With a new year come many new changes and updates to payroll requirements. 2022 will be no exception, and with the new year quickly approaching, we've compiled the following extensive list of items that may initiate some payroll changes in your organization. We understand that this is a very long list to review, but we hope it provides a valuable reference guide for your organization. You might start thinking about these and act sooner than later.
FICA Tax Rate Increase
Beginning January 1, 2022, the maximum amount of earnings subject to the Social Security payroll tax will increase $4,200, from the current $142,800 to $147,000. The 7.65% employee tax rate remains unchanged and is the combined rate for Social Security (6.2%) and Medicare (1.45%). There is no wage limit for Medicare. These rates do not include the additional 0.9% individuals with earned income of $200,000 ($250,000 and more for married couples filing jointly) and more pay.
The CARES Act, implemented in March of 2020, enabled employers to defer deposit and payment of the employer’s share of the Social Security FICA taxes from March 27th through December 31, 2020. The deferred payments are required to be paid, with half due by December 31, 2021, and the other half by December 31, 2022.
State Unemployment Tax Act (SUTA)
Despite a crazy employment year in 2021, Oregon is lowering the unemployment rate to an average of 1.97% for 2022 (was 2.26% for 2021). The current Oregon SUTA base ($43,800) will receive a shift in tax schedule. Employers subject to the Oregon payroll tax will move to a Tax Schedule III for 2022 with a base of $47,700. House Bill 3389 was signed into law in July 2021, which is designed to help employers by:
- Lowering the tax schedule for 2022 from four to three.
- Keeping the same experience rating from individual employers 2020 pre-pandemic UI tax rate to determine the 2022 to 2024 rate.
- For eligible employers, deferring up to one-third of their 2021 UI tax liability until June 30, 2022, if their tax rates increased by more than 0.5 percentage points.
The Washington State base for 2021 is currently $56,500. The base for 2022 we have been seeing is $62,500, but this number has not yet been confirmed by the State.
The base rate is the maximum amount of wages per employee for which unemployment tax is applicable each year and is the same for all employees within a state, while the unemployment rate is specific to each individual company.
Federal Unemployment Tax Act (FUTA)
The current FUTA rate is 6.0% of the first $7,000 of employee wages. Employers generally get a credit of up to 5.4% (state tax credit) if unemployment taxes are paid in full and on time. The FUTA rate after the credit is 0.6%.
Oregon Local Taxes
In calendar year 2022, the Lane Transit District tax will be increasing from the current .0076 to .0077. The Wilsonville transit tax will remain unchanged at .005. The TriMet transit tax rate for 2022 is .007937, an increase from the current .007837.
Oregon Workers’ Benefit Fund
There is no change once again in 2022 to the 2.2 cents per hour worked for the Oregon Workers’ Benefit Fund. Employers must continue to pay at least half of the amount (1.1 cents) and deduct no more than 1.1 cents from employees' wages. Payments must continue to be made directly to the state along with other state payroll taxes on a quarterly basis. This fund pays for benefits to injured workers and their beneficiaries. The fund also helps injured workers return to work.
Oregon Metro Supportive Housing
In May 2020, voters approved a new regional supportive housing services program funded by personal and business income taxes. The personal income tax is 1% on taxable income above $125,000 for individuals ($200,000 for those filing jointly). The business income tax is 1% on net income with gross receipts above $5 million. Oregon residents are subject to this tax as are non-residents with wages paid for work performed within the Metro District. Metro’s boundaries do not align with Clackamas, Multnomah, and Washington Counties. To determine if a residence or workplace is within Metro’s jurisdiction, it is advised to use the Find your Councilor tool on Metro’s website. For 2021, businesses were required to offer withholding to it employees as soon as their payroll system could be configured to capture and remit taxes. For 2022, withholding will be mandatory for all employees and employers that meet requirements.
Preschool For All (PFA) Tax
On November 3, 2020, Multnomah County voters approved Tax Measure 26-214 establishing a tuition-free preschool program. The PFA program is funded by a personal income tax of 1.5% on taxable income over $125,000 for individuals ($200,000 for joint filers), and an additional 1.5% (3% total) on taxable income over $250,000 for individuals ($400,000 for joint filers). Residents of Multnomah County will have 100% of their Oregon Taxable Income subject to the tax thresholds. For non-residents of Multnomah County, income sourced within the county will be subject to the tax withholdings. Like the Oregon Metro Supportive Housing tax above, for 2021, businesses were required to offer withholding to it employees as soon as their payroll system could be configured to capture and remit taxes. For 2022, withholding will be mandatory for all employees and employers that meet requirements. For additional information, please reference the Multnomah County FAQ.
Washington Paid Family and Medical Leave
Paid Family and Medical Leave is an insurance program funded through premiums paid by employers and employees which began January 1, 2019. Effective January 1, 2022, the premium amount will increase to 0.6% for gross wages up to the 2022 Social Security cap of $147,000. The premium is shared by the employer (26.78%) and the employee (73.22%) for employers with over 50 employees. An employer can choose to pay the employee portion of the premium. Employers with fewer than 50 employees are not required to pay the employer portion of the premium but are still required to collect and remit the employee portion. For additional information you can visit the Washington Paid Family & Medical Leave website.
Washington Long Term Care (UPDATED 12/20/2021)
A mandatory payroll tax to fund Washington State's new long-term care program was set to begin January 1, 2022. Washington workers would have paid $0.58 per $1,000 of earnings towards the Washington Cares Fund. On December 17, 2021, Governor Inslee released a statement delaying the start of the program until April 2022. Legislators intend to vote to delay the tax for at least another year beyond April 2022 to conduct further work to address concerns about the plan. For additional information please reference the Washington Cares Fund website.
401(k) Limit Increase
The contribution limit for employees who participate in 401(k) and 403(b) plans in 2022 will increase from the current $19,500 to $20,500. Employees age 50 and over will continue to have the 'catch-up' contribution limit of $6,500. The maximum contributions from all sources (employer and employee combined) will rise by $3,000 in 2022 to $61,000 for all employees age 49 and younger, and $67,500 if age 50 or older.
Flexible Spending Account (FSA) / Parking and Transit Limits
Employee pre-tax deductions for FSA health reimbursement accounts will increase for the 2022 plan year to $2,850. This is an increase of $100 over 2021. For health FSA plans that contain the carryover feature, the maximum carryover amount for 2022 is increasing to $570. We advise checking with your employee benefits consultant regarding special carry over options for plan years 2020 and 2021 under the Consolidated Appropriations Act (CAA). Parking and transit limits for 2022 are also increasing slightly to $280 per month. The dependent care reimbursement remains unchanged at $5,000 ($2,500 if married and filing separate taxes).
Health Savings Account (HSA) Contributions
For 2022, the IRS increased pre-tax deductions for HSAs to $3,650 for individual coverage ($50 increase) and $7,300 for family coverage ($100 increase). This is for members that have high deductible medical coverage that qualifies to be paired with a Health Savings Accounts.
Workers’ Compensation pure premium rates are the base rates before insurer costs are added. The pure premium rates for 2022 are expected once again to decrease by 5.5% from 2021. The pure premium is the portion employers pay to cover claims and to maintain workplace safety programs. The pure premiums are combined with an assessment rate, which is expected to increase from 9.0% to 9.8% of premiums paid.
OregonSaves was rolled out in October 2017 and is a mandatory state retirement program. The program is applicable to all size employers. The deadline for the final phase of the program has been updated and is targeted for late 2022 and is for employers with four or few employees. The deadlines for all other size employers has past. Employers that do not offer an employer-sponsored retirement plan are required to facilitate OregonSaves. The law states that employers not complying with OregonSaves will be subject to penalties of up to $100 per eligible employee up to $5,000 per year. Employees make contributions to personal IRAs through payroll deduction starting at 5% of gross pay and increases 1% each year of participation (employees can choose additional amounts) up to 10%. Employers that offer an employer-sponsored plan must certify they do, and this certification can be done online in just minutes.
The last several years the IRS has issued notices about extended filing deadlines for ACA reporting. Forms are due to employees by January 31st each year. This year, in new proposed regulations, the IRS would permanently grant a 30-day extension for employers to furnish forms to employees. Employers can take advantage of the automatic proposed extension for the distribution of the 2021 forms. This means that the 2021 deadline for providing individuals with Forms 1095-B or 1095-C is March 2, 2022. The deadlines for filing forms 1094-B and 1095-B or Forms 1094-C and 1095-C to the IRS remain unchanged. For paper filers, the deadline is February 28, 2022. Electronic filers have until March 31, 2022.
Remote Workers and Tax Consequences
It is important to take note that remote workers could be creating tax compliance risks for employers. If you have employees working, even remotely from home (also part-time), in a different state than where your company is physically located be sure you are withholding the appropriate payroll taxes. Just a few examples of taxes this could affect include income taxes, gross-receipts taxes, and local taxes. We encourage employers to consult a tax advisor who understands the tax laws of the employer’s physical business home state and the locations where employees are working remotely. In addition to state and local taxes, employers should also take into consideration workers’ compensation insurance and unemployment insurance.