December 29, 2020
The year is coming to an end, and we want to provide information regarding changes for 2021. Also enclosed is a summary quick reference guide.
Deadline for 1099 Filing – January 31, 2021:
- The attached 1099 information worksheet is for your use in preparing 1099 forms, or for you to provide us with the information so that we are can prepare these forms on your behalf. If we prepare your forms, we must receive your information by January 21 to guarantee timely filing to the IRS and recipients by the deadline date of January 31, 2021.
- Late filing of mandatory 1099s could lead to penalties. Refer to “General Instructions for Certain Information Returns,” IRS.gov.
Deadline for W-2 Forms to the Government – January 31, 2021:
- The deadline to file W-2’s with the government has been accelerated to January 31; this change aims to make it easier for the IRS to detect and prevent refund fraud. The January 31 deadline has long applied to employers furnishing copies of these forms to their employees, so you now need to be sure to file with the government by this date.
- The standard FUTA tax is 6% on the first $7,000 of wages subject to FUTA.
- Some sales tax rates have changed. For rate information, click here.
Summary of Changes and Reminders for 2021:
- Social Security: The earnings limit will increase to $142,800.00. The rate remains at 6.2% for both employee and employer.
- Medicare: The rate remains at 1.45% with no limit. Employees who earn more than $200,000 ($250,000 for married couples filing jointly) will continue to pay an extra 0.9% Medicare tax in 2021; employers do not pay a matching portion for this amount.
- State Disability Insurance (SDI): The rate increases to 1.20% and the limit is raised to $128,298.00 for 2021. (These changes should be installed with your payroll software update).
- SUI: Verify and change your rate as necessary based on your notification received from EDD. You should have received your new “EDD State of California Notice of Contribution Rates and Statement of UI Reserve Account for the year 2021” notice in the mail or you can find your new rate by clicking here.
- If your SUI rate has changed from the rate used in 2020, you need to manually change it in your computer payroll module. Tax table updates do not include your new SUI and ETT rate. Make this change before you process a 2021 payroll.
- Minimum Wage: The minimum wage is increasing effective January 1. For companies with 26 or more employees, the minimum wage will be $14.00 per hour. For companies with 25 or fewer employees, the minimum wage will be $13.00 per hour. The California minimum wage is scheduled to increase every January by $1 per hour until 2022.
- Minimum Salary for Exempt Employees: 25 or fewer employees: $54,080.00; 26 or more employees: $58,240.00.
- Agricultural Workers’ Overtime:
- 25 or fewer employees: Overtime paid at 1.5 x regular rate for hours over 10 per day/60 per workweek
- 26 or more employees: Overtime paid at 1.5 x regular rate for hours over 8.5 per day/45 per workweek
- Mileage rate for 2021: Not released – Continue to check here for the updated rate when released.
- W-2 Reporting of Health Insurance Premiums: irs.gov, “The Affordable Care Act and Employers”
- The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on the Form W-2 does not mean that the coverage is taxable. The value of the employer’s excludable contribution to health coverage continues to be excludable from an employee’s income and is not taxable. This reporting is for informational purposes only and will provide employees with useful and comparable consumer information on the cost of their health care coverage. The value of the health care coverage will be reported in Box 12 of the Form W-2, with Code DD to identify the amount. There is no reporting on the Form W-3 of the total of these amounts for all employees. In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee.
- The Affordable Care Act requires employers with at least 50 full-time workers to offer employee health insurance. Each year, those employers must send a statement (Form 1095-C) to all employees eligible for coverage and also report to the IRS. Form 1094-C acts as a cover sheet for the 1095-C reporting information to be sent only to the IRS. For more information on this filing requirement, please contact our Core Accounting Services Department.
HSA Limits: www.irs.gov, “Health Savings Accounts”
- The maximum individual annual contribution increases to $3,600.00 (over 55 may add $1,000 = $4,600.00).
- The maximum family annual contribution increases to $7,200.00 (over 55 may add $1,000 = $8,200.00).
Pension Limits: www.irs.gov, “Retirement Plans”
- The 401(k) annual contribution limit remains at $19,500.00 (individuals over 50 may contribute $26,000.00). For more information on various retirement plan limits go to the website above.
- SIMPLE IRA annual contribution limit remains at $13,500.00 (individuals over 50 may contribute $16,500.00).
If you are utilizing payroll software, you should receive a new tax table update, or it will be available for download. Updates will need to be installed after running 2020 year-end reports, and before processing any payroll for 2021. Be certain to update your tables and closely review your first payroll in 2021. Again, change the SUI and ETT rates in your software, if necessary.
If you need to re-run any 2020 reports after changing rates, you must revert to the 2020 information, re-run reporting, then update to 2021 information again.
If you have any questions regarding your software, payroll taxes, or 1099s, don’t hesitate to contact our office at 209-527-4220 or firstname.lastname@example.org. Please ask for one of our qualified Client Accounting Services Department staff members to assist you. We are happy to be of service.