Payroll Planning

Payroll Planning

Paying people used to be simple. More and more federal and state regulations have complicated the payroll process. Important changes in 2018 include the State of Michigan minimum wage increase to $9.25 per hour for wages earned starting January 1, 2018. Following are changes for 2018.

2018 Payroll Changes

Social Security Wage Base. The 2018 wage base will be $128,400. The employee and employer match will be 6.2%. The maximum deduction will be $7,960.80 ($128,400 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 $2,650.

Health Savings Accounts. HSAs are for eligible individuals in a high deductible health plan.

The maximum annual contribuition that can be made to an HSA in 2018:

  • Individual: $3,450
  • Family: $6,900

Catch-up contributions: Individuals 55 and older can make additional "catch-up" contributions to an HSA until they are enrolled in Medicare. The additional allowable contribution is $1,000.

IRA Contribution Limits. The 2018 contribution limit for Simple IRAs is $12,500. The catch-up contribution for those age 50 or older by December 31, 2018, is $3,000.

401(k), 403(b) and 457 Contribution Limits. The contribution limit for these plans’ employee deferrals is $18,500. The catch-up contribution for those age 50 or older by December 31, 2018, is $6,000.

Dependent Care Limits. The maximum exclusion from gross income under a dependent care program is $5,000 for an individual or a married couple filing jointly.

For more information, view our 2018 Payroll Planning Brief.

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