Category: Payroll

  • Payroll Tax Changes

    Payroll Tax Changes

    Payroll deductions

    Payroll taxes are changing, but how?  Right now, the best answer we have is that we don’t really know.  We have tax law but not regulations.  The regulations give us instruction on how to apply the laws.  There are some things we do know about the changes to payroll taxes.  Look at a few of them below:

    Social Security

    Social Security is still 6.2% of gross pay.  However, the new wage base increases to $128,400.  This means that the most Social Security tax your employees will pay in 2018 would be $7,960.80.

    Medicare

    Medicare is 1.45% of an employee’s gross pay and has no cap.  Earnings greater than $200,000 will be taxed at 1.54%.  The employee, not the employer, will pay the additional 0.9%.

    Federal Unemployment Rate

    The wage base for Federal Unemployment remains at $7,000 and the effective tax rate will be 0.6%.

    Federal Income Tax

    This is where payroll taxes may get tricky.  W-4s submitted by your employees determine the Federal Income Tax.  This form shows their filing status and their chosen number of exemptions.  Because we know that the tax brackets are changing, the W-4 will need to be updated.  In an announcement on December 13, 2017, the IRS stated that, “We anticipate issuing the initial withholding guidance (Notice 1036) in January reflecting the new legislation, which would allow taxpayers to begin seeing the benefits of the change as early as February.”  Until then, we will be using the 2017 tax brackets and W-4 and make any adjustments once the new information is available.

    Supplemental Wages

    Traditionally, since 2007, bonuses, commissions, and other supplemental wages have been taxed at 25%.  With the new tax law, however, the tax rate may increase to 28%.

    What Now?

    We wait and we continue doing what we have always done until the IRS gives us a new W-4 and releases the notice.  We also suggest that employees keep an eye on their withholding.  Later in 2018 employees should look at their earnings, compare their withholding to the new tax tables, and make any adjustments necessary.

    Does all of this still worry you?  Do you find payroll taxes way too confusing already?  Give us a call and we would be happy to take those worries off of your hands!

  • Payroll Pitfalls

    Payroll Pitfalls

    Payroll calculator

    While working on my degree, one of my accounting classes talked about payroll.  We also learned how to calculate paycheck withholdings.  This transaction has a well defined formula; the steps are straightforward.  I didn’t understand why would it ever be an issue for anyone.  Then I started talking to friends that ran their own businesses and the difficulties became clear.

    Payroll Rules

    Many cities and counties are drafting their own regulations surrounding minimum wage, paid time off, and overtime.  The uncertainty of how these laws apply to individual businesses, can make compliance a nightmare.  As a result, the laws that apply where the business is located may not always pertain to your employees.  This is especially true if services are provided in other cities.  These challenges make it almost impossible for a business owner to do the right thing.

    Local Changes

    In the last few years, we have seen cities in Washington making some of these changes.  Seattle and Tacoma were some of the first to vote in paid time off and minimum wage laws specific to their cities.  In the upcoming year, however, our state lawmakers have added another layer of confusion to the issue by adopting their own rules surrounding paid time off.  The Labor and Industries Department will be holding webinars over the next few weeks to make sure that business owners are fully informed of these changes.

    Let Us Help

    If you are feeling overwhelmed, or just want to ensure that you are compliant, give Sound Accounts a call.  We make it our job to stay up to date on the most recent changes in rules and regulations.  In fact, Sound Accounts will be attending one of the webinars put on by Labor and Industries to do just that for our clients.  We can then review your records to ensure compliance and free you to do what it is that you do better than anyone else: being the reason your customers are keeping you busy.