Obama’s 2014 budget has provisions that would increase minimum wage, increase Federal unemployment insurance taxes, and modify reporting requirements. Business owners should take note.
As he has in the past, Obama proposed an increase in the federal minimum wage to $9 an hour from $7.25 an hour. The wage would rise to $9 an hour by the end of 2015 and the rate would be indexed to inflation in subsequent years, the proposal said. The minimum wage rate last rose in 2009 to $7.25 an hour from $6.55 an hour.
Also under Mr. Obama’s budget proposals, Federal Unemployment tax changes would include suspension of the FUTA credit reductions for 2013 and 2014, increasing the unemployment taxable wage base to $15,000 from the current $7,000, effective Jan. 1, 2016, and increasing the effective minimum federal unemployment tax rate to 0.8 percent from 0.6 percent, as of Jan. 1, 2014. He then proposes reducing the total tax over time as the wage base increases. This is an attempt to replenish unemployment trust funds depleted by up to 99 week unemployment compensation coverage. Nationwide, trust funds are at low levels.
Tax changes under the proposed budget would include: reducing the W-2 electronic filing threshold to 50 W-2s, and implementing more quarterly reporting. It would allow for the IRS to issue worker status guidance/change definitions. It would also adopt a policy to hold certain Professional Employment Organizations liable for client’s federal taxes. This item comes after a number of recent IRS investigations of PEO firms , including local PEO firms, who have been suspected of misusing customer payroll tax dollars.