The Internal Revenue Service today announced cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015. Many of the pension plan limitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment. Highlights include the following:
- The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
- The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
- The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
- 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 $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
- The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000. 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 $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.
Below are details on both the adjusted and unchanged limitations.
Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost‑of‑living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made under adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.
Effective Jan. 1, 2015, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $210,000. For a participant who separated from service before January 1, 2015, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2014, by 1.0178.
The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.
The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2015 are as follows:
The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,500 to $18,000.
The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C) and 408(k)(6)(D)(ii) is increased from $260,000 to $265,000.
The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.
The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5‑year distribution period is increased from $1,050,000 to $1,070,000, while the dollar amount used to determine the lengthening of the 5‑year distribution period remains unchanged at $210,000.
The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $115,000 to $120,000.
The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $5,500 to $6,000. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $2,500 to $3,000.
The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost‑of‑living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $385,000 to $395,000.
The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from $550 to $600.
The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,000 to $12,500.
The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,500 to $18,000.
The compensation amount under Section 1.61‑21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $105,000. The compensation amount under Section 1.61‑21(f)(5)(iii) is increased from $210,000 to $215,000.
The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2015 are as follows:
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $36,000 to $36,500; the limitation under Section 25B(b)(1)(B) is increased from $39,000 to $39,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $60,000 to $61,000.
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $27,000 to $27,375; the limitation under Section 25B(b)(1)(B) is increased from $29,250 to $29,625; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $45,000 to $45,750.
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $18,000 to $18,250; the limitation under Section 25B(b)(1)(B) is increased from $19,500 to $19,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $30,000 to $30,500.
The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.
The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $96,000 to $98,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $60,000 to $61,000. The applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $181,000 to $183,000.
The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $181,000 to $183,000. The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $114,000 to $116,000. The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.
The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,084,000 to $1,101,000.
IRS will begin a one-year pilot program in June to help small businesses with retirement plans that owe penalties for not filing reporting documents. By filing current and prior year forms during this pilot program, they can avoid penalties.
The IRS is reaching out to certain small businesses that maintain retirement plans and may have been unaware that they had a filing requirement. The IRS projects that this program will bring a significant number of small business owners into compliance with the reporting requirements.
Plan administrators and sponsors who do not file an annual Form 5500 series return can face stiff penalties — up to $15,000 per return. Those who have already been assessed a penalty for late filings are not eligible for this program. This program is open only to retirement plans generally maintained by certain small businesses, such as those in an owner-spouse arrangement or eligible partnership.
Multiple late retirement plan returns may be included in a single submission. If a retirement plan has delinquent returns for more than one plan year, penalty relief may be available for all of these returns. Similarly, delinquent returns for more than one plan may be included in a single penalty relief request. No filing fee will be charged during the pilot program.
This revenue procedure establishes a temporary one-year pilot program providing administrative relief to plan administrators and plan sponsors of certain retirement plans from the penalties otherwise applicable under §§ 6652(e) and 6692 of the Internal Revenue Code (the “Code”) for a failure to timely comply with the annual reporting requirements imposed under §§ 6047(e), 6058, and 6059 of the Code. The administrative relief provided under this revenue procedure applies only to plan administrators (as defined in § 414(g) of the Code) and plan sponsors of retirement plans that are subject to the reporting requirements of §§ 6047(e), 6058, and 6059 of the Code, but that are not subject to the reporting requirements of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”). This revenue procedure also requests comments as to whether a permanent relief program should be established and, if so, how fees should be determined.
Both the Code and Title I of ERISA impose reporting requirements with respect to certain retirement plans. To minimize the filing burden on plan sponsors and plan administrators of employee benefit plans, the Internal Revenue Service (the “Service”) and the Department of Labor (the “DOL”) (as well as the Pension Benefit Guaranty Corporation) have consolidated various annual reporting requirements in the Form 5500 Series Annual Return/Report. The Form 5500 Series includes: the Form 5500, Annual Return/Report of Employee Benefit Plan; the Form 5500-SF, Short Form Annual Return/Report of Employee Benefit Plan; and the Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan.
Plan sponsors and plan administrators who fail to file timely Form 5500 series annual returns/reports for their retirement plans may be subject to civil penalties under the Code (or under both Title I of ERISA and the Code). In particular, the Service may assess penalties under §§ 6652(e) and 6692 of the Code for the failure to satisfy the requirements for annual returns. Section 6652(e) generally provides, in part, that in the case of any failure to timely file a return or statement required under § 6058 (annual return of employee benefit plans) or § 6047(e) (returns and reports for employee stock ownership plans), the late filer shall pay, upon notice and demand, a penalty of $25 for each day the failure continues, up to $15,000 per return or statement. Section 6692 generally provides that, in the case of any failure to timely file a report required by § 6059 (actuarial report for employee benefit plans), the late filer shall pay a penalty of $1,000 for each failure. No penalty is imposed under these sections if it is shown that such failure to timely file is due to reasonable cause.
In 1995, the DOL established the Delinquent Filer Voluntary Compliance (“DFVC”) program to reduce ERISA late-filing penalties on filers of delinquent annual reports. In Notice 2002-23, 2002-1 C.B. 742, the Service determined that it would not impose the penalties under §§ 6652(c)(1), (d), (e) and 6692 (to the extent applicable) on a person who is eligible for, and satisfies the requirements of, the DFVC program with respect to the filing of a Form 5500. The relief under Notice 2002-23 was available only to filers who are required to file under both Title I of ERISA and the Code. Notice 2002-23 has been superseded by Notice 2014-35, which will appear in 2014-23 I.R.B. As under Notice 2002-23, the penalty relief provided by Notice 2014-35 does not apply to a delinquent filing of a Form 5500-EZ for retirement plans that do not cover any common law employees (such as a plan under which a business owner and the owner’s spouse are the only participants). See 29 C.F.R. 2510.3-3(b) and (c).
Certain retirement plans that are not subject to Title I of ERISA are exempt from some of the annual reporting requirements if they satisfy certain criteria specified by statute or by the Service in published guidance. For example, for years beginning after 2006, section 1103 of the Pension Protection Act of 2006 (Pub. L. No. 109-280, 120 Stat. 780, 1057) provides that “one-participant plans” with assets of $250,000 or less at the end of the plan year are not required to file a Form 5500 series return/report. (The Service has determined that such plans must, however, file an annual return/report when the plan is terminated and all assets have been distributed.)
The relief applies to filers who are eligible to participate under Section 4 of this revenue procedure and who satisfy the requirements of Section 5 of this revenue procedure by no later than June 2, 2015. However, in lieu of the relief provided under this revenue procedure, filers may continue to file for the relief currently available for a failure to timely file that is due to reasonable cause.
Seattle City Council unanimously approved the adoption of a $15 per hour minimum wage. Beginning April 1, 2015, the legislation will phase-in a $15 per hour minimum wage annually over 3 to 7 years, depending on employer size.
Twenty-four percent of Seattle workers earn hourly wages of $15 per hour or less, and approximately 13.6 percent of the Seattle community lives below the federal poverty level, according to a University of Washington study. Washington State’s minimum wage is currently $9.32 per hour. Effective April 1, 2015, the minimum wage in Seattle will be $10.00 or $11.00 per hour depending on employer size. Here is a chart illustrating the subsequent annual minimum wage increase based on employer size.
The Additional Medicare Tax is added by the Affordable Care Act (ACA). It applies to wages, railroad retirement (RRTA) compensation, and self-employment income over certain threshold amount received in taxable years beginning after Dec. 31, 2012. Employers are responsible for withholding the tax on wages and RRTA compensation in certain circumstances.
Tax rate is 0.9 percent.
An individual is liable for Additional Medicare Tax if the individual’s wages, compensation, or self-employment income (together with that of his or her spouse if filing a joint return) exceed the threshold amount for the individual’s filing status:
|Married filing jointly||$250,000|
|Married filing separate||$125,000|
|Head of household (with qualifying person)||$200,000|
|Qualifying widow(er) with dependent child||$200,000|
IRS final regulations (TD 9645)
All employees receiving $20 or more a month in tips must report 100% of their tips to their employer.
Form 8027 is used by large food or beverage establishments when the employer is required to make annual reports to the IRS on receipts from food or beverage operations and tips reported by employees.
You must file Form 8027 if you are an employer who operates a large food or beverage establishment. If you own more than one establishment, you must file Form 8027 for each one. There may be more than one establishment (business activity providing food or beverages) operating within a single building, and, if gross receipts are recorded separately, each activity is required to file a Form 8027.
A return is required only for establishments in the 50 states and the District of Columbia.
A large food or beverage establishment is one to which all of the following apply.
- Food or beverage is provided for consumption on the premises.
- Tipping is a customary practice.
- More than 10 employees who work more than 80 hours were normally employed on a typical business day during the preceding calendar year.
The filing requirement (more than 10 employees) is based on the total of all employees who provided services in connection with the provision of food and beverages at the establishment, not just the number of directly tipped employees. Include employees such as waitstaff, bussers, bartenders, seat persons, wine stewards, cooks, and kitchen help. See Regulations section 31.6053-3(j)(10) for more information.
A person who owns 50% or more in value of the stock of a corporation that runs the establishment is not considered an employee when determining whether the establishment normally employs more than 10 individuals.
File Form 8027 (and Form 8027-T when filing more than one Form 8027) by February 28, 2014. However, if you file electronically, the due date is March 31, 2014.
Extension of time to file. Filers of Form 8027 submitted on paper or electronically may request an extension of time to file on Form 8809, Application for Extension of Time To File Information Returns. File Form 8809 as soon as you know an extension of time to file is necessary, but not later than February 28, 2014 (March 31, 2014 if you file electronically).
Use Form 941 to report the following amounts.
- Wages you have paid.
- Tips your employees have received.
- Federal income tax you withheld.
- Both the employer’s and the employee’s share of social security and Medicare taxes.
- Additional Medicare Tax withheld from employees.
- Current quarter’s adjustments to social security and Medicare taxes for fractions of cents, sick pay, tips, and group-term life insurance.
Do not use Form 941 to report backup withholding or income tax withholding on nonpayroll payments such as pensions, annuities, and gambling winnings. Report these types of withholding on Form 945, Annual Return of Withheld Federal Income Tax.
After you file your first Form 941, you must file a return for each quarter, even if you have no taxes to report, unless you filed a final return or one of the exceptions listed next applies.
When To File Form 941
|Your Form 941 is due by the last day of the month that follows the end of the quarter.|
|The Quarter Includes . . .||Quarter Ends||Form 941
|1. January, February, March||March 31||April 30|
|2. April, May, June||June 30||July 31|
|3. July, August, September||September 30||October 31|
|4. October, November, December||December 31||January 31|
For example, you generally must report wages you pay during the first quarter—which is January through March—by April 30. If you made timely deposits in full payment of your taxes for a quarter, you have 10 more days after the due date to file your Form 941.
Social security and Medicare tax for 2014. The social security tax rate is 6.2% each for the employee and employer, unchanged from 2013. The social security wage base limit is $117,000. The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2013. There is no wage base limit for Medicare tax. Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation in 2014. Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation in 2014.
Reporting Due Dates
Generally, employers must report wages, tips and other compensation paid to an employee by filing the required form(s) to the IRS. You must also report on the taxes you deposit.
By January 31
- File Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. However, if you deposited all of the FUTA tax when due, you have 10 additional calendar days to file.
- File Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees if you paid wages to one or more farmworkers and the wages were subject to social security and Medicare taxes or federal income tax withholding under the $150 Test or the $2,500 Test.
- File Form 944, Employer’s Annual Federal Tax Return, for the previous calendar year instead of Form 941 if the IRS has notified you in writing to File Form 944.
- File Form 945, Annual Return of Withheld Federal Income Tax, to report any nonpayroll income tax withheld in the previous year. If you deposited all taxes when due, you have 10 additional calendar days to file. See Nonpayroll Income Tax Withholding under Reminders in Publication 15 for more information.
- File Form W-2, Wage and Tax Statement to report wages, tips and other compensation paid to an employee.
By February 28
- File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U.S. Information Returns, with the IRS. For electronically filed returns, see By March 31 below.
- File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). For electronically filed returns, see By March 31 below.
- File paper Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, with the IRS. See section 6 of Publication 15. For electronically filed returns, see By March 31 below.
By March 31
File electronic Forms 1099 and 8027 with the IRS. File electronic Forms W-2 with the SSA. For information on reporting Form W-2 information to the SSA electronically, visit the Social Security Administration’s Employer W-3 Filing Instructions & Information web page. We have two publications about filing information returns electronically.
- Publication 1220 (PDF), Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically
- Publication 1239 (PDF), Specifications for Filing Form 8027
By April 30, July 31, October 31, and January 31
- File Form 941, Employer’s QUARTERLY Federal Tax Return, for the fourth quarter of the previous calendar year. If you timely deposited all taxes when due, you have 10 additional calendar days from January 31 to file the appropriate return.
Deposit Due Dates
In general, you must deposit federal income tax withheld and both the employer and employee social security and Medicare taxes.
There are two deposit schedules, monthly and semi-weekly. Before the beginning of each calendar year, you must determine which of the two deposit schedules you are required to use. The deposit schedule you must use is based on the total tax liability you reported on Form 941 during a lookback period. See special rules for Forms 944 and 945. Schedules for depositing and reporting taxes are not the same.
You must use electronic funds transfer (EFTPS) to make all federal tax deposits.
Under the monthly deposit schedule, deposit employment taxes on payments made during a month by the 15th day of the following month. Employers who deposit monthly should only report their deposits quarterly or annually by filing Form 941 or Form 944.
Under the semiweekly deposit schedule, deposit employment taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. Deposit taxes for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. Report your deposits quarterly or annually only by filing Form 941 or Form 944.
Deposit FUTA tax by the last day of the first month that follows the end of the quarter. If the due date for making your deposit falls on a Saturday, Sunday, or legal holiday, you may make your deposit on the next business day.
If your liability for the fourth quarter (plus any undeposited amount from any earlier quarter) is over $500, deposit the entire amount by the due date of Form 940 (January 31). If it is $500 or less, you can make a deposit, pay the tax with a credit or debit card, or pay the tax with your 2011 Form 940 by January 31.
As required by our Payroll Expense Tax and Business Registration Ordinance all businesses with a taxable San Francisco payroll expense greater than $150,000 must file a Payroll Expense Tax Statement for their business annually by the last day of February for the prior calendar year (Jan. 1st – Dec. 31st). The Payroll Expense tax rate is 1.5% or .015. You calculate the Payroll Expense Tax by multiplying the business’ annual San Francisco payroll expense by 1.5% or .015, the Payroll Expense Tax rate.
Businesses must also renew their Business Registration for the next fiscal year (July 1st – June 30th) if they plan to conduct business during the new fiscal year. The 2014 – 2015 business registration renewal is due on May, 31, 2014.
A business is required to file if its San Francisco payroll expense was over $150,000 and it was operating for any portion of time in 2013.
|Please have the following data ready:|
Deadline to distribute Forms W-2 to employee: January 31, 2014
Deadline to file using paper Forms W-2: February 28, 2014
Deadline to file using Business Services Online (e-filing): March 31, 2014
Each year, employers must send Copy A of Forms W-2 (Wage and Tax Statement) to Social Security to report the wages and taxes of your employees for the previous calendar year. In addition, a Form W-2 must be given to each employee. Forms W-2 are sent to Social Security along with a Form W-3 (Transmittal of Income and Tax Statements). Employers are required to file a Form W-2 for wages paid to each employee from whom:
- Income, Social Security, or Medicare taxes were withheld, or
- Income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on a Form W-4, (Employee’s Withholding Allowance Certificate).