Some states are conservative in their approach to maintaining adequate SUI trust fund reserves. Consequently, the SUI wage base is flexible in those states, meaning it is indexed to the average wage or varies based on the trust fund balance. According to the U.S. Department of Labor, 24 states and the Virgin Islands had a flexible wage base in 2020. (U.S. Department of Labor, Comparison of State Unemployment Laws, 2020.)

As a result of the COVID-19 pandemic, several states are considering or have passed legislation or have issued executive orders to change their UI laws, bolster UI trust funds and/or provide relief to their employers. For example, several states have transferred federal stimulus under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to their UI trust fund balances to avoid significant increases in employers’ 2021 SUI tax rates. In addition, most states, at least for a period of time, chose not to charge employer reserve accounts with COVID-19 UI benefits.

A preliminary look at the 2021 state unemployment taxable wage bases

Following is a preliminary list of the 2021 SUI taxable wage bases (as compared to 2020) and employee SUI withholding rates, if applicable.

* Law sets the taxable wage base; legislation would be necessary to change.

** See footnote below.

*** Due to the high volume of COVID-19 UI benefit claims, the state is delayed in issuing 2021 SUI tax rate

information and notices.

EST: Estimated 2021 wage base

TBD: 2021 wage base was not available as of the time of this printing

Arkansas

2019 legislation (SB 298/Act 512) changes the way that Arkansas determines the SUI wage base starting with tax years after 2019. The SUI wage base, set by law at $10,000 for 2018 and 2019, is now determined each year by the average seasonally unadjusted UI benefit rate for the preceding fiscal year (July 1 through June 30). Depending on the UI benefit rate, the SUI wage base could range from $7,000 to $10,000. In addition, during times when the UI trust fund balance falls below a specified level, the SUI wage base could increase to $11,000 or $12,000. According to a Department representative, the taxable wage base will increase to $10,000 for 2021.

Colorado

2020 legislation (SB 20-207) sets the SUI taxable wage base at $13,600 for calendar year 2021 and provides that the SUI taxable wage base will increase incrementally to $30,600 by calendar year 2026.

Delaware

2013 legislation (HB 168) increased the SUI taxable wage base to a minimum of $10,500 and a maximum of $18,500 by linking the wage limit to the balance of the state’s unemployment trust fund. The higher the trust fund balance, the lower the taxable wage base. 2019 legislation (HB 198) froze the taxable wage base at $16,500 for 2020 (under the bill language from July 1, 2019 to October 29, 2020) so that the Division of Unemployment Insurance and the Unemployment Compensation Advisory Council could determine whether the formula used to calculate the annual figure should be revised. According to a Division representative, the taxable wage base will remain at $16,500 for 2021.

Kentucky

The taxable wage base is expected to continue to increase by $300 each calendar year until it reaches $12,000.

Louisiana

2020 legislation (SB 55/Act 40) provides that the SUI taxable wage base will remain at $7,700 for 2021.

Michigan

The SUI taxable wage base is expected to increase for 2021 from the $9,000 that has been in effect for the past several years to the $9,500 that is currently only assigned to delinquent employers. Michigan’s UI trust fund balance fell below $2.5 billion on June 30, 2020, the balance required for the $9,000 wage base to be in effect. Legislation introduced in September 2020 (HB 6136) would, if enacted, freeze the SUI taxable wage base at $9,000 for calendar year 2021.

Nebraska

2019 legislation (LB 428) increases the SUI taxable wage base to $24,000 for employers assigned the maximum rate. This change was effective for calendar year 2020. The taxable wage base remains $9,000 for all other employers.

New Jersey

Employee contribution rate includes the Workforce Development/Supplemental Workforce Funds surcharge.

New York

The taxable wage base will continue to increase as follows: 2022 — $12,000; 2023 — $12,300; 2024 — $12,500; 2025 — $12,800; 2026 — $13,000; for each year thereafter, computed as 16% of the state’s average annual wage.

Ohio

2016 legislation (SB 235) increased the SUI taxable wage base to $9,500 for calendar years 2018 and 2019. The taxable wage base reverted to $9,000 effective January 1, 2020 and will remain at that amount unless changed by future legislation.

Puerto Rico

2017 legislation grants the territory’s Secretary of Labor the discretion to increase the taxable wage base to as much as $10,500 if deemed necessary.

Rhode Island

Negative-balanced employers assigned the maximum tax rate will have a taxable wage base that is $1,500 higher than other employers (e.g., because the 2020 taxable wage base is $24,000, these negative-balanced employers pay taxes on the first $25,500 in wages).

Tennessee

Under Tennessee UI law, if the UI trust fund balance on December 31 of any year is less than $900 million, the taxable wage base is $9,000. If the trust fund balance is above $900 million, but less than $1 billion on December 31, the taxable wage base is $8,000. If the trust fund balance is over $1 billion on December 31, the taxable wage base is $7,000. The Tennessee UI trust fund balance as of November 30, 2020, was $1,165,876,123. If the balance remains above $1 billion as of December 31, 2020, the 2021 taxable wage base will remain $7,000.

Courtesy of ADP

The Paycheck Protection Program is reopened with over $284B in funds available for new loans. First-time borrowers must have 500 or fewer employees and meet other eligibility criteria. In addition, second PPP loans are available to businesses that received a PPP loan previously if they have 300 or fewer employees and meet other eligibility criteria. PPP loans are available until March 31, 2021, or until all allocated funds are disbursed.

For new borrowers, as well as borrowers who have already received a loan and not yet applied for forgiveness, the law expands eligible non-payroll costs to include certain covered operations expenditures, property damage costs, supplier costs and worker protection expenditures. Non-payroll costs remain limited to less than 40% of the loan amount. Additionally, for all borrowers who have not yet applied for forgiveness, the safe harbor deadline to restore wage and employment levels is extended from December 31, 2020, to September 30, 2021.

Second PPP loans are available to businesses that received a PPP loan previously and that meet special requirements, including:

• Second-time borrowers must have 300 or feweremployees. The rules of the program may limit participation if your organization has related entities, or if you are in certain industries. Check the Small Business Administration’s PPP website (https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program) or speak to your trusted legal or accounting advisor for more information.
• To be eligible for a second PPP loan, businesses will need to demonstrate a reduction in revenue of at least 25% between corresponding quarters in 2020 and 2019. Special rules apply to businesses that were not in operation for all or part of 2019.
• The maximum amount for second draw PPP loans is $2 million.
• Borrowers must have fully spent the loan proceeds from their first PPP loan before their second PPP loan is disbursed.

As a reminder, PPP loans are designed to be 100% forgivable as long as the proceeds are spent in accordance with program rules.

Extension of Paid Leave Credits Under the Families First Coronavirus Response Act (FFCRA)

The FFCRA required employers with fewer than 500 employees to provide mandatory paid sick and paid family leave for certain reasons related to COVID-19. It provided a corresponding tax credit for any amounts paid to employees for the required paid leave. The COVID-related Tax Relief Act of 2020 (CTRA) extends the tax credit portion of the FFCRA for employers that voluntarily offer paid sick or paid family leave through March 31, 2021. The mandatory leave portion will terminate as expected on December 31, 2020.

Extension of Employee Retention Tax Credit (ERTC)

The CARES Act allows eligible employers to claim a federal tax credit with respect to qualified wages paid between March 13 and December 31, 2020. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Act”) extends the ERTC to cover wages paid through June 30, 2021. In addition, as of January 1, the Act increases the credit rate rom 50% to 70% of qualified wages, increases the per employee wage cap from $10,000 in the aggregate to $10,000 per calendar quarter, decreases the required decline in gross receipts from 50% to 20%, and increases the threshold for treatment as a large employer from 100 employees to 500 employees. Retroactive to March 13, the Act provides that employers who receive PPP loans may still be eligible for the ERTC to the extent qualified wages are not paid using forgiven PPP loan proceeds, and it clarifies that group health plan expenses may be considered qualified wages even if no other wages are paid to the applicable employee.

Extension of Repayment Period for Deferred Employee Social Security Taxes

The current guidance issued by the IRS (IRS Notice 2020-65) required that any deferred employee portion of Social Security tax withholding between September 1 and December 31, 2020, must be ratably withheld and paid from wages and compensation paid to employees between January 1 and April 30, 2021, or penalties and interest would begin to accrue on May 1, 2021. The CTRA extends the repayment deadline from April 30, 2021, to December 31, 2021, and the date for penalty and interest to begin accruing from May 1, 2021, to January 1, 2022.

The IRS released a revised 2020 Form 941,Employer’s Quarterly Federal Tax Return, and its instructions. The form will be used to report employment taxes beginning with the third quarter of 2020. The IRS revised Form 941 to allow employers that defer the withholding and payment of the employee share of social security tax on wages paid on or after September 1, 2020, to report the deferral.

Adjustments for Payments or Deposits Made in Same Quarter as a Deferral

The instructions provide guidance on how to report a deferral of the employer and/or employee share of social security tax that is subsequently paid or deposited in the same quarter it was deferred.

Revised Instructions for Schedules B and R

The IRS also updated the Instructions for Schedule B (Form 941), and the Instructions for Schedule R (Form 941), to reflect changes made to the Form 941
Courtesy of the APA –  Curtis E. Tatum

Forbes.com
The Internal Revenue Service announced new, higher contribution limits for health savings accounts for 2021 today. You’ll be allowed to contribute $3,600 for individual coverage for 2021, up from $3,550 for 2020, or $7,200 for family coverage, up from $7,100 for 2020.

In the meantime, you can still top off health savings account contributions for 2019 through the Covid-19-related extended tax day deadline of July 15, 2020. And it’s as good a time as ever to check that your contributions for the 2020 calendar year are on track.

While more and more Americans are opening up these triple-tax-advantaged accounts, few are fully embracing the potential tax savings they offer. Some accounts go unfunded. And only 6% of accountholders choose to invest the money they contribute, according to the Employee Benefit Research Institute.

Is it really worth the hassle of keeping track of a savings and investing account dedicated to healthcare? Absolutely. With an HSA, you save whether you use the money in the account for current out-of-pocket healthcare expenses, or invest it with the intention of using it to help cover your healthcare costs in retirement.

You can even used an HSA to save on a typical trip to the CVS. Thanks to a tax relief provision tucked in the last Covid-19 stimulus package, you can use money you stash in an HSA or FSA (more on those later) for over-the-counter medications like Tylenol or Flonase as well as menstrual products like tampons and pads. That reverses Obamacare restrictions on OTC meds requiring a doctor’s prescription for them to be eligible for reimbursement. Lively, an upstart HSA and FSA provider, has an updated list of eligible expenses here.

As of January 2020, there were 29.4 million HSAs, holding $71.7 billion in assets, according to the 2019 Year-End Devenir HSA Research Report. Contributions and asset growth has been accelerating. As of year-end 2019, investment account holders had a $16,012 total balance on average, Devenir found.

Most HSAs are offered as an employee benefit. But Lively and Fidelity Investments also offer fee-free individual HSAs for self-employed folks, independent contractors and gig workers.

Here are the details on how HSAs work. You put money in on a taxfree basis (usually through salary deferrals), it builds up tax free (you can invest it), and it comes out taxfree to cover out-of-pocket healthcare expenses.

You can contribute to an HSA if you’re in a qualifying high-deductible health plan. (For 2021, that means a plan with a minimum annual deductible of $1,400 for individual coverage or $2,800 for family coverage.) If you’ll be 55 or older by December 31, you can sock away an additional $1,000 for that year. (That catch-up amount isn’t subject to inflation adjustments.) If you’re married, have family coverage and your spouse will be 55 by the end of the year, he or she can also put away the $1,000 catch-up—but only into his or her own HSA, which can be set up specifically to accept these contributions. Here’s a link to the IRS Revenue Procedure 2020-32with the official numbers.

At a minimum, you should put enough money in your HSA to cover your annual health plan deductible. If you lowballed your annual contribution, you can top it off up until the tax year filing deadline. Say you get a big unexpected doctor’s bill. You can put money into your HSA, take it right out, and the government just paid maybe 25% of the bill. The higher your tax bracket, the bigger your savings.

A savvy strategy for high-income earners is to invest the money in your HSA for the long haul. Once you’re 65, you can take out taxfree distributions to cover Medicare premiums. If you withdraw money at that point for non-medical uses, you pay the same tax as you would on withdrawals from a pretax 401(k). But you can also take money out tax-free to reimburse yourself for prior years’ out-of-pocket medical expenses if you have the old receipts.

Note HSAs are a different beast than healthcare FSAs (sometimes confusingly called health spending accounts). FSAs have lower contribution limits and are riskier because you have to spend the money down in one year or you forfeit it (some FSAs have a $500 carryover provision). By contrast, the money you put in an HSA is yours to keep forever: you can spend it when you want. If you have an HSA-eligible health plan, you can’t also put away money in a regular FSA but you can put money in a limited FSA for dental and vision care expenses only.

See also, IRS Covid-19 Fix For Workplace Health And Dependent Care Flexible Spending Accounts: Mid-Year Changes Now Allowed.