Popular Social Security Benefits and Mileage Rate Top this List of Changes in Our 2013 Payroll Taxes and Withholdings Update: Part 3
In this third of four blogs posts, we will address the Electronic Federal Tax Payment System, Social Security Benefits, the Standard Mileage Rate, Earned Income Credit, the Small Business Health Care Tax Credit, Pension Distribution Withholding Rules and the Nanny Tax Threshold.
Electronic Federal Tax Payment System (EFTPS)
Employers must make deposits electronically in 2013. If your required tax deposits are not made via EFTPS, a penalty of 10% of the taxes deposited will be incurred. The IRS has begun enforcing penalties for non-compliance. If you have not enrolled in the EFTPS program, please contact us immediately.
Social Security Benefits
You can continue to earn income while receiving full social security retirement benefits, provided your earnings do not exceed certain limitations. The 2013 yearly earnings ceiling for individuals who have not reached full retirement age will increase to $15,120.00 in 2013. Benefits of $1.00 will be lost for every $2.00 earned in excess of the 2013 ceiling.
For recipients who reach full retirement age in 2013, the earnings limit is $40,080.00 until the month the individual reaches full retirement age. Benefits of $1.00 will be lost for every $3.00 earned in excess of the 2013 ceiling. Once you reach full retirement age, you can collect full benefits, regardless of the amount of your earnings.
Standard Mileage Rate
The standard mileage rate for 2013 will be 56.5 cents per mile. This rate is for all business miles. The 2013 rate for medical travel and moving costs will be 24 cents per mile. The charitable mileage rate will remain at 14 cents per mile.
Earned Income Credit
Each employer is required to notify any employee who has not had income tax withheld from wages and who has not claimed to be exempt from withholding that they may be eligible for earned income credit. The notice must be given by hand or delivered by first class mail within a week, before or after the Form W-2 is furnished, or included with the Form W-2. The notification must contain all information described in Notice 797 from the IRS.
Small Business Health Care Tax Credit
For 2013, small employers may be eligible to claim a tax credit for non-elective contributions to purchase health insurance for its employees. Eligible employers must meet the required number of full-time equivalent employees and average annual wages.
Pension Distribution Withholding Rules
If an employee does not elect a direct rollover (a trustee to trustee transfer), the employer must withhold federal income tax from the distribution at a 20% rate. The withholding is required even if the employee executes the rollover personally.
The rules contain some exceptions to the general rule stated above. Please contact us to discuss these rules in greater detail if a pension distribution is forthcoming.
Nanny Tax Threshold
The 2013 annual earnings threshold above which an employer is required to pay FICA taxes for domestic workers will be $1,800.00.
In 2013 employers will have to satisfy their tax obligations by either increasing wage withholding or making estimated tax payments to prevent the application of underpayment penalties.
If you have questions about these changes, please contact your Anders advisor. We will address additional changes in the next and final blog on Payroll and Withholding.