PAYROLL WITHHOLDING RATES AND LIMITS
The chart below can be used
as a guide for 2002/2003 payroll withholding rates and limits.
|
|
2003
|
2002
|
|
MINIMUM WAGE
|
$5.15
|
$5.15
|
|
SOCIAL SECURITY
Taxable Wage Base
FICA Limit
Medicare Limit
Employee Withholding
7.65%
FICA Portion - 6.20% Rate
Medicare Portion - 1.45% Rate
Employer Liability/per
employee 7.65%
FICA Portion - 6.20%
Medicare Portion - 1.45% Rate
Self Employment Tax Rate
|
$87,000
No Limit
$5,394.00
No Limit
$5,394.00
No Limit
15.30%
|
$84,900
No Limit
$5,263.80
No Limit
$5,263.80
No Limit
15.30%
|
|
MAXIMUM EARNINGS - SOCIAL SECURITY RECIPIENTS
Recipients Under Age 65*
Recipients Attaining Age 65
during the year**
Recipients Age 65 and up
*For
each $2 earned above this amount, $1 benefit is lost
**For
each $3 earned above this amount, $1 benefit is lost
|
$11,520.00
***$30,720
No Limit
***Limit
applies only to earnings for months prior to reaching age 65.
|
$11,280.00
***$30,000
No Limit
|
|
FUTA
Taxable Wage Base
Gross Tax Rate 6.2%
Minimum FUTA Credit (5.4%)
Net FUTA Rate
|
$7,000.00
.8%
|
$7,000.00
.8%
|
|
FEDERAL INCOME TAX WITHHOLDING FROM SUPPLEMENTAL WAGES
Method 1 - Flat Rate
or
Method 2
|
27.0%
Add
the supplemental wages to the regular wages for the most recent payroll
period; compute the income tax withholding as if the total were a single
payment; subtract the tax already withheld from regular wages; withhold the
remaining tax from supplemental wages.
Use method 2 if no withholding was made from the employee’s regular
wages.
|
27.0%
Same
|
|
STANDARD MILEAGE RATE
Rate when using the simplified method
to reimburse employees for business
miles driven.
|
.36
|
.365
|
|
PA PERSONAL INCOME TAX WITHHOLDING RATE
|
2.8%
|
2.8%
|
|
PA UNEMPLOYMENT COMPENSATION
Taxable Wage Base For Employer
Contribution
Employee Contribution Rate
|
$8,000.00
.02%
|
$8,000.00
None
|
Backup Withholding:
Payments
that are not subject to normal income tax withholding, such as payments to
independent contractors, interest, dividends, and royalties, are subject to
withholding at a rate of 30% for 2002 and 2003 if the payee has failed to
furnish his correct taxpayer identification number. These nonpayroll income tax backup
withholdings must be reported on Form 945, Annual Return of Withheld Federal
Income Tax. The rules for Form 945
nonpayroll deposits have been revised.
Under the new rules you will either be a monthly or semiweekly schedule
depositor. Your deposit schedule is
based on your lookback period. The
lookback period is the second calendar year preceding the current calendar
year. You are a monthly schedule
depositor if you reported $50,000 or less of withholding on Form 945 for the
lookback period. You are a semiweekly
schedule depositor if you reported more than $50,000 of withholding on Form 945
for the lookback period. There are two
exceptions: The $1,000 rule and the
$100,000 next-day deposit rule. If you
accumulate a total Form 945 tax liability of less than $1,000 for the year no
deposits are required and the liability may be paid with Form 945. If $100,000 or more is accumulated on any day
during a deposit period, it must be deposited by the next banking day, whether
you are a monthly or semiweekly schedule depositor.
New
Employees:
Complete
Immigration and Naturalization Service’s Form I-9, Employment Eligibility
Verification Form. Maintain completed
forms as part of personnel files. The Commonwealth of Pennsylvania requires all employers to report information on
newly-hired employees. The information must be submitted within 20 days of
hiring the employee. New hire Form
DUR-1575 has been created for this reporting.
COMPLIANCE WITH MINIMUM WAGE AND
OVERTIME REQUIREMENTS
Back
pay, penalty and interest for dealers who have not properly complied with the
federal wage and hour laws and regulations can result from an audit
situation. The following are some of the
troublesome areas. Specific
circumstances of individual employees should be reviewed with dealership legal
advisors.
General Rule: Unless a specific exemption exists, an
employee must be paid at least the minimum wage ($5.15 per hour) and overtime
at 150% of normal rate for hours over 40 in a week.
Commission Sales Persons:
1. Must be paid minimum wage for all hours worked. Short settlement periods (weekly) can result
in no commissions due for a period, result - pay due for the hours worked will be
less than the minimum wage requirement.
Suggestion - use a monthly settlement period with interim draws to cover
minimum wage requirements to avoid this problem.
2. Should be required to keep time records.
Be
aware that “gray area” employees such as, service writers, service advisors and
leasing salespersons, could be subject to minimum wage and overtime
requirements.
Salaried Employees:
1. There is no exemption from minimum wage or overtime
provisions simply because an employee is paid on a salary basis.
2. General office and finance office employees are
potential problems. To be exempt, they
must be either executives or bona fide administrative employees. Strict tests are set forth in the law for
both of these exemptions. If employees
do not meet these tests, they must be paid no less than minimum wage and
overtime at a rate equal to 150% of their normal rate for all hours worked in
excess of 40 hours per week.
Mechanics and Parts Persons: - Generally exempt from overtime pay requirements.
1. Mechanics -
Individuals primarily performing mechanical work. Typically, this includes service mechanics,
reconditioning mechanics and body shop mechanics. The following are among those activities not
considered mechanical: painting,
cleaning, polishing, tire changing and lubrication.
2. Parts Persons
- Individuals whose primary duties include ordering, stocking, pulling and
selling of parts. Parts delivery people
do not qualify for this exemption.
Dealers may wish to consult
NADA’s Management Guide, “Federal
Wage-Hour Law and Equal Pay Act”.
