As an annual service to our members, NJBIA explains the changes in tax withholding rates and taxable wage bases that employers face in the year ahead. Outside of payroll taxes, it is important to note that legislation signed into law in 2020 (P.L.2020, c.95) reinstated the 2.5% corporate business tax surtax until Dec. 31, 2023. The surtax was previously lowered to 1.5% prior to being increased in 2020.
Unemployment Insurance & New Jersey Workforce Development Taxes
Employee and employer state Unemployment Insurance and Workforce Development/Supplemental Workforce Funds tax rates apply to the first $39,800 of an employee’s earnings in 2022 (up from $36,200 in 2021).
Employees are subject to a 0.0425% (.000425) Workforce Development/Supplemental Workforce Funds tax rate for 2022, the same as last year. For FY2022 the state will be operating on Schedule C, meaning that UI tax rates for employers will range from 0.5% to 5.8% on the first $39,800 paid to each employee. Employers are required to make their contributions within 30 days of the close of each quarter. For 2022, employers are scheduled to make Q1 payments on April 30, Q2 payments on July 30, Q3 payments on Oct. 30, and Q4 payments on Jan. 30,2023.
The employee Unemployment Insurance tax rate remains at 0.3825% (.003825) of taxable payroll.
New Jersey Temporary Disability (TDI) & Family Leave Insurance (FLI) Taxes
- The 2022 TDI and FLI Taxable Wage base for employees-only is $151,900, a significant increase from 2021’s $138,200. The TDI Taxable Wage Base for employers-only is $39,800 – a slight increase from 2021’s $36,2005
- The 2022 disability tax rate for employees is 0.14%, down from 0.47% of taxable wages in 2021.
- The tax rate for existing employers for the state plan is based on each employer’s claims experience. Employer contribution rates vary from 0.10% to 0.75%.
- Family Leave Insurance tax rate in 2022 for employees is 0.14% of taxable wages, down from 0.28% of taxable wages in 2021.
Explanation of Federal Unemployment Tax Act (FUTA)
FUTA is a tax that employers pay to the federal government to help states pay for unemployment benefits. New Jersey borrowed from the federal government in 2020 when the UI trust fund became insolvent due to pandemic unemployment benefits. New Jersey must repay the outstanding balance, $426,755,815.46 as of Feb. 8, 2022, by Nov. 10, 2022 or the state will experience a FUTA credit reduction of 0.3% for calendar year 2022, which will further increase payroll taxes.
FICA and Medicare
The Social Security portion of the FICA tax that both employers and employees pay remains unchanged at 12.4% (6.2% each). The maximum amount of earnings subject to the Social Security payroll tax will increase to $147,000, up from the 2021 amount of $142,800.
Most Americans will pay a 2.9% Medicare FICA tax, which is split evenly between employees and employers (1.45% each). However, it should be noted that unlike the Social Security FICA tax, there is no limit on the amount of wages subject to the Medicare portion of the tax.
The Affordable Care Act imposed an additional tax of 0.9% on the employee-paid portion of the Medicare FICA tax for high-wage earners. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for single and all other taxpayers. While the additional Medicare tax for the individual wage earner’s portion on compensation will rise to 2.35% (1.45% plus 0.9%), the employer-paid portion of the Medicare tax on these amounts remains at 1.45%.
Self-employed individuals are responsible for the entire FICA tax rate of 15.3% on the first $147,000 of self-employment income. They are also responsible for the 2.9% Medicare FICA tax on income above $147,000, as well as the additional 0.9% Medicare tax established under the ACA if income meets the aforementioned “high wage earner” thresholds.
NOTE: Employers are advised to check with the IRS regarding information on federal income tax withholdings. Information can be found at www.IRS.gov.
Employee Benefits Increase in 2022
Employee maximum weekly benefits for Workers’ Compensation, Unemployment Compensation, and Temporary Disability are adjusted annually to reflect increases in average taxable wages of covered employees. Amounts applicable in 2022 are set forth below:
New Jersey Unemployment Insurance
The 2022 maximum unemployment insurance benefit is $804 weekly, up from $731 in 2021.
Temporary Disability & Family Leave Insurance
The 2022 Maximum TDI weekly benefit rate is $993, up from $903 weekly in 2021.
Workers’ Compensation
The 2022 Maximum Workers’ Compensation weekly benefit rate is $1,065 up from $969 in 2021
If you need additional assistance, please contact Christopher Emigholz at cemigholz@njbia.org .
