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  • Nov 14 / 2021
What's New

IRS Announces 2022 COLAs for Transportation Fringes, FSA Deferrals, and More


The IRS released cost-of-living-adjustments (COLAs) for 2022 reflecting any increases in the flexible spending arrangements (FSA) deferral limit, foreign earned income exclusion, and excludable transportation fringes, among other changes [Rev. Proc. 2021-45, 11-10-21].

Qualified transportation fringes
The amounts that may be excluded from gross income for employer-provided qualified transportation fringe benefits (transportation in a commuter highway vehicle and any transit pass) and qualified parking for 2022 increase to $280 ($270 in 2021).

Health FSAs
For plan years beginning in 2022, the dollar limitation under IRC §125(i) on voluntary employee salary reductions for contributions to health FSAs increases to $2,850 ($2,750 in 2021). For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount increases to $570 ($550 in 2021).

Standard deduction
The standard deduction amounts for 2022 increase to $25,900 for married couples filing jointly or surviving spouses ($25,100 in 2021), $12,950 for single taxpayers and married taxpayers filing separately ($12,550 in 2021), and $19,400 for heads of household ($18,800 in 2021).

Federal tax levies
The Tax Cuts and Jobs Act altered the way the amount of wages, salary, or other income exempt from a federal tax levy is calculated. For taxable years beginning in 2022, the dollar amount used to calculate the amount determined under IRC §6334(d)(4)(B) increases to $4,400 ($4,300 in 2021).

Foreign earned income exclusion
For 2022, the maximum foreign earned income exclusion amount under IRC §911(b)(2)(D)(i) is $112,000 (up from $108,700 in 2021). The maximum amount of the foreign housing cost exclusion is $15,680 (up from $15,218 in 2021).

Medical Savings Account
To be eligible to make contributions to a Medical Savings Account (or to have the employer make the contributions), an employee must be covered by a high deductible health plan. For 2022, a high deductible health plan is a plan with an annual deductible of $2,450-$3,700 for individual coverage (up from $2,400-$3,600 in 2021) and $4,950-$7,400 for family coverage (up from $4,800-$7,150 in 2021). Maximum out-of-pocket expenses can be no more than $4,950 for individual coverage (up from $4,800 in 2021) and $9,050 for family coverage (up from $8,750 in 2021).

Long-term care insurance benefits
If a long-term care insurance contract makes per diem benefit payments, the amount of the payments that is excluded from income in 2022 is capped at $390 per day (down from $400 in 2021).

Adoption assistance
For 2022, the maximum amount that can be excluded from an employee’s gross income for qualified adoption expenses under an employer’s adoption assistance program is $14,890 (up from $14,440 in 2021). The maximum amount that can be excluded in connection with the adoption of a child with special needs is $14,890 (up from $14,440 in 2021).

The amount excludable from an employee’s gross income begins to phase out for taxpayers with adjusted gross income of $223,410 (up from $216,660 in 2021) and is completely phased out for taxpayers with adjusted gross income of $263,410 (up from $256,660 in 2021).

Qualified small employer HRA
For 2022, a qualified small employer health reimbursement arrangement (QSEHRA) is an arrangement which, among other requirements, makes payments and reimbursements for qualifying medical care expenses of an eligible employee that do not exceed $5,450 (up from $5,300 for 2021), or $11,050 in the case of an arrangement that also provides for payments or reimbursements for family members of the employee (up from $10,700 for 2021).

Pipeline construction industry per diem option
For 2022, an eligible employer may pay certain welders and heavy equipment mechanics up to $19 per hour for rig-related expenses that will be deemed substantiated under an accountable plan (up from $18 in 2021) and up to $12 per hour for fuel (up from $11 in 2021), when paid in accordance with Rev. Proc. 2002-41 (2002-23 IRB 1098).

  • Nov 07 / 2021
What's New

2022 Pension COLAs -401(k), 403(b), 457(b) Pre-Tax Contribution Limit Increases to $20,500 for 2022


The IRS has announced the cost-of-living adjustments (COLAs) to the dollar limits on benefits and contributions under qualified retirement plans, as well as other items, for tax year 2022.

  • The limitation on the exclusion for elective deferrals under §402(g)(1) (e.g., §401(k) and §403(b) plans) increases to $20,500 (from $19,500).
  • The limit on annual additions to defined contribution plans under §415(c)(1)(A) increases to $61,000 (from $58,000).
  • The limit on the annual benefit under a defined benefit plan contained in §415(b)(1)(A) increases to $245,000 (from $230,000).
  • The annual compensation limit under §401(a)(17), §404(l), §408(k)(3)(C), and §408(k)(6)(D)(ii) increases to $305,000 (from $290,000).
  • The compensation amount under §408(p)(2)(E) regarding elective deferrals to SIMPLE retirement accounts increases to $14,000 (from $13,500).
  • The limitation under §457(e)(15) concerning elective deferrals to deferred compensation plans of state and local governments and tax-exempt organizations (§457(b) plans) increases to $20,500 (from $19,500).
  • The limitation under §416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan increases to $200,000 (from $185,000).
  • The limitation under §414(v)(2)(B)(i) for catch-up contributions to §§401(k), 403(b), and 457(b) plans for individuals age 50 or over remains unchanged at $6,500; the limitation under §414(v)(2)(B)(ii) for catch-up contributions to an employer’s SIMPLE plan for individuals age 50 or over remains unchanged at $3,000.
  • The limitation used in the definition of “highly compensated employee” under §414(q)(1)(B) increases to $135,000 (from $130,000).
  • The annual compensation limit under §401(a)(17) for eligible participants in certain government plans that, under the plan as in effect on July 1, 1993, allowed cost-of-living adjustments to the compensation limit under the plan under §401(a)(17) to be taken into account, increases to $450,000 (from $430,000).
  • The compensation amount under §408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $650.
  • The compensation amount under Treas. Reg. §1.61-21(f)(5)(i), concerning the definition of “control employee” for fringe benefit valuation purposes, increases to $120,000 (from $115,000). The compensation amount under §1.61-21(f)(5)(iii) increases to $245,000 (from $235,000).
  • The limit on annual contributions to an Individual Retirement Arrangement, remains unchanged at $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • Nov 07 / 2021
What's New

Social Security Wage Base Increases to $147,000 for 2022


The Social Security Administration announced that the 2022 social security wage base will be $147,000, which is an increase of $4,200 from $142,800 in 2021.

The maximum social security tax employees and employers will each pay in 2022 is $9,114, an increase of $260.40 from $8,853.60 in 2021.

  • Aug 29 / 2021
What's New

Department of Education Extends Federal Student Loan Relief


The U.S. Department of Education announced it will extend the federal student loan relief until January 31, 2022 [U.S. Department of Education, Press Release, 8-6-21; Federal Student Aid notice]. This final extension sets a “definitive end date” to the relief.

During this extension of relief for federal student loan borrowers, repayments, interest, and collections are still halted, and any borrower with defaulted federally held loans whose employer continues to garnish their wages will receive a refund of those garnishments. The relief had been set to expire on September 30, 2021.

Courtesy of the APA

  • Aug 29 / 2021
What's New

Federal Per Diem Rates Updated for Fiscal Year 2022


The General Services Administration (GSA) issued its annual updated list of federal maximum per diem rates for travel to locations within the continental United States (CONUS). Per Diem Bulletin FTR 22-01 is effective for travel undertaken on or after October 1, 2021 [86 F.R. 45731, 8-16-21].

GSA Per Diem Rates

The federal per diem rate is a combination of the lodging expense rate and the meal and incidental expense (M&IE) rate for the locality of travel. For travel within CONUS, the per diem rates published by the GSA may be used to substantiate certain travel expenses.

The standard CONUS M&IE rate is $59 for fiscal year (FY) 2022. The M&IE rates for non-standard areas (NSAs) increase to $59, $64, $69, $74, and $79.

For all locations within CONUS not shown on the list, the lodging per diem remains at $96, the M&IE rate increases to $59, and the combined maximum standard per diem rate increases to $155. The combined per diem rates for the listed NSA locations range from a low of $155 (off-season) for several locations, to a high of $497 (peak season) for Telluride, Colo. There are 319 NSA locations in FY 2022. All FY 2022 NSA lodging per diem rates will remain at FY 2021 levels.

Courtesy of the APA

  • Mar 30 / 2021
What's New

IRS Releases 2021 Form 941, Instructions for Form and Schedules B and R


On March 9, the IRS released the 2021 Form 941, Employer’s Quarterly Federal Tax Return, and its instructions. The IRS also revised the instructions for Form 941, Schedule B and the instructions for Form 941, Schedule R. When the IRS released the instructions, Congress was considering changes to COVID-19 tax relief. When the new legislation changes these instructions, the IRS will post updates here.

Updates to Form 941

The Form 941 instructions have been updated to include extensions of the COVID-19-related tax credits under the Consolidated Appropriations Act, 2021:

  • The Families First Coronavirus Response Act (FFCRA) tax credit for emergency paid sick leave wages and expanded family and medical leave wages was extended to qualified leave wages paid for leave taken before April 1, 2021.
  • The employee retention credit, established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, was extended to qualified wages paid through June 30, 2021.
  •  The instructions also provide guidance on claiming advance tax credits using Form 7200, paying the employer and employee social security tax deferred in 2020, and a new payroll tax credit for tax-exempt organizations affected by qualified disasters.

Paying Deferred Amount of Social Security Tax

The IRS said it will update its Electronic Federal Tax Payment System (EFTPS) to allow employers to pay the deferred amounts of the employer and employee share of social security tax by March 19. Filers will be able to select the new option to make these payments.

Courtesy of the APA

 

  • Mar 30 / 2021
What's New

California Pay Data Reporting Required by March 31


By March 31, 2021, California private employers with 100 or more employees that are required to file the annual federal Employer Information Report (EEO-1) are required to submit a pay data report to the state. The California Pay Data Reporting Portal is open.

Due to the COVID-19 pandemic, the California Department of Fair Employment and Housing will consider an employer’s request that the agency defer seeking an order for compliance (to submit the required report by the due date). An employer must submit the request before March 31. Requests must be submitted using the online form.

Legislation requiring California pay data reporting in 2021 was passed last year. Guidance is available for employers, including a User Guide, FAQs, and a template that employers may use to submit their data.

Courtesy of the APA Lia Coniglio, Esq

  • Mar 09 / 2021
What's New

Biden Administration Extends Relief for Federal Student Loan Borrowers


On January 20, President Biden requested that the Secretary of Education extend COVID-19-related relief for federal student loan borrowers. The U.S. Department of Education has indicated on its Coronavirus and Forbearance Info for Students, Borrowers, and Parents website that the relief will be extended at least through September 30, 2021. Without the extension, the relief measures would have expired on January 31.

During this extension of the payment suspension, collections on defaulted, federally held loans are still halted, and any borrower with defaulted federally held loans whose employer continues to garnish their wages will receive a refund of those garnishments.

New Administration May Have Big Impact on Payroll

The Biden administration has many priorities that, if implemented, will have a big impact on payroll professionals. Some of these policy initiatives include: adjusting the income tax benefits for participation in retirement plans such as 401(k) plan, raising the federal minimum wage to $15 an hour, and reforming labor provisions relating to joint employer status.

Courtesy of Curtis E. Tatum, Esq., Director of Federal Payroll Compliance for the APA.

  • Mar 09 / 2021
What's New

IRS Releases 2021 Forms W-2, W-3, Instructions


The IRS released the 2021 Form W-2, Wage and Tax Statement, Form W-3, Transmittal of Wage and Tax Statements, and the General Instructions for Forms W-2 and W-3. The instructions have been updated to address how employers should handle COVID-19-related employment tax credits.

Items of interest to payroll professionals:

  • Potential discrepancies when reconciling Forms W-2 and W-3 with Forms 941 and 944 due to COVID-19-related employment tax credits.Employers may have a discrepancy when reconciling Forms W-2 and W-3 with Forms 941 and 944 if COVID-19 tax relief was taken in 2020. Paid qualified sick leave and family leave wages are not subject to the employer share of social security tax. Also, the deferred amount of the employee share of social security tax is reported on Forms 941 and 944, but it is not reported on Forms W-2 and W-3.
  • Reporting deferred employee share of social security tax from 2020. Employee social security tax deferred in 2020 under Notice 2020-65 that is withheld in 2021 and not reported on the 2020 Form W-2 should be reported in Box 4 on Form W-2c. Enter tax year “2020” in Box c and adjust the amount previously reported in Box 4 of the Form W-2 to include the deferred amounts withheld in 2021. All Forms W-2c should be filed with the Social Security Administration, along with Form W-3c, as soon as possible after withholding the deferred amounts. For more information, see the IRS webpage on Form W-2 reporting of employee social security tax deferred under Notice 2020-65.
  • Mar 09 / 2021
What's New

IRS Releases 2021 Publications 15 (Circular E) and 15-B

Circular E summarizes the COVID-19-related tax credits and other tax relief on page 2.

COVID-19 Items 

Due to the COVID-19 pandemic, employers with participants in health and dependent care flexible spending arrangements (FSAs) can amend their plans to allow:

  • Participants in health and dependent care FSAs to carry over any unused benefits or contributions remaining in the account from the plan year ending in 2020 to 2021 and also from the plan year ending in 2021 to 2022.
  • A 12-month grace period for unused benefits or contributions in health and dependent care FSAs for plan years ending in 2020 or 2021.
  • Post-termination reimbursements from health FSAs from unused benefits or contributions for 2020 or 2021 through the end of the plan year in which an employee ceases participation in the plan.
  • A midyear change in the election amounts up to the maximum allowable amount for the year for health and dependent care FSAs for plan years ending in 2021.

Reminder on Withholding Tables

The percentage method and wage bracket method withholding tables, as well as the amount to add to a nonresident alien employee’s wages for figuring income tax withholding, are now in Publication 15-T,  Federal Income Tax Withholding Methods.

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