UPDATED 2014 AMOUNTS WHICH AFFECT PAYROLL ARE AS FOLLOWS:
The IRS will allow business mileage tax deductions at the rate of 56 cents per mile, effective for miles driven in 2014. An employer may choose to reimburse employees at the IRS rate for business miles driven on their personal vehicle, without the reimbursement being reported as taxable wages to the employee. Reimbursement for 2014 above 56 cents per mile must be treated as taxable wages. NOTE – An employer is not required to use the IRS mileage rate for employee reimbursements, and therefore can reimburse more (taxable on excess) or less than the IRS rate.
HEALTH SAVINGS ACCOUNTS
The 2014 annual funding limits to health savings accounts (HSA’s) are $3,300 for self-only or $6,550 for family HSA’s. Employees age 55-65 can fund additional “catch-up” amounts of $1,000 to HSA’s (to $4,300 for self-only and $7,550 for family HSA accounts). These 2014 annual funding limits are the combined contribution amounts between employee and employer funding. NOTE- It is always smart to include employee HSA contributions as an “includable benefit”in a written Section 125 cafeteria plan document, in order to save FICA/Medicare taxes.
HEALTH FLEXIBLE SPENDING ACCOUNTS
Salary reduction deferrals/funding for employer healthcare spending accounts are limited to $2,500 per employee in 2014.
EMPLOYER PAID PARKING
An employer may reimburse or directly pay employees for up to $250 per month of parking as a non-taxable fringe benefit. The parking must be job-related and on or near the employer’s business location. NOTE – “Downtown” employers may want to consider providing non-taxable parking benefits in lieu of taxable employee wages.
FUNDING 2014 RETIREMENT PLANS
Funding limits for employee deductions to various types of “qualified” retirement plans during 2014 are as follows: Type of Regular Additonal Plan Amount “Catch-up”* 401(k), 403(b) annuity $17,500 + $5,500 and 457 government
SIMPLE-IRA $12,000 + $2,500
*An employee must be at least age 50 by 12/31/14 to contribute the “catch-up” contributions.
NOTE – The maximum compensation which can be “counted” for defined contribution retirement plans is $260,000 for 2014 which produces a funding “cap” of $52,000 in 2014.
EXTRA MEDICARE TAX ON HIGH WAGE EARNERS
Brand new for year 2013 was an additional amount of Medicare tax withholding of 9/10 of 1% on an employee’s annual wages in excess of $200,000 during 2013. The additional Medicare tax on “high earners” remains unchanged for 2014. The employer is not required to “match” this new Medicare tax on high wage earners.
SOCIAL SECURITY WAGE BASE
Wages are taxed up to $117,000 for FICA in year 2014. Both employer-paid FICA and Medicare tax rates in 2014 are unchanged from 2013 rates of 6.2% and 1.45%. Call one of AccuPay’s CPP/CPA teams at 885-7600 with questions about your payroll or suggestions about how we can serve you better in 2014!
PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques. You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.