We may have just started the fourth quarter, but IRS wants you to start prepping for 2012 – with a ton of updates you’ll need for the new year.
Last week both IRS and Social Security Administration released several mission critical numbers every Finance department needs for year-end. No time like the present to begin preparing — check out the three biggies to come out.
2012 Update #1: The Taxable Wage Base
Here’s one Payroll can’t live without. The Social Security Administration just announced that hat the 2012 social security wage base will be $110,100. That’s up from $106,800 – a figure that has held steady for the last three years.
The change will make the maximum social security tax employers and employees will pay next year will be $6,826.20. And don’t forget: There’s no limit to the wages subject to the 1.45% Medicare tax.
2012 Update #2: Pension Plan Limits
Your benefits folks will be most interested in the new cost of living adjustments (COLAs) for benefit plans. This year many of them changed. Depending on what type of plan, here’s the info your finance staffers need, starting Jan. 1, 2012:
- 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 to $17,000 (from $16,500).
- The catch-up contribution limit for those aged 50 and over stays the same at $5,500.
- The limitation on the annual benefit under a defined benefit plan under section 415(b)(1)(A) is increased to $200,000 (from $195,000).
- The limitation for defined contribution plans under Section 415(c)(1)(A) is increased to $50,000 (up $1,000).
- The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased to $17,000 (from $16,500).
- The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased by $5,000 to $250,000.
- The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased by $5,000 to $165,000.
- The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased to $115,000 (up from $110,000).
- The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $550.
- The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains the same at $11,500.
- The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is also increased to $17,000 (from ($16,500).
2012 Update #3: Medical Savings Account Limits
Lastly, if your company offers a medical savings account, you’ll want to make note of the new limits for 2012 just released by IRS:
- Minimum annual deductible: $2,100 (individuals); $4,200 (family coverage)
- Maximum annual deductible: $3,150 (individuals); $6,300 (family coverage), and
- Maximum out of pocket expenses: $4,200 (individuals); $7,650 (family coverage).
Stay tuned – now’s the time of year when the feds start cranking out these vital year-end numbers. CFO Daily News will continue updating you.