2021 RATES FOR PAYROLL DEDUCTIONS
The Additional Medicare Tax of 0.9% that went into effective January 1, 2013 remains in effect for 2021. Employers will be responsible for withholding an additional 0.9% Medicare tax on an employee’s wages and compensation paid in excess of $200,000 in the calendar year.
Business Mileage Rate:
The mileage rate for 2021 will decrease from 57.5 to 56 cents per mile.
Local Wage Tax:
As you are already aware, a Pennsylvania state law (Act 32 of 2008) mandating some changes in local tax collection was effective January 1, 2012. The primary provision of Act 32 was to consolidate tax offices within the state so that there will typically be only one office per county. Act 32 also required that all employers use a uniform 6-digit political subdivision (PSD) code to represent the resident and work municipality of each employee. Another mandated change of Act 32 that went into effect January 1, 2012 is the withholding requirement. Under Act 32, employers are required to withhold the higher of the employee’s resident earned income tax amount (rate of total resident EIT where they reside) versus the employee’s municipal non-resident earned income tax amount (rate of non-resident EIT where they are employed). In most cases, the employee’s resident rate where they live will be higher than the non-resident rate where they are employed. PSD codes and withholding rates can be obtained by calling your local tax office or visiting the following website: http://munstats.pa.gov/Public/FindLocalTax.aspx.
A requirement under Act 32 is that you are to enter the 2-digit number that represents the Tax Collection District (TCD) where you submitted the EIT withholdings in Box 20 “Locality name” of the W-2 forms. For EIT withholdings reported to Franklin County Area Tax Bureau, that number would be “28”.
Federal Unemployment Compensation Taxes (FUTA):
The FUTA tax liability will remain at 0.6% for 2021.
Pennsylvania Unemployment Compensation Taxes:
Pennsylvania Unemployment Compensation Taxes vary with every employer. The PA Unemployment Contribution (UC) rate notices are usually mailed on or before December 31st. If you have not received your rate notice, you can obtain your contribution rate online (https://www.uctax.pa.gov) or by calling the PA Unemployment Help Desk (866-403-6163).
The wage limit for 2021 will remain $10,000.
Credit weeks are used to determine how many weeks of unemployment benefits an individual may receive and are reported on your UC tax and wage report. A credit week is any calendar week in which an employee earns $116 or more. Only one credit week may be reported for each calendar week.
The Federal minimum wage rate remains at $7.25. However, some states, cities and counties have a higher minimum wage rate. When the state, city or county minimum wage rate is higher than the federal rate, employers are required to pay their employees the higher rate. State minimum wage rates in our area are as follows: Pennsylvania - $7.25; Maryland - $11.75 for employers with 15 or more employees, $11.60 for employers with 14 or less employees; New Jersey - $12.00 for employers who are non-seasonal and with 6 or more employees, $11.00 for seasonal employees and employers with 5 or less employees; Virginia - $7.25 for the period 1/1/21-4/30/21, $9.50 for the period 5/1/21-12/31/21; West Virginia - $8.75.
The minimum wage for tipped employees in Pennsylvania will remain at the current $2.83 per hour. However, the employer must make up the difference if the employee’s tips and the $2.83 per hour do not meet the regular minimum wage in effect for non-tipped employees. The tipped wage applies only if an employee receives over $30 in tips for a given month. If an employee does not make more than $30 per month in tips, the employer must pay the regular minimum wage. The minimum wage for tipped employees varies with each state. If you are an employer with tipped employees and are located in another state, please call our office at 717-267-2100 for the appropriate rates.
Electronic filing requirements for Forms W-2:
For W-2 forms submitted to the Social Security Administration, the electronic filing requirement remains at 250 or more. The electronic filing requirements for W-2 forms for states in our area are: Pennsylvania - 10 or more; Maryland - 25 or more; Virginia - all W-2 forms must be submitted electronically; West Virginia - 25 or more.
Employees W-4 Form:
The IRS has issued a new W-4 form for 2021. The new form must be used for any new employees hired after 1/1/21 and for any employees who want to make changes. W-4 forms completed prior to 1/1/21 are still valid and there is no requirement for those individuals to complete the new form unless they want to make changes.
If you have any questions on any of the above items, please call our office at