If you are a business owner, whether or not you have employees, below is important information that could affect your business during 2022. As always, Isler is here to help you navigate through the often-muddy waters of payroll and 1099 reporting. As you read through this information, make a note of anything that you think may affect you and ask your tax professional if you have any questions.

General Information

  • This is the time of year that many business owners give bonuses and gifts to their employees. Please remember that any bonuses (including gift cards) over $25 must be reported as wages to the employee.
  • Shareholder Medical premiums – if you have not already done so, please make sure your payroll provider has the correct amount of Shareholder Medical premiums on your payroll. The IRS requires Shareholder medical premiums to be included in wages in order for the company to take a deduction.
  • Employee/Owner fringe benefits
    • Many fringe benefits given to employees and/or owners must be reported as wages. These taxable fringe benefits can include gym memberships, personal use of company automobile, health insurance premium assistance in lieu of company provided health insurance, etc. It is important to talk to your tax professional if you have any questions about these types of benefits.

Federal Updates

  • Employee Retention Credits for 2020 and 2021: It’s not too late to apply!
    • If you have not already applied for the Retroactive Employee Retention Credits for 2020 or 2021, you may still be eligible:
      • If you saw a reduction of revenue over 50% during any quarter of 2020, or over 20% in either of the first two quarter of 2021, you may be eligible to amend any applicable Federal quarterly payroll form 941 to request the Employee Retention Credit. This is a valuable credit, and you may be eligible even if you received one or two PPP loans during 2020-2021.
      • Even if your revenue did not decrease during 2020-2021, you may still be eligible for the credits for any quarters that you were under a shut down or partial shut-down order.
      • Talk to your tax professional if you think you may be eligible. Isler’s Client Accounting Services department can take care of any amended payroll reports that you would need to file to claim these credits.
    • If you have already applied for these credits using amended Federal quarterly payroll reports, and you have not yet received your refunds, be patient. The IRS is taking months to process these forms.
  • Employee Forms W-4 and I-9
    • Employers are required to have forms W-4 and I-9 on file for all employees. Oregon has its own form W-4 that you should have on file as well. Each form must be signed by the employee in order for it to be valid. Electronic signatures are not allowed. At this time of year, it is a good idea to check your records for these forms. Here are links to all three forms that you can download and have your employees fill out:
  • Social Security/Medicare
    • Wage Base increasing
      • The maximum 2022 earnings that are subject to Social Security tax is increasing from $142,800 to $147,000
      • The maximum employee Social Security tax will be $9,114
    • COLA increase for SS benefits
    • Annual amount of W-2 earnings before benefits reduced
    • No changes to Medicare hospital insurance tax. It will stay at 1.45% with no wage limit
    • Additional hospital insurance tax mandatory withholding also remains unchanged on wages over $200,000.00.
  • Retirement contribution limits (see IRS Notice 2021-61) for more information https://www.irs.gov/pub/irs-drop/n-21-61.pdf
    • 401(k) increasing from $19,500 to $20,500
    • Traditional IRA contribution limits staying the same at $6,000
    • Catch up Contributions for traditional IRA also staying at $1,000
    • ROTH IRA – income phaseout for contributions increasing
      • Single and Head of Household
        • New phaseout between $129,000 and $144,000
      • Married Filing Joint
        • New phaseout between $204,000 and $214,000
    • SIMPLE IRA contribution limit increasing from $13,500 to $14,000
  • Forms 1099-NEC and 1099-MISC
    • It is important to determine whether or not you are required to file forms 1099 each year. You must assert on your business tax return (and on your personal income tax return if you have rental or self-employment income) whether or not you have made payments of $600 or more to any person or business that is eligible for 1099 reporting. Please talk to your tax professional if you have any questions about this.
    • The IRS requires business owners to retain Form W-9 for each entity that provides services to the business, even if they do not reach the $600 threshold for reporting on a 1099. The best practice for business owners is to require vendors who provide services to provide a signed Form W-9 BEFORE the vendor is paid. An online version of this form can be found here.
    • A major change occurred in 2021 with the inception of the Form 1099-NEC. The form 1099-NEC replaced what used to be box 7 (Non-Employee Compensation) of the old forms 1099-MISC. Many employers were caught off-guard regarding when to use form 1099-NEC or 1099-MISC.
    • The Form 1099-NEC should only be used when reporting payments of $600 or more during the year to non-employees providing services to your company. Services include such things as consulting, professional fees, labor, etc.
      • Payments to corporations are exempt from 1099-NEC reporting
      • Payments made with a credit card or debit card are exempt from 1099-NEC reporting
      • Payments made for legal services must be reported, even if the provider is a corporation. However, the services can be reported on either Form 1099-NEC (in box 1) or Form 1099-MISC (in box 10)

Isler’s Client Accounting Services department can help you with filing these forms. Please let your tax professional know if you would like us to prepare these for you.

For more information on how to file forms 1099-NEC and 1099-MISC, see the following IRS instructions: IRS instructions for Forms 1099-NEC and 1099-MISC

Oregon Updates

  • State Unemployment (SUTA) rate changes
    • The average SUTA rate has decreased from 2.26% in 2021 to 1.97% in 2022. This means that most employers will see a decrease in SUTA rates. You should have already received your notice from the Oregon Employment Department with your company’s new rate. Remember to give your payroll professional a copy of the notice as soon as possible.
  • Oregon Statewide Transit tax is unchanged at .1% (.001) for 2022
  • Lane Transit tax has increased from .76% (.0076) in 2021 to .77% (.0077) for 2022
  • Tri-Met tax is increasing from .7837% (.007837)

Oregon Employment Law

Oregon has made several changes to employment law that could affect your company. Here are a couple of the major changes:

  • Oregon HB 2470, effective January 1, 2022
    • Employers will be prohibited from requiring a valid driver license as a condition of employment, unless the ability to drive legally is essential to the employee’s job or if it is related to a legitimate business purpose. Here is a link to the language in the bill: Oregon HB 2420
  • Oregon HB 3398 postpones the Paid Family and Medical Leave program from January 1, 2022 until January 1, 2023.

City of Eugene Community Safety Payroll Tax

This tax was enacted on January 1, 2021, and affected self-employed persons and employers with a physical business address within the Eugene city limits. The first annual return will be due April 15, 2022 for calendar year taxpayers. For fiscal year taxpayers, the return will be due on the fifteenth day of the fourth month following the end of the fiscal year. Employers are required to withhold this tax from employees, and pay the employer portion. The employee withholding varies based on the employee’s wages and some employees are exempt. Please see your payroll provider if you have questions on filing and paying this tax.