Important Year-End Updates

Important Year-End Updates

2020 was a long, difficult year for many. As the year comes to a close, many are eagerly looking forward to turning the page on the calendar to 2021, and to the hope that a new year inevitably brings.

While 2020 taught us that there are some things we may not expect, there are still some changes we know and can prepare for. To help your staffing business get ready for the new year, we’ve assembled a list of important tax and minimum wage changes for 2021.

Earned Income Tax Credit Notice Information:
For 2020, you are encouraged to notify the following employees that they may be able to claim EIC on their 2020 tax returns:

  • Employees with one qualifying child and wages less than $41,756.  The employee’s copy of Form W-2 TRICOM prepares has the required statement about the EIC on the back of the form.  

There are seven states that require employers to provide some additional notification to their employees about their possible eligibility for Earned Income Tax Credit. The following states allow employers to use Federal Notice 797:

  • California
  • Illinois
  • Louisiana
  • Texas

The following states require the use of a state-specified form:

  • New Jersey
  • Virginia
  • Maryland

Once these documents are updated for the current year, they will be available on TRICOM’s website under: http://tricom.com/resources/tax-tools. Please contact your TRICOM Accounting representatives if you have any questions.

Minimum Wage Increases:
2021  Wage Changes
 

State

2021

2020

Change

Alaska

10.34

10.19

0.15

Arizona

12.15

12.00

0.15

Arkansas 11.00 10.00 1.00

California -1

14.00

13.00

1.00

Colorado

12.32

12.00

0.32

Florida

8.65

8.56

0.09

Illinois 11.00 10.00 1.00

Massachusetts

13.50

12.75

0.75

Maine

12.15

12.00

0.15

Maryland 11.75 11.00 0.75
Michigan 9.87 9.65 0.22

Minnesota-3

10.08 10.00 0.08

Missouri

10.30

9.45

0.85

Montana

8.75

8.65

0.10

Nevada 9.75 9.00 0.75

New Jersey-4

12.00

11.00

1.00

New Mexico 10.50 9.00 1.50

New York-2

12.50

11.80

0.70

Ohio-5

8.80

8.70

0.10

South Dakota 9.45 9.30 0.15

Vermont

11.75

10.96

0.79

Washington

13.69

13.50

0.19

1- Listed for employers with 26 or more employees-employers with 25 or less is $12.00

2- Listed rate for most NY employers; Minimum wage for New York City is $15.00 for all employers

3- Rate listed for large employers (annual sales of $500,00 or more) small employers have minimum wage of $8.21

4- Rate for most employers; $11.10 for seasonal or small employers (fewer than 6 employees); $10.44 for agricultural employers

5- Rate is listed for large employers ($323,000 in gross receipts); $7.25 (Federal Rate, for small employers)

2021 Unemployment Wage Bases:
Taxable Wage Base for 2021

STATE

 

STATE

 

WAGE

WAGE

BASE

BASE

Alabama

$8,000

Nebraska

9,000

Alaska

 

Nevada

33,400

Arizona

7,000

New Hampshire

14,000

Arkansas

10,000

New Jersey

36,200

California

7,000

New Mexico

27,000

Colorado

13,600

New York

11,800

Connecticut

15,000

North Carolina

26,000

Delaware

 

North Dakota

 

District of Columbia

9,000

Ohio

9,000

Florida

7,000

Oklahoma

24,000

Georgia

9,500

Oregon

43,800

Hawaii

 

Pennsylvania

10,000

Idaho

 

Puerto Rico

 

Illinois

12,960

Rhode Island (Tier 1)

 

Indiana

9,500

Rhode Island (Tier 2)

 

Iowa

32,400

South Carolina

14,000

Kansas

14,000

South Dakota

15,000

Kentucky

 

Tennessee

 

Louisiana

7,700

Texas

9,000

Maine

12,000

Utah

38,900

Maryland

8,500

Vermont

14,100

Massachusetts

15,000

Virgin Islands

 

Michigan

 

Virginia

8,000

Michigan (delinquent employers)

 

Washington

56,500

Minnesota

 

West Virginia

12,000

Mississippi

14,000

Wisconsin

14,000

Missouri

11,000

Wyoming

27,300

Montana 35,300    
  • Yellow highlighted areas indicate those states that have not yet released their wage bases. This information will also be listed on TRICOM.com and updated as information becomes available.

FUTA Reduction States:
For tax year 2020, only the Virgin Islands has not repaid their Federal Unemployment Tax loans. Their FUTA Credit reduction rate for 2020 will be 3.0%. There are currently 12 other states that have Federal Unemployment loans, but the outstanding amounts for these loans do not affect the 2020 FUTA rates for these states.

State Tax Table Changes:
The following states have changed their tax tables for 2021 (please keep in mind other states may be added to this list):

  • Iowa
  • Maine
  • California
  • New Jersey
  • South Carolina

Federal Tax Changes:

  • Social Security Wage Limit has increased from $137,700 to $142,800.  This is an increase for both the employee and the employer of $316.20. The additional .9% Medicare tax on employee wages over $200,000 is still in place for 2021.
  • 401K Limit for 2021 remains unchanged at $19,500; the limit on the contribution for individuals aged 50 and over remains unchanged at $6,500.
  • SIMPLE Retirement Plan is at $13,500, no change from 2020.

Standard Deduction Changes:

  • Single & Married Filing Separately: $12,550
  • Married Filing Jointly: $25,100
  • Head of Household: $18,800

Additional State & Federal Tax Topics:

  • For 2021, Oregon’s workers’ compensation premium assessment rate will increase to 9.0% from 8.4%. In addition, Oregon Worker’s Benefit Fund will remain the same at 2.2 cents per hour. One-half of this amount is paid by the employer.
  • The FLSA rate for exempt employees who earn salaries changes to $780 (40,560) per year starting October 3, 2021. This is an increase from the current $684 (35,568).
  • California 2021 SDI rate is 1.2% on the first $128,298 of wages.
  • New York employee paid family leave (PFL) contribution will be .511% (currently .270%) of wages up to the annual maximum of $72,860.84 in wages.
  • Cincinnati City payroll tax rate has been reduced in 2021 from 2.1% to 1.8%.
  • Effective January 1, 2021, employee temporary disability insurance (TDI) and Family Leave Insurance (FLI) rates in New Jersey have increased. The employee TDI rate has increased from .26% to .47%. The FLI rate has increased from .16% to .28%. The taxable wage base for these taxes has increased from $134,900 to $138,200.
  • Earlier in the year it was announced that Non-employees (Independent Contractors) compensation that was reported on 1099-MISC in prior years will be reported on a new 1099-NEC. TRICOM will report all Non-employee income using this new form except for the appropriate exceptions (per instructions); those will be reported appropriately on the 1099-MISC.
  • Per the Guidance on Reporting Qualified Sick Leave Wages and Qualified Family Leave Wages paid pursuant to the Families First Coronavirus Response Act (FFCRA), TRICOM will report any paid wages in Box 14 of the employee’s W-2. They will be labeled “PFL” or “PSL” depending on which reason the employee was paid.
  • All TRICOM Full Service and Administrative-Only Clients should have received their Year End Questionnaire from the TRICOM team. Please make sure to respond promptly and return to the Accounting Representative that sent it to you.

For more legislative and year-end updates, please refer to TRICOM.com. We will post the latest legislative and tax updates, as well as tax tools and other resources for 2021 as they become available. For specific questions, please contact Mary Jo Heim in the TRICOM Accounting Department at 262-509-6214 or your TRICOM Accounting Representative.

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