2016 Payroll Changes

CPAs & Advisors

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Employers must implement a number of 2016 payroll tax changes to accurately process payroll. Provided below is a list of scheduled changes that will affect employers beginning next year.

  • Social Security Wage Base. The 2016 wage base will be $118,500. The employee and employer match will be 6.2%. The maximum deduction will be $7,347 ($118,500 x 6.2%).
  • Medicare Tax. As in prior years, there is no limit to the wages subject to the Medicare Tax; therefore, all covered wages are still subject to the 1.45% tax. Wages paid in excess of $200,000 will be subject to an extra 0.9% Medicare tax that will be withheld only from employees’ wages.
  • Health Flexible Spending Arrangements. The dollar limitation on voluntary employee salary reductions for contributions to a health flexible spending arrangement (FSA) is $2,550.
  • Medical Savings Accounts. A high-deductible health plan is a plan with an annual deductible of $2,250-$3,350 for individual coverage and $4,450-$6,700 for family coverage.
  • IRA Contribution Limits. The 2015 contribution limit for Simple IRAs is $12,500. The catch-up contribution for those age 50 or older by December 31, 2015, is $3,000.
  • 401(k), 403(b) and 457 Contribution Limits. The contribution limit for these plans’ employee deferrals is $18,000. The catch-up contribution for those age 50 or older by December 31, 2015, is $6,000.
  • 2016 Federal Standard Mileage Rates: The 2016 mileage rates have not yet been released. Continue to visit for updates.
  • Dependent Care Limits. The maximum exclusion from gross income under a dependent care program is $7,500 for an individual or a married couple filing jointly.
  • For more information, view our 2016 Payroll Planning Brief, which includes a list of items to consider before December 31, 2015.

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