Payroll Tax Update for 2016
The Social Security Administration (SSA) announced that the maximum earnings subject to the Social Security component of the FICA tax will remain at $118,500 for 2016. This means that for 2016, the maximum Social Security tax that employers and employees will each pay is $7,347 ($118,500 x 6.2%). A self-employed person with at least $118,500 in net self-employment earnings will pay $14,694 for the Social Security part of the self-employment tax. The Medicare component will remain at 1.45% of all earnings, and individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) will pay an additional 0.9% in Medicare taxes. This additional Medicare Tax is applicable to employees only; there is no employer match for Additional Medicare Tax.
IRS limits the amount employees can deposit to a 401(k) plan each year. A participant’s maximum pre-tax contribution for 2016 will remain at $18,000 (an additional $6,000 can be contributed for individuals who will be at least age 50 by the end of the year). This limit applies to the contributions to all 401(k) plans the person participated in during the year. It is the employee’s responsibility to keep track of the total contributions if they participated in the 401(k) plans of more than one employer during the same year.
Maryland businesses will pay less in unemployment insurance taxes next year. Fewer workers are being laid off and filing unemployment insurance claims, enabling the trust fund, used to pay jobless claims, to grow to levels that now permit a rate reduction. The tax rate is reset by law each year, based on the balance in the fund, which topped $983 million at the end of September, up nearly $80 million from the same time the year before.
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