250,000 exclusion for 2013 and 40% with a $5,340,000 exclusion for 2014.

 

New Jersey has no gift or GST tax.

 

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