December 27, 2019
The Employment Tax Rates and Wage Base rates and requirements effective January 1, 2020, are as follows:
Social Security
– Both the employer and employee’s contribution rate remain the same at 6.2%. However, the Wage Base will be $137,700, which is an increase of $4,800 from $132,900 in 2019. The maximum amount of Social Security Tax for 2020 that could be withheld from your employee’s pay is $8,537.40.
Medicare Tax
– The rate remains the same at 1.45% for both the employer and employee’s contribution. There is no limit to the wages subject to the Medicare tax; all covered wages are subject to the tax. Wages paid in excess of $200,000 will be subject to an extra 0.9% Medicare tax withholding that will only be withheld from employees’ wages, as employers do not pay the extra tax.
Federal Withholding
– Refer to the tables in the Circular “E”. As of January 1, 2020, any new employees or employees who are changing their Form W-4, must fill in the new Form W-4. Both the Circular E and Form W-4 can be found on the Internal Revenue Service Website,
www.irs.gov
.
Pennsylvania Withholding
– The rate remains the same at 3.07%.
New Jersey Withholding
– Refer to the tax tables.
Local Taxes for Pennsylvania
– For the majority of employees, the tax rates have remained the same. Check with your employees to see if their resident rate changed. You can also check the municipal website at
http://munstats.pa.gov
.
Note:
On the 2019 W-2s, the name of the locality is the full Political Subdivision Code (PSD) of the Employer, with the exception of Philadelphia withholding. Use the PSD Code for Philadelphia is 510101.
Philadelphia Withholding
– The Philadelphia tax rates remain the same for January 1, 2020. The rates are as follows:
- Philadelphia Residents – 3.8712%
- Philadelphia Non-Residents – 3.4481%
Note:
If there is a tax rate change in 2020, the change will occur on July 1, 2020.
Pennsylvania Unemployment Tax
– The Wage Base remains at $10,000 for 2020. The employee deduction for SUI remains the same at .06% or $.60 for each $1,000. There is no wage ceiling for the employee portion of Unemployment withholding. The new employer rate for 2020 will be mailed on December 31, 2019. As of December 16, 2019, employers will be able to access their rate notice information on their Pennsylvania Department Of Labor employer portal,
https://www.uctax.pa.gov.
New Jersey Unemployment Tax
–
Effective January 1, 2020, the Wage Base will increase to $35,300 for Unemployment (UI) and Temporary Disability Insurance (TDI). Your employees’ taxable wage base for both Temporary Disability and Family Leave Insurance (FLI) will be $134,900.
- State Unemployment Insurance (SUI) Employee – The rate continues at 0.425% for calendar year 2020, on wages earned up to $35,300. Based on the 2020 taxable wage base of $35,300, an employee's maximum SUI contribution for 2020 will be $150.03.
- Temporary Disability Insurance (TDI) - The TDI rate increases as of January 1, 2020, (for calendar year 2020) to 0.26%. Based on the increased 2020 taxable wage base of $134,900, up from $34,400 for 2019, an employee's maximum TDI contribution for 2020 will increase to $350.74, up from $58.48 for calendar year 2019.
- Family Leave Insurance (FLI) – The FLI rate increases as of January 1, 2020, (for calendar year 2020) to 0.16%. Based on the increased 2020 taxable wage base of $134,900, up from $34,400 for 2019, an employee's maximum FLI contribution for 2020 will be $215.84, up from $27.52 for 2019.
Local Services Tax for Pennsylvania
– Most municipalities impose a Local Services Tax or an Occupational Privilege Tax, which can range from $10 to $52 per year. For amounts over $10, the tax is prorated over the number of pay periods in the year. Check with your local municipality for the amount of the tax, or check the municipal website,
http://munstats.pa.gov.
Federal Unemployment Tax
–
The Wage Base of $7,000 remains the same. The current tax rate is 6% on the first $7,000 of wages you pay an employee. Employers typically receive a credit of 5.4% on Form 940 reducing the FUTA rate to .6% or a maximum amount of $42 per employee per year.
When Hiring New Employees:
- Verify that each new employee is legally eligible to work in the United States
- Each new employee must fill in the NEW Form W-4 and Form I-9, Employment Eligibility Verification Form. Form W-4 can be obtained on the IRS website, www.irs.gov. Form I-9 can be obtained at www.uscis.gov, go to the Forms tab, and select Form I-9.
- Report all new employees to your state’s New Hire Registry within 20 days of the hiring date. The link for PA employers is http://www.panewhires.com. Multistate employers must file on-line.
Form W-2 & Form 1099
– Before the forms are finalized for the year, verify the spelling of your employee/subcontractor’s name and also verify their social security number or employer identification number. The Internal Revenue Service may fine $50 for every W-2 and Form 1099 with incorrect information. The due date for filing Forms W-3/W-2 and Forms 1096/1099 is January 31, 2020.
Mileage Allowanc
e
– The IRS has not yet released the mileage allowance rate for 2020. It is recommended using the 2019 standard mileage rate of 58 cents as a point of reference until further notice.
Pennsylvania 2020 Average Weekly Wage
– Based upon the Statewide Average Weekly Wage, as determined by the Pennsylvania Department of Labor & Industry for the fiscal year ending June 30, 2019, the maximum compensation payable under the Workers' Compensation Act (Article 1, subsections 105.1 and 105.2) shall be $1,081.00 per week for injuries occurring on and after January 1, 2020. For purposes of calculating the update to payments for medical treatment rendered on and after January 1, 2020, the percentage increase in the Statewide Average Weekly Wage is 3.1 percent.
For New Jersey Employers
-
The taxable wage base will be adjusted for the upcoming calendar year on January 1, 2020. A significant adjustment in the taxable wage base for your employees is to accommodate benefit increases that take effect on July 1, 2020.
Employers' taxable wage base for Unemployment and Temporary Disability Insurance will be $35,300 for 2020. Your employees' taxable wage base for Unemployment Insurance will also be $35,300. However, your employees' taxable wage base for both Temporary Disability and Family Leave Insurance will be $134,900.
Employers are responsible for withholding the proper amount of Unemployment, Temporary Disability, and Family Leave Insurance contributions for your employees. Recent changes in the Temporary Disability and Family Leave Insurance laws are designed to allow employees the time and funding that they need to heal from an injury, recover from a birth, bond with a new child, or care for a family member.
Please be sure to alert your payroll staff or payroll vendor to these important changes. To learn more about these and other benefits, please visit:
nj.gov/labor
.
Martin C. McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company, PC
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).
