2016 Payroll and Tax Update

Published on December 30, 2015.

January 2016

 

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

 

This letter contains important tax related information that you may need for 2015 and 2016. As always, please contact us if you have any questions.

 

TOPIC                                                                                                                                                                              

IMPORTANT WEBSITES.

ESTIMATED TAXES FOR INDIVIDUALS.

INDIVIDUAL INCOME TAX RATES.

Federal Individual Rates.

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

Net Investment Income Tax.

FEDERAL TAX PROVISIONS.

Standard Deductions.

Itemized Deductions.

Personal Exemptions.

Alternative Minimum Tax (AMT) patch.

TAX CREDITS.

Adoption Credit

Child Tax Credit

Dependent Care Credit

Energy Credits.

EDUCATIONAL PROGRAMS.

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.

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.

MINIMUM WAGE.

RETIREMENT PLAN BENEFITS AND LIMITS.

BUSINESS PLANNING..

Depreciation and Section 179 Expensing Under the “Protecting Americans from Tax Hikes Act”

Employer Provided Child Care.

Energy Incentives.

Small Business Healthcare Tax Credit

1099 REPORTING REQUIREMENTS.

FEDERAL & STATE TAX FILINGS AND PAYMENTS FOR BUSINESS TAXPAYERS.

REPORTING REQUIREMENTS FOR EMPLOYERS AND HEALTH PLANS.

2016 PAYROLL TAX RATES.

2015 Federal Unemployment (FUTA) Tax Rates by State.

Additional Medicare Tax on Wages & Self-Employment

ESTATE AND GIFT TAX PROVISIONS.

 

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/

Electronic Services: http://www.state.nj.us/treasury/taxation/eservicesother.shtml

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 2016 are due on the following dates:

 

April 15, 2016                  September 15, 2016

June 15, 2016                  January 15, 2017

 

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: 2016 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

 

 

If prior year taxable gross income is:

Prior Year

Income Tax

Current Year

Income Tax

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:

https://www1.state.nj.us/TYTR_RevTaxPortal/jsp/IndTaxLoginJsp.jsp

 

Pennsylvania

 

  • 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

 


INDIVIDUAL INCOME TAX RATES

 

Federal Individual Rates

The following are the individual income tax brackets and rates in place for 2015 and 2016.

 

SINGLE

2015

Taxable Income

RATE 2016

Taxable Income

RATE
ORDINARY INCOME TAX BRACKETS

 

$0 – $9,225 10% $0 – $9,275 10%
$9,225 – $37,450 15% $9,275 – $37,650 15%
$37,450 – $90,750 25% $37,650 – $91,150 25%
$90,750 – $189,300 28% $91,150 – $190,150 28%
$189,300 – $411,500 33% $190,150 – $413,350 33%
$411,500 – $413,200 35% $413,350 – $415,050 35%
Over $413,200 39.6% Over $415,050 39.6%

 

MARRIED FILING JOINT

2015

Taxable Income

RATE 2016

Taxable Income

RATE
ORDINARY INCOME TAX BRACKETS $0 – $18,450 10% $0 – $18,550 10%
$18,450 – $74,900 15% $18,550 – $75,300 15%
$74,900 – $151,200 25% $75,300 – $151,900 25%
$151,200 – $230,450 28% $151,900 – $231,450 28%
$230,450 – $411,500 33% $231,450 – $413,350 33%
$411,500 – $464,850 35% $413,350 – $466,950 35%
Over $464,850 39.6% Over $466,950 39.6%

 

MARRIED FILING SEPARATE

2015

Taxable Income

RATE 2016

Taxable Income

RATE
ORDINARY INCOME TAX BRACKETS $0 – $9,225 10% $0 – $9,275 10%
$9,225 – $37,450 15% $9,275 – $37,650 15%
$37,450 – $75,600 25% $37,650 – $75,950 25%
$75,600 – $115,225 28% $75,950 – $115,725 28%
$115,225 – $205,750 33% $115,725 – $206,675 33%
$205,750 – $232,425 35% $206,675 – $233,475 35%
Over $232,425 39.6% Over $233,475 39.6%

 

HEAD OF HOUSEHOLD

2015

Taxable Income

RATE 2016

Taxable Income

RATE
ORDINARY INCOME TAX BRACKETS $0 – $13,150 10% $0 – $13,250 10%
$13,150 – $50,200 15% $13,250 – $50,400 15%
$50,200 – $129,600 25% $50,400 – $130,150 25%
$129,600 – $209,850 28% $130,150 – $210,800 28%
$209,850 – $411,500 33% $210,800 –$413,350 33%
$411,500 – $439,000 35% $413,350 – $441,000 35%
Over $439,000 39.6% Over $441,000 39.6%


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

 

For 2015 & 2016, 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 2015 2016 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%

 

Net Investment Income Tax

 

The 3.8% Net Investment Income Tax is applicable on certain unearned income of individuals, trusts, and estates. 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: 2015 2016
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 2015 2016
Single $6,300 $6,300
Married Filing Joint $12,600 $12,600
Married Filing Separate (MFS) $6,300 $6,300
Head of Household $9,250 $9,300

 

 

Itemized Deductions

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:

FILING STATUS 2015 2016
Single $258,250 $259,400
Married Filing Joint $309,900 $311,300
Married Filing Separate (MFS) $154,950 $155,650
Head of Household $284,050 $285,350

 

Unreimbursed medical expense deductions must exceed 10% of adjusted gross income (AGI). 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 $4,000 for 2015 and $4,050 for 2016.

 

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 2015 2016
Single $258,250 – $380,750 $259,400
Married Filing Joint $309,900 – $432,400 $311,300
Married Filing Separate (MFS) $154,950 – $216,200 $155,650
Head of Household $284,050 – $406,550 $285,350

 

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 2015 2016
Single or Head of Household $53,600 $53,900
Married Filing Joint $83,400 $83,800
Married Filing Separate (MFS) $41,700 $41,900

 

 

 

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 2015 and 2016.

  2015 2016
Maximum Credit $13,400 $13,460
Phase-out threshold starts $201,010 $201,920
Completely phased out over $241,010 $241,920

 

Child Tax Credit

The Child Tax Credit (a refundable credit) is $1,000 per child for 2015 and 2016. The credit is reduced by $50 for each $1,000 of adjusted gross income above the threshold amount.

 

Threshold Limits 2015 2016
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. 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.

 

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. The credit is based on 100% of first $2,000 of qualified education expenses; 25% of the next $2,000. Up to 40% of the credit is 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 2015 and 2016:

 

  • 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.

 

2016: The credit will remain the same and the Phase-out begins for Joint filers with modified adjusted gross income in excess of $111,000 ($55,000 for all other filers). The Credit is completely phased out for joint filers with modified adjusted gross income in excess of $131,000 ($65,000 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).

Coverdell Education Savings Program

 

For 2015 & 2016, the maximum annual contribution limit to a Coverdell Education Savings Program is $2,000, subject to phase-out limitations.

 

  • Single – $95,000 to $110,000
  • Joint – $190,000 to $220,000

 

Employer Provided Educational Assistance

 

For 2015 & 2016, 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:

2015 & 2016:

  • 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.

 

2016 Phased out:

  • Joint filers – Adjusted gross income of $116,300 and completely phased out at $146,300
  • All other filers – Adjusted gross income of $77,550 and completely phased out at $92,550

 

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

 

AUTOMOBILE MILEAGE RATES

2015                            2016
Business $0.575/mile $0.54/mile
Medical/Moving $0.23/mile $0.19/mile
Charitable $0.14/mile $0.14/mile

FLEXIBLE SPENDING ACCOUNT CHANGES

Contribution limits:

2015: $2,550 maximum per employee

2016: $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.

 

KIDDIE TAX

 

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 2015 and 2016:

     2015    2016
Child’s unearned income over $ 2,100 $2,100

 

MAXIMUM LONG-TERM CARE INSURANCE PREMIUM DEDUCTION PER PERSON

 

2015                                 2016

Age 40 or less                  $   380                               $   390

Age 41 – 50                       $   710                               $   730

Age 51 – 60                     $1,430                               $1,460

Age 61 – 70                      $3,800                               $3,900

Over Age 70                     $4,750                               $4,870

 

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

There will be no Social Security cost of living adjustment for 2016.

 

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 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 2015 and 2016.

 

Year NRA attained    2015    2016 Social Security Benefits Withheld
The year reaching full retirement age $ 41,880

$3,490/mo.

$ 41,880

$3,490/mo.

$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 $ 15,720

$1,310/mo.

$ 15,720

$1,310/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 2015 and 2016 is $2,663 and $2,639 per month or $31,956 and $31,668 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.

MINIMUM WAGE

 

Jurisdiction    Minimum Wage Minimum Wage with Tips

 

Federal

Delaware

New Jersey

$7.25

$8.25

$8.38

$2.13

$2.23

$2.13

Pennsylvania $7.25 $2.83

Full minimum wage information listed by state can be found at:

http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx

RETIREMENT PLAN BENEFITS AND LIMITS

Type 2015 2016
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 $               12,500 $               12,500
SIMPLE IRA and SIMPLE 401(k) catch-up contribution (50 years old & above) $               3,000 $                3,000
401(k), 403(b), 457(b), and SARSEP salary deferral contribution $               18,000 $               18,000
401(k), 403(b), 457(b), and SARSEP catch-up contribution (50 years old & above) $               6,000 $                 6,000
SEP minimum compensation

SEP maximum compensation

$                   600

$             265,000

$                   600

$             265,000

Retirement Savings Contribution Credit
                  Married filing jointly $              61,000 $               61,500
                   Married filing separately and Single $               30,500 $               30,750
                   Head of Household $               45,750 $                46,125
Roth IRA eligibility compensation Married filing jointly 100% $183,000 or less $184,000 or less
Partial $183,000 – $193,000 $184,000 – $194,000
None $193,000 or more $194,000 or more
Married filing Partial Less than $10,000 Less than $10,000
 separately None $10,000 or more $10,000 or more
100% $116,000 or less $117,000 or less
Single/Head of Household Partial $116,000 – $131,000 $117,000 – $132,000
None $131,000 or more $132,000 or more
IRA deductibility compensation Married filing jointly 100% $98,000 or less $98,000 or less
Partial $98,000 – $118,000 $98,000 – $118,000
None $118,000 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% $61,000 or less $61,000 or less
Single/Head of Household Partial $61,000 – $71,000 $61,000 – $71,000
None $71,000 or more $71,000 or more
Annual addition/contribution limit under a defined contribution plan or SEP IRA $             53,000 $             53,000
Annual benefit under a defined benefit plan $           210,000 $           210,000
Compensation cap $           265,000 $           265,000
Key Employee definition $           170,000 $          170,000
Highly compensated employee definition $           120,000 $           120,000
Social Security (FICA) wage base $           118,500 $           118,500

BUSINESS PLANNING

Depreciation and Section 179 Expensing Under the “Protecting Americans from Tax Hikes Act”

The dollar and phase-out limits under Section 179 of $500,000 (expense) and $2,000,000 (phase-out limit) have been made permanent. There are also special 15-year write-offs for qualified leasehold and retail improvements and restaurant improvements which have been made permanent. In addition, bonus first-year depreciation has been extended through 2019. (The deduction percentage phases down after 2017.)

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.

 

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 2015 & 2016. 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:

 

  2015 2016
Partial Credit:
   Number of full time employees

Maximum annual average wages

25

$51,600

25

$51,800

Full Credit:
    Number of full time employees

Maximum annual average wages

10

$25,800

10

$25,900

 

Additional Details:

 

  • 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 $25,800 – $51,600 for 2015 and $25,900 – $51,800 for 2016 as indicated above.

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:

 

  • 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 2015 tax year are as follows:

 

  • You must provide the recipient with their respective Form 1099 by February 1, 2016
  • If paper filing, you must file Form 1096 & the 1099’s with the government by February 29, 2016
  • If electronic filing, you must file with the government by March 31, 2016

 

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 various NJ business tax payments:

http://www.state.nj.us/treasury/taxation/online.shtml

 

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 2015 and 2016 is below.

 

   New Jersey

Gross Receipts

 

     Minimum Tax

           2015-2016

 
Less than $100,000 $375.00
$100,000 – $ 249,999 562.50
$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. e-Tides: https://www.etides.state.pa.us/
  3. ACH debit, ACH credit, and credit card (additional fees for credit card payments)
  4. 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

REPORTING REQUIREMENTS FOR EMPLOYERS AND HEALTH PLANS

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:

http://www.irs.gov/Affordable-Care-Act/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage

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, 2016 for large employers (100+ full time employees) if the company does not offer affordable coverage to full-time employees.

 

The due date of distributing IRS Forms 1095-B and 1095-C to individuals has been extended from February 1, 2016 to March 31, 2016. The due date for filing IRS Forms 1094-B and 1094-C has also been delayed from February 29, 2016 to May 31, 2016 (paper) and from March 31, 2016 to June 30, 2016 if filing electronically.


2016 PAYROLL TAX RATES

 

Jurisdiction and Tax Type     Employee Rate Employer Rate Limits, if any
Federal Unemployment

 

 

N/A Rates Vary by State

(0.6%-1.7%)

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

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 $32,600 Maximum deduction $138.55 per taxpayer.

 

Standard New Employer Rate is 3.4%

NJ Disability Rate 0.20% Rates Vary Maximum wages $32,600

Max deduction: $65.20

 

Standard New Employer Rate is 0.5%

NJ Paid Family Leave Rate 0.08% N/A Maximum wages $32,600

Max deduction: $26.08

NJ Income Tax See Withholding Charts N/A Rates vary (1.5%-9.9%)
PA State Unemployment 0.07% Rates Vary

(2.801%-15.0977%)

Maximum wages for employers $9,500. No limit for employees.

 

New Employer Rate 3.6785%

PA Income Tax 3.07% N/A
Philadelphia Wage Tax (Residents) 3.9102% N/A Effective July 1, 2015
Philadelphia Wage Tax (Non Residents) 3.4828% N/A

 


2015 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 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, Ohio and the Virgin Islands 1.5% 2.1%
Connecticut 2.1% 2.7%

 

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 2016, the maximum estate tax rate is 40% with a $5,450,000 exclusion ($10.9 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 2015 and 2016 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 2015 and 40% with a $5,450,000 exclusion for 2016.

 

New Jersey has no gift or GST tax.

 

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