Important Year-End Tax & Wage Updates

As 2022 ends, we are preparing for the new year with an eye on the ever-changing industry landscape. One thing that can help your staffing company be prepared for 2023 is to be up-to-date on important changes to wage and tax laws.

We’ve assembled a list of the top wage and tax changes for 2023. From minimum wage increases, to Federal tax changes, to Earned Income tax credit notice requirements and more, we’ve collected the information you need to face 2023 with confidence.

Earned Income Tax Credit Notice Information:
For 2022, you are encouraged to notify the following employees that they may be able to claim EIC on their 2022 tax returns:

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 2023
 

1- The rate was changed in 2023 to be the same rate for all employer sizes

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 $8.63

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)

2023 Unemployment Wage Bases:
Taxable Wage Base for 2023

• 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 2022, there are four states and the Virgin Islands that will have FUTA reduction charges for 2022 and potentially 2023. The FUTA rates for 2022 for California, Connecticut, Illinois, and New York will be increased by .03% to .09%. If the federal loans are not repaid by 11/10/2023, the 2023 rate will increase by another .03% to 1.2%.  TRICOM will be monitoring these loans and will update our clients as the 2023 progresses. TRICOM has withheld the extra FUTA funds for most of 2022 already; there may be only small amounts owed for the FUTA change for 2022. To combat the FUTA increase in CT, the state has reduced unemployment rates for 2023 by .2%.

State Tax Table Changes:
The following states have changed their tax tables for 2023 (please keep in mind other states may be added to this list):

• Arizona
• California
• Maine
• Montana
• Nebraska

Federal Tax Changes:

• Social Security Wage Limit has increased from $147,000 to $160,200.  This is an increase for both the employee and the employer of $818.40. The additional .9% Medicare tax on employee wages over $200,000 is still in place for 2023
• 401K Limit for 2023 increased to $22,500 from $20,500; the limit on the contribution for individuals aged 50 and over increased by $1,000 to $7,500.
• SIMPLE Retirement Plan is at $15,500 up from $14,000.

Standard Deduction Changes:

• Single & Married Filing Separately: $13,850
• Married Filing Jointly: $27,700
• Head of Household: $20,800

Additional State & Federal Tax Topics:

• For 2022, Oregon’s workers’ compensation premium assessment rate will stay at 9. 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’s 2023 SDI rate is .9% (down from 1.1% in 2022) on the first $153,164 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, 2023, employee temporary disability insurance (TDI) and Family Leave Insurance (FLI) rates in New Jersey have decreased. The employee TDI rate has decreased from .14% to 0%. The FLI rate has decreased from .14% to .06%. The taxable wage base for these taxes has increased from $151,900 to $156,800.
• Several states have established state-run mandatory automatic enrollment retirement plans. It is important for employers to be aware of these programs due to the payroll deduction requirements.  Several states have active state-sponsored auto individual retirement (IRA) programs: California, Connecticut, Illinois, Maryland, Oregon, and Washington.

• 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.

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 2023 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.