This week’s question comes from Courteney, an office manager. Courteney asks: I just received my first 2013 paycheck and it is a lot less than my last check from 2012. Why did my paycheck go down in 2013? Answer: The biggest impact most employees will see is the...
The temporary decrease of the social security tax rate to 4.2% has expired with the end of 2012. Beginning in 2013, the social security tax rate on employees reverts to 6.2%. Net Pay Will Decrease Approximately 2% Employees will notice a decrease in net pay by about...
This week’s question comes from Adrienne, a sales manager. I normally earn in excess of the FICA limit ($106,800 in 2010 and 2011). I know the social security withholding rate has been reduced for 2011. What is the maximum amount of social security withholding tax...
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act) reduces the social security tax withholding rate from 6.2% to 4.2 % effective with payments made after December 31, 2010. Transfers To Federal Old-Age And Survivors...
HR 2847, An Act making appropriations for the Departments of Commerce and Justice, and Science, and Related Agencies for the fiscal year ending September 30, 2010, and for other purposes, was passed by Congress and sent to President Barack Obama who indicated he will...
In IR-2010-025, the Internal Revenue Service (IRS) announced that it “has made an administrative determination to accept the position that medical residents are excepted from FICA taxes based on the student exception for tax periods ending before April 1, 2005, when...
In the recently released Chief Counsel Advice (CCA) 200929004, the Internal Revenue Service ruled that money distributed from a company’s tip jar should be considered tips, not wages. The company requires that all its retail locations maintain a tip jar to collect...
This week’s question comes from Norma, an HR manager. I know that students with J-1 visas are exempt from FICA tax withholding in certain circumstances. We hired a non-student with a J-1 visa. Is a non-student holding a J-1 visa exempt from FICA tax withholding?...
This week’s question comes from Ron, a payroll department manager. We have a student who works for us who holds a J-1 Visa. He says that he should not have FICA tax withheld. Is a student holding a J-1 visa exempt from FICA tax withholding? Answer: Non-resident aliens...
This week’s question comes from Debbie, a sole proprietor. I read that children under age 18 are not subject to federal employment taxes. My children are now in college and work part-time year-round. I know they are now subject to FICA taxes. Do FUTA taxes apply to...
In the recently released Chief Counsel Advice (CCA) 200923029, the Internal Revenue Service ruled that discounts provided to an employer’s employees who purchase or lease property from a company that formerly owned the employer are taxable as fringe benefits based on...
This week’s question comes from Brad, a sole proprietor. My 16-year-old daughter will be out of school soon and I’d like to hire her for the summer in my sole proprietorship. Does a sole proprietor have to pay payroll taxes on children’s wages? Answer: Sole...
This week’s question comes from Will, a restaurant owner. We’ve hired several students to work for us this summer. Most of them don’t expect to owe any income tax this year. How do students claim exemption from income tax withholding? Answer: Students or others who...
This week’s question comes from Elizabeth, a small-business owner. We just hired a part-time employee who is seventy years old. He’s already collecting social security benefits so I’m not sure if I should still withhold it from his wages. At what age does social...
This week’s question comes from Rocco, a plant manager. We pay employees on active military duty a differential wage that makes up for wages that they would have earned had they not been on active military duty. Which payroll taxes do we need to pay on differential...
This week’s question comes from Carl, a partner in a partnership. I am an investor in a partnership and own a 25% interest as a partner. I also work for the business that the partnership owns. Can I be paid through payroll, have tax withheld, and receive a Form W-2?...
This week’s question comes from Janet, a sales rep: I read before that the wage base for 2008 was $102,000. I’ve made over $104,000, but FICA tax is still being withheld. Why didn’t my FICA tax deduction stop? Answer: Even though your gross wages are over $104,000,...
This week’s question comes from Becca, a sales rep: I read before that the wage base for 2008 was $102,000. I made over $90,000 at my first job and have earned more than $30,000 at my new job. Why didn’t my FICA tax deduction stop? Answer: The wage base generally must...
The Internal Revenue Service (IRS) recently issued Fact Sheet FS-2008-25, which discusses S corporation officer compensation. Corporate officers, whether in S corporations or C corporations, are generally considered employees of the corporation. Officers who perform...
This week’s question comes from Matt, a sales rep: Every week there’s a deduction for FICA on my paycheck. Two weeks ago, the deduction was lower than usual and last week there was no deduction at all. Why did my FICA tax deduction stop? Answer: The FICA (Federal...
A North Dartmouth, Massachusetts woman was sentenced to 6½ years in federal prison for paying her employees under the table, thereby avoiding approximately $10 million in tax payments and $7 million in workers compensation insurance premiums. Aimee J. King McElroy...
This week’s question comes from Mark, owner of an import company. I receive the same salary every week. All year, my Massachusetts income tax withholding has been the same. Now it’s gone up two weeks in a row. Why did this happen? Answer: In Massachusetts, a deduction...
In Rev. Proc. 2008-25, the IRS provided a safe harbor method of accounting for accrual-basis taxpayers to use to account for FICA and FUTA taxes. It also established procedures for taxpayers to use to change their method of accounting to this safe harbor method. Under...
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