On January 1, 2021, the Social Security wage base will increase to $142,800. Employers should withhold Social Security taxes (6.2 percent) from employees’ wages up to $142,800 and withhold the Medicare tax (1.45 percent) on all wages. If you use an off the shelf software product (i.e. QuickBooks) to prepare payroll, be sure to install any downloads provided by those software products. Employers must continue to pay their portion of Social Security tax using the 6.2 percent and still match the Medicare tax 1.45 percent.
Employers must withhold an additional .9 percent from wages it pays to an employee earning in excess of $200,000 in a calendar year. This withholding does not begin until the period the employee exceeds $200,000 in wages. This tax is not subject to an employer match.
All new employees must file a W-4 form for 2021. The W-4 form should be submitted to the employer as soon as possible so the correct amount of tax can be withheld for the year. If an employee does not submit a W-4 form, you must withhold the tax as if the employee is single with no other adjustments. Employers must also have all new employees complete form I-9, Employment Eligibility Verification form. New York State requires that all employers mail or fax completed W-4’s or NY IT-2104 to New York State within 20 days of date of hire. There is a $20 penalty, multiplied by the number of employees for all W-4’s not reported. New York State also requires employers to provide employees written notice of their pay rate, overtime pay rate (if applicable), and their regular pay day. Please see the NYS Department of Labor website www.labor.ny.gov for details and templates for various types of pay arrangements. This notice is to be provided to employees when hired and whenever there is a change in their pay-rate.
The NYS Unemployment wage base increases to $11,800/per employee in 2021, that’s an increase of $200 over the previous wage base/per employee. It is scheduled to increase each year after that. Additionally, while not a new requirement, employers are reminded that if an employee leaves for any reason (quits, discharged, laid off), they should be provided with a written notice that includes the employer’s name, the NYS Employer Registration Number, Mailing address where payroll records are kept, and instructions to the employee to give the information on the form to the UI Claims Center. We refer you to the NYS Department of Labor’s website www.labor.ny.gov for more information.
Domestic WorkersNanny Tax – Employers must withhold and pay Social Security tax on the wages of their household workers if cash wages paid in calendar year 2021 total $2,300 or more.
Deposit Requirements for 2021 – Federal. There are two deposit schedules, monthly and semi-weekly, for determining when you deposit Federal employment and withholding taxes. The IRS determines which deposit schedule you must use based on the lookback period.
Under the monthly rule, employment and other taxes withheld on payments made during a calendar month must be deposited by the 15th day of the following month.
Under the semiweekly rule, employment and other taxes withheld on payments made on Wednesday, Thursday, and/or Friday must be deposited by the following Wednesday. Employment and other taxes withheld on payments made on Saturday, Sunday, Monday and/or Tuesday must be deposited by the following Friday.
A special rule applies to deposits of $100,000 or more. These deposits must be made the next business day.
The Internal Revenue Service allows businesses with a total employer tax for a calendar quarter of $2,500 or less to be paid with the 941 Employer Quarterly Federal Tax Return. This does not apply to annual returns.
Form 944 is for employers whose annual liability for Social Security, Medicare, and Federal withholding tax is $1,000 or less. The IRS will notify you if you are a Form 944 filer, and your status will remain a Form 944 filer until the IRS notifies you otherwise. The 944 is an annual return. If your liability for these taxes is $2,500 or more, you are generally required to deposit the taxes instead of paying when you file Form 944.
New York State Deposit Requirements – New York State Withholding tax and wage reporting system requires filers with less than $700 in quarterly withholding liability to deposit the withholdings for each quarter by the end of the month following the end of the quarter. Filers with $700 or more in quarterly withholding liability are required to make the deposit with form NYS-1 within three business days following the payroll date on which the $700 total was attained. In addition, if you have reached the $700 threshold and filed at least once during the calendar quarter, you can send the difference with your quarterly return, NYS-45, instead of with a Form NYS-1. New York requires online filing of NYS-45 returns.
Employers withholding $15,000 or more in the calendar year that proceeds the previous calendar year must file a return and remit tax withheld within three business days of the payroll in which their tax withheld equaled or exceeded $700. Employers withholding less than $15,000 must file within five business days.
The Internal Revenue Service and New York State have imposed strict penalties for failure to deposit and/or pay payroll taxes timely. It is the employer’s responsibility to calculate and make these payments. We recommend that all payroll reports and wage and tax statements be mailed via certified mail with a return receipt. This way, the employer has proof of a timely filing, should the need arise.
The CARES Act under sections 2302(a)(1) allowed for the deferral of employer’s share of Social Security tax due during the “payroll tax deferral period” beginning March 27, 2020 and ending December 31, 2020. If you did defer tax payments, 50% of the eligible deferred amount must be paid by December 31, 2021 and the remaining amount is due by December 31, 2022.
Metropolitan Commuter Transportation Mobility Tax – The Metropolitan Commuter Transportation Tax (MCTMT) is new tax imposed on certain employers engaging in business within the Metropolitan Commuter Transportation District (MCTD). The MCTD includes New York City and the counties of Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester. This tax will apply to fewer employers then was the case in prior years.
The MCTMT tax is .11% (.0011) up to .34% (.0034) of your payroll expense (as long as your payroll expense exceeds $312,500 in any calendar quarter), for all covered employees. A covered employee is an employee who performs all of their services inside of the MCTD or an employee who has all of their services allocated to the MCTD. If an employee performs services both inside and outside of the MCTD, the law provides for the application of four (4) successive tests to determine if the employee’s services should be allocated to the MCTD. If this situation applies to you, please contact us for a printout of those tests. The MCTMT tax is filed using Form MTA-305 and is due on a quarterly basis.
Workers Compensation – The Workmen’s Compensation Law allows self-employed persons and partners of partnerships (other than limited partners) to elect coverage of benefits. If you are self-employed (sole proprietor) or a partner as defined in Section Ten of the Partnership Law, you can elect coverage by contacting your insurance agent. LLC’s and LLP’s are treated as partnerships for Workers’ Compensation purposes.
The Workmen’s Compensation Law also allows officers and stockholders of small closely held corporations to elect not to be covered under Workmen’s Compensation. This provision is applicable if the closely held corporation has only one or two shareholders and those shareholders are the only officers, directors, and employees. You should contact your insurance agent to obtain the proper forms if you wish to make this election.
Paid Sick Leave (NYS) – New York state’s paid sick leave law requires employers with five or more employees or not income of more than $1 million to provide paid sick leave to employees. Employers with fewer than five employees and a net income of $1 million or less to provide unpaid sick leave to employees. Please visit www.nyc.gov/PaidSickLeave for more information.
Beginning September 30, 2020 covered employees start to accrue leave at a rate of 1 hour for every 30 hours worked and can start using the accrued time as of January 1, 2021. Employers with 5-99 employees must provide up to 40 hours of paid sick leave per calendar year. Employers with 100 or more employees must provide up to 56 hours.
Miscellaneous – Remember to include in your employees compensation, their personal use of any company-provided vehicles. Please contact us if you need assistance in valuing this taxable fringe benefit.
Also, remember to establish and maintain (for at least six years) payroll records for each pay period for employees and payments to retirees.
Please note the NYS minimum wage increase to $12.50 per hour, effective December 31, 2020. (New Minimum wage posters can be printed from NYS Department of Labor website: www.labor.ny.gov ). Note: In New York City, Long Island, and Westchester; minimum wage rates are higher, please refer to the website or call our office for details. In addition, employers in the hospitality industry also have additional rules. For instance wait staff minimum cash wage rises to $8.35, and the maximum tip credit is $4.15.
Paid Family Leave – On January 1, 2018 Paid Family Leave Act (PFL) began in New York. This program is designed to provide wage replacement and job protection to employees who need time away from their jobs to:
- Bond with a newly born, adopted, or fostered child;
- Care for a family member with a serious health condition; or
- Assist loved ones when a family member is deployed abroad on active military duty
Insurance coverage for Paid Family Leave must be available to employees beginning January 1, 2018, and generally will be included under an employer’s existing disability benefits policy.
Employers may collect the cost of Paid Family Leave through payroll deductions. The maximum employee contribution in 2021 shall be 0.511% of an employee’s weekly wage. The maximum annual contribution is $385.34. For example, an employee earning a gross wage of $1,000 per week, could have PFL premium of $5.11 withheld per week.
For more information please see the State’s website ny.gov/paidfamilyleave.
New York Employer Compensation Expense Tax – Employers can “opt in” for calendar year 2022 must enroll no later than December 1, 2021. This is an optional, employer paid tax. Please contact us if you are thinking about “opting in”.
Sickler, Torchia, Allen & Churchill, CPA’s, PC