2022 Payroll Changes to Keep in Mind

Maria Tanski-Phillips
Posted by Maria Tanski-Phillips on Dec 17, 2021 1:16:47 PM

New year, new payroll changes. As an advisor and accountant, you know all too well that payroll rules, rates, etc. can change from year to year. And to ensure your clients’ payroll is as accurate as possible, you need to keep up with said changes.

Payroll changes for 2022

So, what kind of payroll changes should you keep in mind for 2022? Let us break down the six you need to keep on your radar.

1. Social Security wage base increase

Although this one may not be the most shocking to you if you’ve been in the payroll game for a while, it’s still one to remember when the new year begins. That’s right—the Social Security wage base is going up again.

In 2022, the Social Security wage base is increasing to $147,000 in 2022 (up from $142,800 in 2021). This means your payroll clients only need to withhold and contribute Social Security taxes until an employee earns above $147,000 in 2022. Once an employee reaches the wage base, they can stop withholding and contributing to Social Security tax for that specific employee.

Let clients know about this change for the new year and how it will impact certain employees. If you handle payroll for your client, let them know about the wage base change, and follow the new wage base of $147,000 when running payroll.

2. Minimum wage amounts

Minimum wage can vary depending on state and locality for your clients’ employees. And each year, federal, state, and local minimum wage rates can potentially change.

Review federal, state, and local minimum wage rates in 2022 for your clients. Find out if any rates are changing. And if they are, notify your affected clients and update rates in your payroll software (if applicable).

As always, make sure your clients are going by the highest minimum wage rate possible. For example, if your client’s state rate is higher than the federal, have them follow the state minimum wage rate.

To ensure you and your clients are up-to-date with minimum wage information at the beginning of the new year, look over state websites and do your research ahead of time.

3. Retirement contribution limits

Every year, the annual retirement contribution limit receives an adjustment based on inflation. And, 2022 is no different.

The limit for employees who participate in retirement programs in 2022 (401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan) is $20,500 (an increase of $1,000 from 2021). The limit for IRA contributions stays at $6,000.

If your clients offer retirement plans, this change may impact their payroll and employees’ contribution amounts. Let each applicable client know about this upcoming change. And, make sure they let their employees know about the contribution limit for 2022.

4. Health savings account limits

If you have a client who offers employees a high deductible healthcare plan (HDHP) with a health savings account (HSA) option, keep in mind that contributions are limited each year.

For 2022, employees with self-only coverage can contribute up to $3,650 (up $50 from 2021) for the year. If an employee has family coverage, they can contribute up to $7,300 (up $100 from 2021). And if they’re 55 years old or older, they can put in an additional $1,000 in catch-up contributions (unchanged from previous years).

If your client offers employees an HSA, make sure they are aware of the new limits for 2022. And, make sure they relay the HSA changes to applicable employees.

5. State unemployment tax rates

Depending on factors like your client’s state, industry, how many former employees received unemployment benefits, and experience, their state unemployment tax rate may change annually.

Many states send employers a new unemployment rate each year (e.g., via a notice in the mail). However, this is not true for every state.

To ensure each of your client’s state unemployment rates are accurate for the new year, talk with each client. Have them pass along any notices they receive. Your client may also be able to find out their rate in their state unemployment account online.

If you have a client who is a new employer, check to see if their state offers a new employer rate and use that to calculate state unemployment taxes. Some payroll providers, like Patriot Software, even provide resources for new employers, complete with new employer information by state.

6. Other state- and local-specific taxes and laws

Like with minimum wage rates and SUTA tax, other state- and local-specific taxes and law can change from year to year too.

Review the following for each client to ensure their payroll is good to go for 2022:

  • State-specific taxes and laws
  • Local-specific taxes and laws
  • Paid sick leave laws
  • Paid family leave laws

Before the end of the year, check to see if there are any upcoming payroll changes for each client’s state and locality. If there are any changes, notify your client of what will be different in the new year.


 

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