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We can use this space to introduce the topics below.
In 2022, Congress passed a couple of major pieces of legislation that included tax law changes. The Inflation Reduction Act passed earlier in the year, included little in the way of tax changes that affect our business clients. However, it did enhance several of the energy credit provisions.
At the end of 2022, a government funding package was approved that included a number of provisions affecting retirement plans, commonly known as Secure Act 2.0. Some major changes in this Act include an enhancement to credits for employers starting a new qualified retirement plan, a requirement that new 401k and 403b plans include automatic enrollment provisions, and a requirement starting in 2024 that requires plan catch-up contributions for those earning $145,000 or more to be subject to Roth tax treatment.
We will continue to monitor our government agencies for any new tax rules and assess the impact on our clients. Should new laws be enacted, you can expect PKS to consider revisions to tax planning strategies.
At the end of this letter, we have highlighted a number of tax law changes that became effective in 2022 and 2023.
Generally, the health care reporting requirements only affect “large” employers. However, they will affect any employer, regardless of the number of employees, if the employer sponsors a self-insured health plan.
Reporting is required related to the health care coverage that was provided during 2022. Employers with 50 or more full-time equivalent employees will use Forms 1095-C to report to the IRS and to each employee information about the health coverage that was offered. The reporting will include information about the health care coverage provided during the year, including the employee’s share of the cost.
Health insurance companies have a separate but similar reporting on Forms 1095-B. This reporting will include information about all individuals being covered, including an employee’s spouse and each dependent. For employers with self-insured plans, this reporting obligation would normally fall to the employer. However, rather than self-insured employers filing both Forms 1095-C and 1095-B, combined reporting can be done by completing an additional section of the Form 1095-C.
The due date for filing these 2022 reporting forms with the IRS is February 28, 2023 (paper) or March 31, 2023 (electronic). The 2022 forms must be distributed to employees by March 2, 2023.
The IRS requires nearly all companies to remit their taxes electronically through the Electronic Federal Tax Payment System (EFTPS).
Small employers, whose quarterly federal payroll tax deposits are less than $2,500, will not be required to use EFTPS for these tax remittances. They will be allowed to send in their tax payments by check with the filing of their payroll tax returns. Similarly, for income taxes that are less than $2,500 for the year, payments can be made by check with the return filing.
Employers who need to enroll should visit the EFTPS website at www.eftps.gov and select the Enrollment tab to set up their company and bank account information.
Employers whose combined payroll tax deposits exceeded $50,000 during the prior “look back period” generally will be required to make deposits on a semi-weekly basis (Wednesday and Friday). If deposits totaled $50,000 or less, payroll tax deposits can be made monthly by the 15th day of the following month. Employers with less than $2,500 of accumulated FICA and withheld income tax during a quarter can make payments with their 941, rather than making monthly deposits.
Employers who withheld $15,000 or more in Maryland state withholding for 2022 and who have $700 or more in withholding in any one payroll period are required to remit Maryland withholding payments within three business days following that pay date. Employers with less than $700 of Maryland withholding per quarter may remit the tax withheld on a quarterly basis. If neither of the previous two conditions are met, Maryland withholdings are required to be remitted on a monthly basis.
Non-resident employees from states that have no income tax law or have no reciprocal income tax agreement with Maryland (i.e. Delaware) are subject to Maryland tax and Maryland withholding requirements.
Maryland withholding taxes can be filed and paid online at: www.marylandtaxes.com. If you do not owe tax, you are still required to file a return until you give written notice to the Comptroller of Maryland indicating you no longer have employees, or are no longer liable to file the return.
Maryland Unemployment Insurance Trust fund has determined the tax rates for 2023 will range from 1.0% to 10.5%. Maryland’s taxable wage base remains at $8,500. You should receive your 2023 Experience Rate Notice mid-January by mail. If need be, you can call 1-800-492-5524 to get your current rate.
Delaware’s Unemployment taxable wage base remains at $14,500 for 2023. Employer contribution rates will range from 0.3% to 8.2%.
Pennsylvania’s Unemployment taxable wage base remains at $10,000 for 2023. Employer contribution rates will range from 1.4190% to 10.3734%. The 2023 employee SUI withholding rate increased to 0.07% on total wages.
If you process your own payroll, be sure to enter your new rate before the first payroll of 2023.
The Social Security wage base increases to $160,200 for 2023. Rates and amounts in effect for 2023 are as follows:
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*These Medicare rates increase by 0.9% when employees’ wages exceed $200,000. This increase affects the employee rate only. The employer rate remains at 1.45% no matter the level of compensation. The 0.9% increase also affects self-employed individuals and those with multiple jobs when combined wages and SE earnings exceed $200,000 for a single taxpayer and $250,000 for joint filers.
Social Security benefits will increase 8.7% in January 2023.
If you are not yet collecting Social Security benefits and wish to verify your earnings, you can do so by asking for your Social Security Statement. You can get this by visiting an Administration office, through the mail or via the Internet. You can telephone toll-free (800) 772-1213 and ask for Form SSA-7004 or you can download the form from the Internet by going to the Social Security Administration’s website at http://www.ssa.gov. At this website, you can submit your Social Security Statement request online. For security purposes, you need to enter your mother’s maiden name. The SSA site also has all sorts of information readily available.
The amount of earnings that a Social Security recipient may earn during 2023 without reducing benefits is as follows:
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*These Medicare rates increase by 0.9% when employees’ wages exceed $200,000. This increase affects the employee rate only. The employer rate remains at 1.45% no matter the level of compensation. The 0.9% increase also affects self-employed individuals and those with multiple jobs when combined wages and SE earnings exceed $200,000 for a single taxpayer and $250,000 for joint filers.
IRS Form W-4V must be completed to elect income tax withholding from your Social Security benefits.
You may choose one of four rates: 7%, 10%, 12% or 22%. You should have already received this
information with your Social Security check. If not, we suggest you call your local Social Security office
or visit their website.
The IRS Form W-4 for 2023 has been revised and the IRS-provided Tax Withholding Estimator has been removed. The amounts used in Step 2(b) and Step 4(b) on the worksheet have been updated.
Under the Fair Labor Standards Act (FLSA), salaried employees who earn less than $684 per week are entitled to receive overtime pay.
Delaware’s minimum wage will be $11.75 effective January 1, 2023 and is scheduled for an increase to $13.25 in 2024.
Maryland’s minimum wage will increase to $12.80 effective January 1, 2023 for employers with less than 15 employees. For employers with 15 or more employees, the minimum wage increased to $13.25.
Pennsylvania’s minimum wage remains at $7.25 for 2023, the same as the Federal minimum wage rate.
Employers are required to verify that employees are either U.S. citizens or aliens authorized to work in the U.S. Anyone hired after November 6, 1986 must have a Form I-9 completed and kept on file with the employer for three years after the date of hire or for one year after employment is terminated, whichever is later. The Form I-9 was revised in 2017 and the list of acceptable documents for verifying employment eligibility and identity has been amended. You should be using the most recent Form I-9 for all new hires. There can be substantial penalties when a required form is not completed and retained.
The PKS hospitality group helps businesses succeed in an industry known for financial obstacles, government regulations, employee issues and seasonality.
We work with a wide array of clients in the hospitality industry to provide accounting services for all aspects of their business and serve as trusted advisors. Including but not limited to:
PKS is known as a premier provider of business, accounting and tax services to the professional services sector throughout the Delmarva Peninsula. For decades, we have served as trusted advisors to a wide range of professional service providers including, among others, medical practices, management companies, law, engineering, architectural, and insurance firms.
