Department of Labor Announces Increased FUTA Costs for Employers in 7 States

Due to outstanding federal loans, employers in 7 states plus the Virgin Islands will owe additional Federal Unemployment Tax Act (FUTA) tax for 2014. Employers in FUTA “credit reduction” states will be charged an additional 1.2% to 2.2% of the first $7,000 in taxable 2014 FUTA wages for each employee. The percentage charged is based on the employee’s work-in state.

Below are the 2014 charges by state:

  • Employers in California, Kentucky, New York, North Carolina, Ohio, and the Virgin Islands will face a 1.2% credit reduction on their 2014 FUTA tax return (maximum $84 per employee) for 2014. A quick way to calculate the additional tax due is to double your year-to-date *FUI tax (listed on your payroll register), since you paid at 0.6% during 2014 and you will owe an additional 1.2%.
  • Indiana employers will be charged a 2014 FUTA credit reduction rate of 1.5% (maximum $105 per employee). Indiana employers can calculate their tax due by multiplying their year-to-date FUI tax times 2.5.
  • Connecticut employers will be charged a FUTA credit reduction of 1.7% plus a BCR add-on of 0.5% for 2014 (maximum $154 per employee). Connecticut employers can calculate their additional taxes due by multiplying the year-to-date FUI tax times 3.66.

During the week of January 12, 2015, your TelePayroll SBE will contact you with the exact amount due for your company. TelePayroll will electronically collect any applicable 2014 FUTA tax plus a $30 charge for processing the payroll on January 16, 2015. The additional tax will be reported on line 11 and on Schedule A of your annual Form 940 tax return.

*Our software program labels FUTA tax as “FUI” tax.

EDD Releases 2015 California State Unemployment Insurance Tax Rates

To find your 2015 California SUI rate online, copy and paste the below link into your browser:

Type in your 8 digit EDD account number and click the “Get My Rate” button.

Social Security Wage Base to Increase in 2015

The Old Age Survivor’s and Disability Insurance (OASDI) taxable wage base will increase to $118,500 in 2015.  The 2014 wage base is $117,000. Both the employee and employer OASDI tax rate for wages paid will remain at 6.2%. To see the historic OASDI wage base limits, click here. Employee and employer Medicare tax has no wage limit. Medicare rates will remain unchanged in 2015.

IRS Announces 2015 Pension Plan Limits

The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan will increase in 2015 from $17,500 to $18,000. The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan will increase from $5,500 to $6,000.

The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over will remain at $1,000.

For a complete list of 2015 pension plan limits, click here

States Announce Minimum Wage Increases for 2015

Minimum wage will increase in the following states effective January 1, 2015:

  • Alaska, to $8.75 from $7.75
  • Arizona to $8.05 from $7.90
  • Arkansas, to $7.50 from $6.25
  • Colorado, to $8.23 from $8.00
  • Connecticut, to $9.15 from $8.70
  • Florida, to $8.05 from $7.93
  • Hawaii, to $7.75 from $7.25
  • Maryland, to $8.00 from $7.25
  • Massachusetts, to $9.00 from $8.00
  • Missouri, to $7.65 from $7.50
  • Montana, to $8.05 from $7.90
  • Nebraska, to $8.00 from $7.25
  • New Jersey, to $8.38 from $8.25
  • New York, to $8.75 from $8.00 (effective 12/31/14)
  • Ohio, to $8.10 from $7.95
  • Oregon, to $9.25 from $9.10
  • Rhode Island, to $9.00 from $8.00
  • South Dakota $8.50 from $7.25
  • Vermont, to $9.15 from $8.73
  • Washington, to $9.47 from $9.32; minimum wage for workers ages 14 and 15 is to increase to $8.05 from $7.92
  • West Virginia, to $8 from $7.25 (effective 12/31/14)

California minimum wage will remain unchanged at $9.00 per hour in 2015, but will increase to $10.00 in 2016.

Employee or Independent Contractor?

Employers can avoid costly errors by correctly classifying their workers. The Employment Determination Guide (DE 38) is available to help California business owners determine whether a worker is an employee or an independent contractor. The California EDD also offers free Tax Seminars that teach employers and agents about employees versus independent contractors and the reporting requirements.