We know tax tips are important to small business owners. The last thing you want to do is have to pay more than your fair share or even worse have to pay a penalty. As usual, there are some key changes the IRS is making in 2014 that employers should know about.
Let's break them down:
Social Security Wage Baseline - Fortunately, you are limited on the earnings subject to taxation every year for Social Security. The tax rate stayed the same at 6.2%, however the earnings base in 2014 is $117,000, up from $113,700 in 2013. Put simply, you may be subject to a bit more tax liability for Social Security if your salary allows for it. Remember too, the 6.2 percent rate is paid by both employee and employer.
FUTA Credit Reduction States - Essentially if you live in a state that owes the federal government on a loan to meet its unemployment benefits liabilities and the state has not repaid that loan, you could owe more in Federal Unemployment Taxes. States that could be affected include Arkansas, California, Connecticut, Delaware, Georgia, Indiana, Kentucky, Missouri, New York, North Carolina, Ohio, Rhode Island, the Virgin Islands and Wisconsin.
The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $60,000 and $70,000, up from $59,000 and $69,000 in 2013.
The AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly, up from $178,000 to $188,000 in 2013. For singles and heads of household, the income phase-out range is $114,000 to $129,000, up from $112,000 to $127,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
The AGI limit for the saver's credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $60,000 for married couples filing jointly, up from $59,000 in 2013; $45,000 for heads of household, up from $44,250; and $30,000 for married individuals filing separately and for singles, up from $29,500.