Compliance Central

The California Employment Development Department has released the 2011 personal income tax withholding tables. California provides two methods for determining the amount to be withheld from wages and salaries for state personal income tax.

• Method A figures the withholding amount based on payroll period, filing status and number of allowances. The Standard Deduction and Exemption Allowance Credit are included in the wage bracket tables. This method involves fewer computations but cannot be used with your computer in determining amounts to be withheld.

• Method B may be used to calculate withholding amounts either manually or by computer. This method gives an exact amount of tax to withhold using the payroll period, filing status, number of withholding allowances, standard deduction, and exemption allowance credit amounts included in the tables provided.

The 2011 withholding rates for supplemental wages are unchanged:

• Bonuses and stock options – 10.23 percent

•Other types of supplemental wages (overtime pay, commissions, etc.) – 6.6 percent

Visit the EDD website for more information or contact the Taxpayer Assistance Center at (888)745-3886.

New Jersey employers who are subject to the New Jersey unemployment compensation and temporary disability laws will benefit from a tax amnesty being offered by the New Jersey Department of Labor and Workforce Development.  The UI/DI amnesty offer covers unemployment, disability, workforce, healthcare, and family leave insurance contributions for first quarter of 2005 through the fourth quarter of 2009. The amnesty offer does not include gross income tax, sales tax, or any other taxes due to the Division of Taxation nor does it include liabilities due for quarters prior to the first quarter of 2005 and after the fourth quarter of 2009.

To receive UI/DI tax amnesty, the employer:

• Must be current with the Employer’s Quarterly Report (NJ927) and Employer Report of Wages Paid (WR300),
• Must pay 100% of the contributions, reimbursement charges, assessments and fees, and
• Must pay 50% of the interest and penalties.

 Any employers with delinquent reports must file them before proceeding with the amnesty request.  All delinquent reports and the amnesty payment must be posted by midnight November 1, 2010.  If posted after midnight November 1, 2010, the employer will be responsible for the tax due and the full amount of the interest and penalty.

For more information, visit the NJ Department of Labor and Workforce Development’s Website at: http://lwd.dol.state.nj.us/labor/employer/ea/empinfo/uiditaxamnesty.html

The Social Security Administration (SSA) released the Social Security 2010 indexed figures on October 15, 2010.

The SSA announced that there will be no Cost of Living Adjustment (COLA) for 2011. According to the SSA news release, as determined by the Bureau of Labor Statistics, there is no increase in the CPI-W from the third quarter of 2008, the last year a COLA was determined, to the third quarter of 2010, therefore, under existing law, there can be no COLA in 2011.

The 2011 social security wage base will be $106,800, unchanged from 2010. As in prior years, there is no limit to the wages subject to the Medicare tax; therefore all covered wages are still subject to the 1.45 percent tax.

The OASDI tax rate for wages paid in 2011 is set by statute at 6.2 percent for employees and employers, each. Thus, an individual with wages equal to or larger than $106,800 would contribute $6,621.60 to the OASDI program in 2011, and his or her employer would contribute the same amount. This is unchanged from the 2010 maximum. The OASDI tax rate for self-employment income in 2011 is 12.4 percent.

For Medicare’s Hospital Insurance (HI) program, the tax rates are 1.45 percent for employees and employers, each, and 2.90 percent for self-employed persons. After 1993, there has been no limitation on HI-taxable earnings.

The social security wage base for self-employed individuals in 2011 will also be $106,800. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate remains 15.3 percent (combined social security tax rate of 12.4 percent and Medicare tax rate of 2.9 percent). In 2011, the maximum social security tax for a self-employed individual will be $13,243.20. This is unchanged from the 2010 maximum.

More information on the SSA 2011 indexed figures is available at: http://www.ssa.gov/OACT/COLA/

A fact sheet on SSA’s 2011 Social Security changes is available at: http://www.ssa.gov/pressoffice/factsheets/colafacts2011.htm

Reporting of Employer Health Care Coverage Costs

The Internal Revenue Service (IRS) issued notice 2010-69 on October 12, 2010, deferring the new requirements for employers to report the cost of coverage under an employer-sponsored group health plan. The optional reporting in 2011 allows employers the necessary time in adjusting payroll systems or procedures in preparation for compliance with the new healthcare reporting requirement. The IRS and Treasury Department announced guidance on the Form W-2 reporting requirement is expected to be released before the end of this year.

Although reporting the cost of coverage will be optional with respect to 2011, the IRS continues to stress that the amounts reportable are not taxable and intended to provide employees with more information on health care costs. The new reporting included in the Affordable Care Act, passed by Congress in March, require employers to report the aggregate value of all health coverage (excluding the value of a health flexible spending arrangement).

A draft of the 2011 Form W-2 shows employers Health Care Coverage Costs will be reported in Box 12 using code DD. The Advance Earned Income Credit payments reported in Box 9 is not applicable on the draft Form W-2 for 2011 because the credit was repealed for 2011.