The following changes in the Federal and
California
payroll tax regulations will be effective on January 1, 2010. We are pleased to provide this summary of payroll regulations and welcome any questions that you may have.
FEDERAL TAXES
1. FICA: Social Security and Medicare:
a. SOCIAL SECURITY: The rate per employee is 6.2% (0.062) on wages up to $106,800 for a maximum tax of $6,621.60.
b. MEDICARE: The rate per employee is 1.45% (0.0145) on all wages. There is no upper wage limitation on Medicare tax.
c. The rate for employers is the same as for employees.
2. Self-Employment Tax:
a. The rate is 15.3% (0.153) on self-employment net income up to $106,800. On all self-employment net income over $106,800 the rate is 2.9% (0.029).
b. Self-employed persons may deduct one-half of their self-employment tax as an adjustment to income on their personal tax returns.
3. FUTA (Federal Unemployment):
The rate for employers is 0.8% (0.008) on wages up to $7,000 per employee, for a maximum tax of $56.00 per employee.
CALIFORNIA TAXES
1. SDI (State Disability Insurance):
The rate per employee is 1.1% (0.011) on a taxable wage limit of $93,316, for a maximum tax of $1,026.48.
OTHER ITEMS
2. Retirement plans: 401(k) and 403(b) --The maximum employee contribution is $16,500; the maximum for participants aged 50 or over is $22,000. SIMPLE--The maximum employee contribution is $11,500; the maximum for participants aged 50 or over is $14,000.
3.
California
employers are required to report new and rehired employees within 20 days of the hire date.
4. Remember to always obtain a completed Form W-9 from all independent contractors before paying them.
5. All businesses are required to report to the EDD those independent contractors for whom they must file a Federal Form 1099-MISC. The required information must be reported within 20 days of accumulating payments totaling $600 or more to each independent contractor. PLEASE DO NOT WAIT UNTIL YEAR END.
6. All businesses are required to file an annual Business Property Tax Statement if they have personal property in excess of $100,000 or if they receive a form from their county assessor’s office.
7. Every person who engages in business within the City of
Los Angeles
is required to obtain the necessary Tax Registration Certificate(s) and to pay the business tax or to obtain an exemption. For other cities, please call us or contact your city government for registration and reporting requirements.
1099 REPORTING
Every trade or business, including individually owned businesses, not-for-profit entities and owners of rental property, must issue a Form 1099 to each person, partnership, LLC, or legal service corporation paid $600 or more for rents or services, or $10 or more for interest during the calendar year. Among other federal and state penalities, the Franchise Tax Board may disallow deductions when a payment is not reported on a 1099.
