Each year, HR pros are on the lookout for changes to compliance with payroll processing. We answer your questions about what you need to know for 2022.
Q: Did the Social Security taxable wage limit change for 2022?
A: Yes, the Social Security wage base increased to $147,000. The employer and employee share of Social Security tax remain at 6.2%; Medicare at 1.45%. As of 2021, an added Medicare tax of 0.9% has been imposed on employee wages exceeding $200,000 in a calendar year.
Q: I’m receiving questions from employees about how federal taxes will change for 2022, what can I provide?
A: The IRS encourages everyone to use the Tax Withholding Estimator to perform a quick “paycheck checkup.” Employers can use the IRS Tax Withholding Assistant tool (download in Excel) to calculate withholding based on employee elections on Form W-4.
Q: What changes did the IRS make to the federal income tax for the filing status in 2022?
A: Standard deductions for 2022 are as follows:
- Married couples filing jointly: $25,900
- Single/Married filing separately: $12,950
- Head of Household: $19,400
Q: What changes did the IRS make to the federal income tax withholding tables?
A: Rates remain the same as established by the TCJA (Tax Cuts and Jobs Act of 2017): 10%, 12%, 22%, 24%, 32%, 35%, 37%. The income range for each rate bracket has been adjusted upwards slightly for inflation.
Q: What changes did the IRS make for Form W-4?
A: Form W-4 hasn’t changed since its overhaul in 2019. It is divided into five steps:
- Enter Personal Information
- Multiple Jobs or Spouse Works
- Claim Dependents
- Other Adjustments
Withholding allowances have been eliminated, meaning employees can no longer claim them. Employees who want lower tax withholding must either claim dependents or use the deductions worksheet and enter that amount in Step 4. An employee can also request their employer withhold more tax in Step 4. Checking the box in Step 2 will also increase the amount of federal income tax withheld.
Q: Are there any changes to the supplemental wage rate?
A: For those receiving up to and including $1M in supplemental wage payments in 2022, the rate is still the same as 2021 at 22%. For those receiving an amount that exceeds $1M in supplemental wages in 2022, the rate remains the same as 2021 at 37%. The 37% rate is applicable even if an employee claims exemption from federal income tax withholding on Form W-4.
Q: What changes were made to qualified fringe benefits?
A: For tax year 2022, qualified fringe benefits are set at:
- Qualified parking: $280 per month
- Commuter highway vehicle and transit pass (combined): $280
- Adoption assistance: $14,890
Q: What are the qualified retirement contribution limits for 2022?
A: Qualified retirement contribution limits are as follows:
- Elective deferral limits for the 401(k), 403(b) and 457 plans remain at $19,500
- Catch-up (age 50 or older) remains at $6,500
- Annual compensation limit increase to $290,000 for 401(k), 403(b), SEP and profit sharing plans
- Defined benefit plan limits remain at $230,000
- The contribution limits for SIMPLE plans remain at $13,500
- The SIMPLE catch-up limit remains at $3,000
Q: What are the 2022 HSA and FSA limits?
A: Health Savings Accounts contribution limits have risen slightly:
- Self-only: $3,700 (annual out-of-pocket $4,950)
- Family: $7,400 (annual out-of-pocket $9,050)
- HSA catch- up contributions (age 55+) are still limited to $1,000
- FSA limits increased to $2,850
- Cafeteria plans allow a carryover of $570 in 2022
Q: Did any states change their minimum wage?
A: Yes, 24 states have a change in minimum wage for 2022. Most changes have an effective date of January 1, 2022, but some don’t kick in till the second half of the year. To help business track these and future rises, Paycor provides a comparison chart with complete 2022 state minimum wage rates. Remember, businesses must always select the highest of the federal state and local minimum wage applying in your jurisdiction.
Q: What trends are you seeing in state withholding?
A: There have been normal changes to withholding tables based on inflation or annual changes to standard deduction or allowance amounts.
Q: What do we need to know about the states that have enacted Paid Family and Medical Leave (PFML) with a payroll tax component?
A: Several states have new paid family leave legislation for 2022:
California’s State Disability Insurance (SDI) taxable wage base increased significantly to $145,600 in 2022. Employee contribution, which includes both SDI and PFL, decreased to 1.1% in 2022. The 2022 maximum weekly benefit has increased to $1,540.
The Connecticut maximum weekly PFML benefit will start at $780 in January 2022 and increase to $840 on July 1. 2022 employee contribution is 0.5% of wages up to $147,000.
Hawaii’s 2022 Temporary Disability Insurance (TDI) weekly wage base increased to $1,200.30. Hawaii law allows employee contributions of up 0.5% of wages, with a maximum weekly contribution of $6.00. The 2022 maximum weekly benefit is $697.
Massachusetts’ maximum weekly benefit amount for 2022 is $1,084.31 per week. Total contributions in 2022 have decreased to 0.68% of an employee’s wages up to $147,000. Employers with at least 25 Massachusetts employees must pay a medical leave contribution of 0.336% in 2022. Employees’ 2022 contributions also have dropped to 0.12% for family leave and 0.224% for medical leave.
- New Jersey
The New Jersey 2022 taxable wage base is $151,900, for both TDI and Family Leave Insurance (FLI). The 2022 combined employee contribution rate for TDI and FLI is 0.28%. Maximum weekly benefit for TDI or FLI is $993.
- New York
New York’s 2022 employee contribution rate for PFL stays the same at 0.511% of an employee’s wages, which includes a 0.005% adjustment for COVID-19 claims. Contributions are limited to an annual maximum of $423.71 in 2022. Weekly PFL benefit is 67% of the employee’s average weekly wage with a maximum weekly benefit of $1,068.36.
- Rhode Island
The 2022 taxable wage base is $81,500 for combined TDI and Temporary Caregiver Insurance (TCI). The 2022 employee contribution rate has dropped from 1.3% to 1.1% of wages. The maximum weekly benefit is $978 for leave beginning on or after July 1, 2021; a new rate will be announced in July 2022. The state has extended family leave from 4 to 5 weeks and will increase to 6 weeks in 2023.
Washington’s 2022 employee contribution rate has increased to 0.4393% of wages up to $147,000. Employers with at least 50 employees in the state contribute 0.16068% in 2022. The maximum weekly benefit also increased to $1,327 in 2022.
- Washington, DC
For leaves that started on or after Sept. 26, 2021, the Universal Paid Leave (UPL) law added 2 weeks of paid prenatal leave, increased the maximum duration of medical leave from 2 to 6 weeks, and allows use for miscarriage or stillbirth. UPL also allows employees using parental/new child bonding and prenatal leave to take a total of 10 weeks paid leave in one 52-week period instead of 8 weeks. The maximum weekly benefit for leave is $1,009.
Q: Are there any new local withholding taxes in 2022?
A: New (and unique) local taxes in 2022 include:
- San Francisco, CA
Businesses subject to the San Francisco Administrative Office Tax (AOT) must pay an extra annual Overpaid Executive Tax (OET) of 0.4% to 2.4% on their payroll expense if the highest paid executive earns more than 100x the median compensation paid to San Francisco-based employees.
Have More Questions?
Paycor creates HR software for leaders who want to make a difference. If you have more payroll questions, don’t worry. Our technology comes with dedicated support from HR experts, who ensure our product is always up to date with the latest payroll compliance legislation.