Important Year-End Tax & Wage Updates

After facing another tumultuous year, we’re getting ready to wrap up 2021 and are looking to 2022 with hope and anticipation. If there’s anything we’ve learned over the last two years, it’s that sometimes it can be hard to know what to expect.

That’s why it’s important to be prepared for the changes we know are coming — specifically tax and wage changes.

We’ve put together a list of the top changes that you’ll need to prepare your staffing business for 2022. From minimum wage increases, to states with changing tax tables, to Earned Income tax credit notice requirements, we’ve collected the information you need to face the tax changes coming in 2022 with confidence.

Earned Income Tax Credit Notice Information:
For 2021, you are encouraged to notify the following employees that they may be able to claim EIC on their 2021 tax returns:

• Employees with one qualifying child and wages less than $42,158. The employee’s copy of Form W-2 TRICOM prepares has the required statement about the EIC on the back of the form.  

There are seven states that require employers to provide some additional notification to their employees about their possible eligibility for Earned Income Tax Credit. The following states allow employers to use Federal Notice 797:

• California
• Illinois
• Louisiana
• Texas

The following states require the use of a state-specified form:

• New Jersey
• Virginia
• Maryland

Once these documents are updated for the current year, they will be available on TRICOM’s website under: http://tricom.com/resources/tax-tools. Please contact your TRICOM Accounting representatives if you have any questions.

Minimum Wage Increases:
The chart below indicates which states are initiating minimum wage changes for 2022
 

1- Listed for employers with 26 or more employees-employers with 25 or less is $14.00

2- Listed rate for most NY employers; Minimum wage for New York City is $15.00 for all employers

3- Rate listed for large employers (annual sales of $500,00 or more); small employers have minimum wage of $8.42

4- Rate for most employers; $11.90 for seasonal or small employers (fewer than 6 employees)

5- Rate is listed for large employers ($342,000 in gross receipts); $7.25 (Federal Rate, for small employers)

2022 Unemployment Wage Bases:
Taxable Wage Base for 2022

• Yellow highlighted areas indicate those states that have not yet released their wage bases. This information will also be listed on TRICOM.com and updated as information becomes available.

FUTA Reduction States:
For tax year 2021, only the Virgin Islands has not repaid their Federal Unemployment Tax loans. Their FUTA Credit reduction rate for 2021 will be 3.3%. There are currently 11 other states that have Federal Unemployment loans (down from 20 prior), but the outstanding amounts for these loans do not affect the 2021 FUTA rates for these states. TRICOM will be watching the FUTA loans and reach out to our clients on any updates to payments of these loans. As of 9/27/2021 (last time they were reported) CA, CO, CT, HI, IL, MA, MN, NJ, NY, PA and TX have outstanding loans with the Federal Government for state unemployment.

State Tax Table Changes:
The following states have changed their tax tables for 2021 (please keep in mind other states may be added to this list):

• Oklahoma
• Nebraska
• Colorado
• South Carolina
• Wisconsin

Federal Tax Changes:

• Social Security Wage Limit has increased from $142,800 to $147,000.  This is an increase for both the employee and the employer of $260.40. The additional .9% Medicare tax on employee wages over $200,000 is still in place for 2022.
• 401K Limit for 2022 increased to $20,500 from $19,500; the limit on the contribution for individuals aged 50 and over remains unchanged at $6,500.
• SIMPLE Retirement Plan is at $14,000 up from $13,500.

Standard Deduction Changes:

• Single & Married Filing Separately: $12,950
• Married Filing Jointly: $25,900
• Head of Household: $19,400

Additional State & Federal Tax Topics:

• For 2022, Oregon’s workers’ compensation premium assessment rate will increase to 9.8% from 9.0%. In addition, Oregon Worker’s Benefit Fund will remain the same at 2.2 cents per hour. One-half of this amount is paid by the employer.
• California 2022 SDI rate is 1.1% (down from 1.2% in 2021) on the first $145,600 of wages.
• New York employee paid family leave (PFL) contribution will be .511% similar to 2021. However, the annual maximum is $423.71.
• Effective January 1, 2022, employee temporary disability insurance (TDI) and Family Leave Insurance (FLI) rates in New Jersey have decreased. The employee TDI rate has decreased from .47% to .14%. The FLI rate has decreased from .28% to .14%. The taxable wage base for these taxes has increased from $138,200 to $151,900.
• Massachusetts Paid Family and Medical Leave (PFML) has a new rate for 1/1/2022. The new PFML Contribution rate will be .68% of eligible wages to be split between employers and employees. The employer contribution is .336% and the employee contribution is .344% The wage base has increased from $142,800 to $147,000 (equivalent to Federal Social Security wage limit).
• Per the Guidance on Reporting Qualified Sick Leave Wages and Qualified Family Leave Wages paid pursuant to the Families First Coronavirus Response Act (FFCRA), TRICOM will report any paid wages in Box 14 of the employee’s W-2. They will be labeled “PFL” or “PSL” depending on which reason the employee was paid.
• All TRICOM Full Service and Administrative-Only Clients should have received their Year End Questionnaire from the TRICOM team. Please make sure to respond promptly and return to the Accounting Representative that sent it to you.
• As of 1/1/2022, Washington State has enacted a new Long-Term Care Program. Employers will be required to withhold employee contributions of .58% of a covered employees wages and remit contributions to the ESD on a quarterly basis

For more legislative and year-end updates, please refer to TRICOM.com. We will post the latest legislative and tax updates, as well as tax tools and other resources for 2022 as they become available. For specific questions, please contact Mary Jo Heim in the TRICOM Accounting Department at 262-509-6214 or your TRICOM Accounting Representative.