With a new year in full swing, some of the updates to look at are payroll changes for the tax year of 2022.
Here’s a brief overview of some of those changes, broken down into five points for clarity.
1. Social Security wage base increase
FICA, which is comprised of Social Security and Medicare taxes, is at a fixed rate of 7.65% on the employer, as well as an equal rate on the employee. The Social Security portion of the FICA is at 6.2%, and is capped to a taxable compensation wage base that adjusts annually. In 2022 the limit will be $147,000, which is up from $142,800 in 2021.
2. Minimum wage increases
The minimum wage can vary depending on the state and locality of your employees. Each year, federal, state, and local minimum wage rates can potentially change.
As of 12/31/21, the minimum wage in NY and NJ is as follows:
- $15 hourly for NYC, Long Island, and Westchester.
- $13.20 for the remainder of New York State.
- $13 for NJ workers.
3. Retirement contribution limits
4. Health savings account limits
- If you offer employees a high deductible healthcare plan (HDHP) with a health savings account (HSA) option, keep in mind that contributions are limited each year. For 2022, employees with self-only coverage can contribute up to $3,650 (an increase of $50 from 2021) for the year.
- If an employee has family coverage, they can contribute up to $7,300 (an increase of $100 from 2021). And if they’re 55+, they can put in an additional $1,000 in catch-up contributions (unchanged from previous years).
5. State unemployment tax rates
State unemployment tax rates may change annually. Many states send employers a new unemployment rate each year via a notice in the mail. NYS sends a letter with updated UI rates annually.
To ensure your state unemployment rates are accurate for the new year, make sure to forward any correspondence you receive from the state to your payroll provider. If you are using payroll software provided by Oberlander & Co, we review your UI rate annually on our NYS online account and update it accordingly.
❓ Looking to learn more about Form 1099 Requirements? Read more here.
