Employment Tax Tips
This summer, the IRS released news of its issuance of the first group CPEOs, which allow these organizations to be treated as the employer for certain purposes. Payroll taxes affect individuals, business entities and non-profit organizations.
CPEOsIn June, the IRS released news of its issuance of the first group of certifications from its program for the Professional Employer Organizations. The certification allows these organizations to contractually be treated as the employer for purposes of compensation and wages paid. CPEO arrangements can affect payroll taxes including FICA, FUTA and income tax withholding.
Payroll RequirementsFor 2017, the FICA (Federal Insurance Contributions Act) tax consists of the Old-Age, Survivors, and Disability tax, 12.4%, and the Hospital Insurance tax, 2.9%. The Old-Age, Survivors and Disability Insurance tax wage base is limited to wages paid by the employer to the employee over the 12-month calendar period, not to exceed a base pursuant to section 230 of the Social Security Act. The base amount is $127,200. The Federal Unemployment Tax Act tax is 6.2% up to $7,000 that an employee earns, with a partial state credit reduction. The Railroad Retirement Act taxes apply to railroad employees in lieu of FUTA, consisting of tier 1 and tier 2 taxes. Covered individuals will include employees within the scope of a contract between the CPEO. Payroll taxes can affect almost everyone. They can impact individual sole proprietors, partnerships, S corporations, limited liability corporations, and corporations. They affect both non-profit and for-profit organizations. Determination of employment status and the resulting taxability depend upon analysis of both statutory and common law.
Payroll taxes affect governments and political subdivisions. For example, the tax liability of political subdivision positions depends upon Section 218 of the Social Security Act for public employees.
An attorney specializing in tax and employment tax matters can help guide you through any issues that you face, helping to keep you in compliance and helping you if you run into issues. Important information regarding updates and due dates can be found on the IRS website.