An inevitable part of life is a changing jobs. Now a recent Supreme Court decision clarifies that severance payments you receive when you leave your job are wages and subject to employment taxes. So how might this impact you?
All employees and employers pay FICA taxes. There are two components;
Social Security. Social Security tax rates are 6.2% for the employee and 6.2% for the employer (total 12.4%) on the first $117,000 of wages in 2014.
Medicare. Medicare tax is 1.45% for the employee and another 1.45% for the employer (total 2.9%). There is also a potential Obamacare surcharge if your wages exceed $200,000 single and $250,000 married.
Many employers who pay a severance check to employees when they leave have classified these checks as other, non-wage, income. This allows both the employer and employee to save on paying these FICA taxes.
April 15th: Tax Returns Due April 15th: 1st Quarter 2014 estimated tax payments due
appy tax filing month. To help celebrate, this month's newsletter includes a fun tax quiz. In addition, there are articles outlining state revenue department's new strategy of harassing out-of-state businesses to collect their sales/use tax for them and an article outlining the risks children can place on parents with their internet behavior.
Should you know of someone who may benefit from this information please feel free to forward this newsletter to them.