As an annual service to our members, NJBIA explains the changes in tax withholding rates and taxable wage bases that employers face in the year ahead.
—Unemployment Insurance, New Jersey Workforce Development and Health Care Subsidy Fund Taxes—
• Employee and employer state Unemployment Insurance tax rates will apply to the first $33,500 of an employee’s earnings in 2017 (up from $32,600 in 2016).
• For 2017, employees are subject to a 0.0425 percent (.000425) Workforce Development Partnership Fund tax rate. The employee Unemployment Insurance tax rate remains at 0.3825 percent (.003825) of taxable payroll.
—2016 New Jersey Temporary Disability (TDI) & Family Leave Insurance—
• Maximum taxable wages— $33,500 (up from $32,600).
• The disability tax rate for employees—0.24 percent of taxable wages, up from 0.20 percent
• Employer tax rate for the state plan is based on each employer’s claims experience.
• Employee Family Leave Insurance tax rate—0.10 percent of taxable wages, up from 0.08 percent in 2016.
—Explanation of Federal Unemployment Tax Act (FUTA)—
Due to the actions taken by the Christie Administration in 2013 to stabilize the state Unemployment Insurance Fund and repay federal loans, New Jersey employers will pay a FUTA tax rate of 0.6 percent on the first $7,000 of an employee’s wages in 2017.
—FICA and Medicare—
The Social Security portion of the FICA tax that both employers and employees pay remains unchanged at 12.4 percent (6.2 percent each). The maximum amount of earnings subject to the Social Security payroll tax will increase to $127,200, up from the 2016 amount of $118,500.
Most Americans will pay 2.9 percent Medicare FICA tax, which is split evenly between employees and employers (1.45 percent each). However, it should be noted that unlike the Social Security FICA tax, there is no limit on the amount of wages subject to the Medicare portion of the tax.
The Affordable Care Act imposed an additional tax of 0.9 percent on the employee-paid portion of the Medicare FICA tax for high-wage earners. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for single and all other
taxpayers. While the additional Medicare tax for these individual wage earner’s portion on compensation will rise to 2.35 percent (1.45 percent plus 0.9 percent), the employer-paid portion of the Medicare tax on these amounts remains at 1.45 percent.
Self-employed individuals are responsible for the entire FICA tax rate of 15.3 percent on the first
$127,200 of self-employment income. They are also responsible for the 2.9 percent Medicare FICA tax on income above $127,200, as well as the additional 0.9 percent Medicare tax established under the ACA if income meets the aforementioned “high wage earner” thresholds.
NOTE: Employers are advised to check with the IRS regarding information on federal income tax withholdings. Information can be found at www.IRS.gov.
—Employee Benefits Increase Slightly in 2017—
Employee maximum weekly benefits for Workers’ Compensation, Unemployment Compensation, and Temporary Disability are adjusted annually to reflect increases in average taxable wages of covered employees. Amounts applicable in 2017 are set forth below:
—New Jersey Unemployment Insurance—
Maximum benefit for benefit years commencing on or after January 1, 2017: $677 weekly (up from
—Temporary Disability & Family Leave Insurance—
Maximum benefit (state plan) for periods of disability commencing in 2017: $633 weekly (up from $615).
Maximum benefit applicable to temporary disability, permanent disability, permanent partial disability, permanent total disability, and dependency benefits awarded for injuries suffered in 2017: $896 weekly (up from $871).
—For More Information—
If you need additional information, please contact Andrew Musick at firstname.lastname@example.org or 609-393-7707, ext. 9512.
Updated: December 18, 2017
This information should not be construed as constituting specific legal advice. It is intended to provide general information about this subject and general compliance strategies. For specific legal advice, NJBIA strongly recommends members consult with their attorney.