While We Don’t Know All The Changes That We’ll See To Payroll in 2021 – Here Is What We Know So Far!
After an unpredictable 2020, there will almost certainly be new legislation, executive orders, and routine changes throughout 2021.
Changes already released for the first quarter include:
- Limits To Social Security & Medicare Taxes
- Limits To Health Savings Accounts & High Deductible Health Plans
- Paycheck Protection Program & Other Relief Aid: How It Will Impact Your Business
Routine Changes To Social Security Rates And Limits
The Social Security Administration announced that the Social Security taxable wage base for 2021 is $142,800, slightly up from $137,700 in 2020. Social Security and Medicare tax rates remain the same for both the employer and employees:
- Social Security Rate: 6.2% of taxable wages
- Medicare Tax Rate: 1.45% of taxable wages*
*Employees earning more than $200,000 for the year are still subject to an additional Medicare tax of 0.9%.
Limits To Health Savings Accounts and High-Deductible Health Plans
| Type | 2021 Limits |
| HSA (employee employer contributions) | Individual = $3,600 Family = $7,200 |
| HSA catch-up | $1,000 |
| HDHP minimum deductibles | Individual = $1,400 Family = $2,800 |
| HDHP maximum out-of-pocket costs | Individual = $7,000 Family = $14,000 |
Be Prepared For Paycheck Protection Program And Impact
Paycheck Protection Program (PPP) loans and other COVID-19 relief aid have kept businesses wondering what long-term impacts these programs will have on their organization. While these programs have been beneficial in keeping their doors open, the tax implications or obligations associated with these loans and grants have been challenging to track and understand.
The tax implications around the PPP loans and other relief aid changed again in December of 2020 when the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) of 2021 passed. After the passage of the CRRSAA, Congress made it clear that a forgiven PPP loan is completely tax-exempt and is not considered taxable income. Businesses can also take advantage of the Employee Retention Tax Credit (ERTC) for both 2020 and 2021, as long as they don’t cover the same payroll expenses.
These and other payroll tax relief aid can be complicated; consult your financial professional for additional guidance.
It is almost certain that there will be more changes ahead, at both the Federal and State levels, as businesses navigate this new pandemic environment.
