Preparing for Changes
With 2017 year-end tax activities under way, gearing up for the new tax year can be equally as important for employers. There are various changes on the Federal payroll level, recently announced, that may potentially impact you, as an employer. Knowing of these changes can help you determine, and plan accordingly.
What to know for Year-End 2017
Federal Unemployment Tax Act (FUTA) & Credit Reduction States for 2017
- The federal unemployment tax (FUTA) rate is 6.0% for 2017.
- The taxable wage base is the first $7,000 paid in wages to each employee during the calendar year.
- 2017 FUTA Credit Reduction States have not yet been announced. Information is expected to be released by the Department of Labor later this month. This section will be updated as new information is provided.
Learn more about the FUTA Credit Reduction States here.
Form W-2 and Form W-3
Employee/Employer Social Security Tax Withholding
The 2017 Social Security tax rate is 6.2% (for each employee and employer), for the first $127,200 in wages. The amount reported in box 4 should not exceed $7,886.40 ($127,200 x 6.2%).
Reporting of the Cost of Coverage of Group Health Insurance
Many employers will be required to report the cost of their employer sponsored group health plan coverage, on employees' 2017 Form W-2. This reporting is informational only, showing the value of the employee's healthcare benefits, and does not affect the employee's tax liability.
Who must report. Employers who filed 250 or more Form W-2's for the 2016 calendar year will be subject to the reporting requirement on W-2's for 2017.
Tracking the cost in QuickBooks Desktop. Intuit QuickBooks Desktop includes a tax tracking type, Health Coverage Cost, to support this reporting requirement. By using this tax tracking type, you can track the cost of coverage to be reported on your employees' 2017 Form W-2 in box 12, code DD.
How to obtain additional information. Our team has created a step-by-step guide, the Health Coverage Reporting User Guide for QuickBooks, to help you setup a payroll item for tracking the cost for your employees.
Additional Medicare Tax
Beginning January 1, 2013, employers have been required to withhold a 0.9% Additional Medicare Tax on an employee's compensation exceeding $200,000 in a calendar year. The Additional Medicare Tax is paid by the employee; no employer share of the Additional Medicare Tax is required. The Medicare Tax reported on the 2017 Form W-2, in Box 6 will be a combined total of the employee Medicare tax, and Additional Medicare Tax (if applicable).
Since its introduction, information on this new payroll tax item has been provided throughout, including setup details for our Intuit QuickBooks Desktop Payroll customers. More information can be found in our Additional Medicare Tax User Guide, or here.
What to expect for 2018
Form W-4, Employee's Withholding Allowance Certificate
Federal Tax Withholding Tables for 2018
Federal Withholding The IRS has not yet published the 2018 Withholding Tables. We will continue to monitor this and update this article. For 2017, the withholding allowance amounts remain unchanged, while the withholding tax brackets have been indexed for the upcoming year. For additional details, please refer to Notice 1036.
Social Security and Medicare Taxes
- The wage base for the Social Security Old Age Survivor's and Disability Insurance (OASDI) tax will increase for 2017 to $128,700.
- The Social Security tax rate remains at 6.2% for 2018, for each employee and employer.
- For more information, see the press release Social Security Press Release; An Increase in Social Security Benefits in 2018
- The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2017. There is no wage base limit for Medicare tax.
Additional Medicare Tax
As an employer, you must activate this tax tracking type in Intuit QuickBooks Desktop Payroll. For complete details, click here.