Easy-to-Use Tax Withholding Calculator 2021

Easy-to-Use Tax Withholding Calculator 2021

Employers, have you reminded your employees to check that they are having the right amount of tax withheld from their paychecks? It’s a good idea for everyone to check their payroll withholding every year, but it is particularly important this year due to the many proposed tax changes.

The law’s changes do not affect every taxpayer the same way. Some workers may need to increase their withholding so they will not face a tax bill —and possible penalties — next April when their 2021 tax return is due. Many other workers, however, benefit from the law’s changes and can take home more pay because the withholding amounts are less.

Help your employees avoid being surprised next spring when they prepare their 2021 returns. Remind them now to check their year-to-date withholding so they can make adjustments, if appropriate, on their paychecks for the rest of this year. It’s easy and convenient using tools provided by the IRS.

Here is a sample message to employees:
The IRS encourages everyone to use the Withholding Calculator to perform a quick “paycheck checkup.”  This is even more important this year because of recent changes to the tax law for 2021.
The Calculator helps you identify your tax withholding to make sure you have the right amount of tax withheld from your paycheck at work. Use the Calculator to see if you should give your employer a new Form W-4, Employee’s Withholding Allowance Certificate, to adjust your income tax withholding going forward.
To get started, gather your most recent pay stubs and a copy of your last federal tax return (2020 Form 1040). You’ll use the information to estimate your 2021 income and taxes.
The Withholding Calculator does not ask you to provide sensitive personally-identifiable information like your name, Social Security number, address, or bank account numbers. The IRS does not save or record the information you enter on the Calculator.
Ready to start? Make sure Javascript is enabled and go to: Withholding Calculator

by Kathleen Berger
Originally posted on thinkhr.com

Advance Child Tax Credit Payments in 2021 | CA Employee Benefits Agents

Advance Child Tax Credit Payments in 2021 | CA Employee Benefits Agents

There have been important changes to the Child Tax Credit that will help many families receive advance payments starting this summer. The American Rescue Plan Act (ARPA) of 2021 expands the Child Tax Credit (CTC) for tax year 2021 only.

The expanded credit means:

  • The credit amounts will increase for many taxpayers.
  • The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes.
  • The credit will include children who turn age 17 in 2021.
  • Taxpayers may receive part of their credit in 2021 before filing their 2021 tax return.

For tax year 2021, families claiming the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021. They will receive $3,600 per qualifying child under age 6 at the end of 2021. Under the prior law, the amount of the CTC was up to $2,000 per qualifying child under the age of 17 at the end of the year.

The increased amounts are reduced (phased out), for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.

Advance payments of the 2021 Child Tax Credit will be made regularly from July through December to eligible taxpayers who have a main home in the United States for more than half the year. The total of the advance payments will be up to 50 percent of the Child Tax Credit. Advance payments will be estimated from information included in eligible taxpayers’ 2020 tax returns (or their 2019 returns if the 2020 returns are not filed and processed yet).

The IRS urges people with children to file their 2020 tax returns as soon as possible to make sure they’re eligible for the appropriate amount of the CTC as well as any other tax credits they’re eligible for, including the Earned Income Tax Credit (EITC). Filing electronically with direct deposit also can speed refunds and future advance CTC payments.

Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not done so.

Eligible taxpayers who do not want to receive advance payment of the 2021 Child Tax Credit will have the opportunity to decline receiving advance payments. Taxpayers will also have the opportunity to update information about changes in their income, filing status or the number of qualifying children. More details on how to take these steps will be announced soon.

The IRS also urges community groups, non-profits, associations, education groups and anyone else with connections to people with children to share this critical information about the CTC. The IRS will be providing additional materials and information that can be easily shared by social media, email and other methods.

The IRS will provide more information about advance payments soon.

Additional information can be found at IRS.gov/childtaxcredit2021

IRS Announces HSA Limits for 2020

IRS Announces HSA Limits for 2020

On May 28, 2019, the Internal Revenue Service (IRS) released Revenue Procedure 2019-25 announcing the annual inflation-adjusted limits for health savings accounts (HSAs) for calendar year 2020. An HSA is a tax-exempt savings account that employees can use to pay for qualified health expenses.
To be eligible for an HSA, an employee:

  • Must be covered by a qualified high deductible health plan (HDHP);
  • Must not have any disqualifying health coverage (called “impermissible non-HDHP coverage”);
  • Must not be enrolled in Medicare; and
  • May not be claimed as a dependent on someone else’s tax return.

The limits vary based on whether an individual has self-only or family coverage under an HDHP. The limits are as follows:

  • 2020 HSA contribution limit:
    • Single: $3,550 (an increase of $50 from 2019)
    • Family: $7,100 (an increase of $100 from 2019)
    • Catch-up contributions for those age 55 and older remains at $1,000
  • 2020 HDHP minimum deductible (not applicable to preventive services):
    • Single: $1,400 (an increase of $50 from 2019)
    • Family: $2,800 (an increase of $100 from 2019)
  • 2020 HDHP maximum out-of-pocket limit:
    • Single: $6,900 (an increase of $150 from 2019)
    • Family: $13,800* (an increase of $300 from 2019)

*If the HDHP is a nongrandfathered plan, a per-person limit of $8,150 also will apply due to the Affordable Care Act’s cost-sharing provision for essential health benefits.

Originally posted on ThinkHR.com

IRS Releases 2019 Inflation-Adjusted Limits

IRS Releases 2019 Inflation-Adjusted Limits

The Internal Revenue Service (IRS) released its inflation-adjusted limits for various benefits. For example, the maximum contribution limit to health flexible spending arrangements (FSAs) will be $2,700 in 2019. Also, the maximum reimbursement limit in 2019 for Qualified Small Employer Health Reimbursement Arrangements will be $5,150 for single coverage and $10,450 for family coverage.
Read more about the 2019 limits.

By Karen Hsu
Originally posted on UBABenefits.com

PCORI Fee Increase for Health Plans

PCORI Fee Increase for Health Plans

On November 5, 2018, the Internal Revenue Service (IRS) released Notice 2018-85 to announce that the health plan Patient-Centered Outcomes Research Institute (PCORI) fee for plan years ending between October 1, 2018 and September 30, 2019 will be $2.45 per plan participant. This is an increase from the prior year’s fee of $2.39 due to an inflation adjustment.

Background

The Affordable Care Act created the PCORI to study clinical effectiveness and health outcomes. To finance the nonprofit institute’s work, a small annual fee — commonly called the PCORI fee — is charged on group health plans.
The fee is an annual amount multiplied by the number of plan participants. The dollar amount of the fee is based on the ending date of the plan year. For instance:

  • For plan year ending between October 1, 2017 and September 30, 2018: $2.39.
  • For plan year ending between October 1, 2018 and September 30, 2019: $2.45.

Insurers are responsible for calculating and paying the fee for insured plans. For self-funded health plans, however, the employer sponsor is responsible for calculating and paying the fee. Payment is due by filing Form 720 by July 31 following the end of the calendar year in which the health plan year ends. For example, if the group health plan year ends December 31, 2018, Form 720 must be filed along with payment no later than July 31, 2019.
Certain types of health plans are exempt from the fee, such as:

  • Stand-alone dental and/or vision plans;
  • Employee assistance, disease management, and wellness programs that do not provide significant medical care benefits;
  • Stop-loss insurance policies; and
  • Health savings accounts (HSAs).

HRAs and QSEHRAs

A traditional health reimbursement arrangement (HRA) is exempt from the PCORI fee, provided that it is integrated with another self-funded health plan sponsored by the same employer. In that case, the employer pays the PCORI fee with respect to its self-funded plan, but does not pay again just for the HRA component. If, however, the HRA is integrated with a group insurance health plan, the insurer will pay the PCORI fee with respect to the insured coverage and the employer pays the fee for the HRA component.
A qualified small employer health reimbursement arrangement (QSEHRA) works a little differently. A QSEHRA is a special type of tax-preferred arrangement that can only be offered by small employers (generally those with fewer than 50 employees) that do not offer any other health plan to their workers. Since the QSEHRA is not integrated with another plan, the PCORI fee applies to the QSEHRA. Small employers that sponsor a QSEHRA are responsible for reporting and paying the PCORI fee.

PCORI Nears its End

The PCORI program will sunset in 2019. The last payment will apply to plan years that end by September 30, 2019 and that payment will be due in July 2020. There will not be any PCORI fee for plan years that end on October 1, 2019 or later.

Resources

The IRS provides the following guidance to help plan sponsors calculate, report, and pay the PCORI fee:

Originally posted on thinkhr.com