When it comes to employment tax, 2010 is a year when many things change — and much remains the same.

Here's an overview of what's new and what's not.

  • Social security wage base. The 2010 wage base is $106,800, the same as 2009. Once an employee's gross wages reach that amount, you no longer have to deduct FICA tax. As in prior years, there is no limit on wages subject to Medicare tax.
  • FICA and Medicare tax rates. The rates for these taxes remain the same: 6.2% for the FICA portion and 1.45% for Medicare, resulting in a combined total of 7.65%.
  • Unemployment tax. The federal unemployment tax rate of 6.2% (less a credit for state unemployment payments) has not changed.
  • However, your state unemployment tax rate is likely to increase, and you may have to pay the higher tax on more wages.
  • "Making Work Pay" credit. This refundable credit of up to $400 for single workers ($800 for married filing jointly) is still in effect during 2010. The credit is incorporated into federal income tax withholding tables, so be sure your employees give you an accurate W-4.
  • Form 944 opt-out rules. Would you prefer to prepare quarterly payroll returns instead of this annual report? In 2010 you can opt out of filing Form 944.
  • Business vehicle mileage. You can reimburse yourself and your employees 50¢ for each mile driven for business during 2010, a decrease from 2009's rate of 55¢.
  • Identity theft safeguards. Under a new initiative, you can elect to use asterisks instead of identification numbers on certain information returns you send to vendors, such as Form 1099.
  • Tip program extension. The Attributed Tip Income Program, originally set to expire December 31, 2009, is now extended to December 31, 2011.

Please call for more information on the latest employment tax rules and their application to your business.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.

The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.

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