Key Tax-Related Amounts for New Year

The Bloomberg BNA Payroll Library gives you reliable, up-to-date guidance and analysis in every area of payroll administration and compliance, and includes hundreds of interactive forms and links to related federal, state, and local sites.

By Keith M. Hill

Most of the tax-related amounts that payroll practitioners are to work with in 2016 are available. Most of these numbers are unchanged from 2015.

For payroll departments, this guide serves as a reminder of some of the required amounts for 2016.

Threshold Amounts

These figures represent amounts that are to be used in the new year.

•$118,500—the 2016 wage base for the Social Security program, also known as the Old-Age, Survivors and Disability Insurance program, unchanged from 2015.

•$18,000—the limit for tax-deferred employee contributions to a Section 401(k) plan, Section 403(b) plan or Section 457 plan for 2016.

•$6,000—the catch-up contribution limit to a Section 401(k) plan for individuals 50 and older for 2016.

•$53,000—the annual contribution limit for defined-contribution plans in 2016, provided the annual compensation taken into consideration is no more than $265,000.

•$12,500—the maximum elective deferral an employee may contribute in 2016 to a savings incentive match plan for employees (SIMPLE plan). Employees 50 and older may contribute up to $15,500.

•$600—the participation threshold for a simplified employee pension under Internal Revenue Code Section 408(k)(2)(C) in 2016.

•$210,000—the annual benefit limit for defined-benefit plans for 2016.

•$395,000—the Section 401(a)(17) cost-of-living adjustment to the compensation limit for 2016.

•$120,000—the limitation used in the definition of a highly compensated employee under Section 414(q)(1)(B) for 2016.

•$170,000— the dollar limitation for a key employee in a top-heavy plan in 2016.

•$105,000—the amount of compensation used to identify a control employee for use in valuing fringe benefits in 2016.

• $15,900—the minimum fair-market value amount for cars available for personal use by employees; $17,700, the minimum value for trucks and vans; $21,200, the car fleet value; $23,100, the truck fleet value.

Other Payroll Numbers

2016 per diem rates: The standard per diem rate is $140 ($89 lodging, $51 meals and incidental expenses) to reflect the average daily rate for lodging and meals and incidentals. Four hundred locations were assigned rates higher than the standard rate for the continental U.S. High-low per diem rates for 2016 also have been released.

For 2016, payroll departments may have to make a few updates to their systems.

•$130—the maximum monthly amount that an employer may provide on a tax-free basis for transit passes or qualified van pools or both. The employer-provided parking exclusion increases to $255 a month. Employers may reimburse employees who commute by bicycle up to $20 a month in expenses tax free. Note: An IRS letter states that a bike-share program is not considered a qualified transportation fringe benefit under tax code Section 132(a)(5).

•$101,300—the maximum amount of foreign-earned income that a U.S. citizen or resident living and working abroad may exclude for tax purposes in 2016, provided the individual qualifies under Internal Revenue Code Section 911 requirements.

•$2,550—the tax-free amount for qualified health flexible spending arrangements in 2016, unchanged from 2015.

•$3,350—the maximum amount of tax-free contributions for covered benefits allowed for individual health savings accounts. For family HSAs, the amount increases to $6,750.

•$2,000—the maximum amount a domestic employee in a private home may be paid in a year that is exempt from FICA taxes in 2016.

• $500,000—Maximum penalty in 2016 for filing incorrect information returns with IRS and correcting them within 30 days.

•$1,100—the amount per employee that an employer may be charged for repeated or willful violations of the minimum wage and overtime requirements of the Fair Labor Standards Act. The penalty for violations of the child labor provisions of the law remains a maximum of $11,000 per employee.

•$13,460—the credit allowed for expenses related to adoption assistance.

•39.6 percent—the highest marginal tax rate will affect singles whose income exceeds $415,050 in 2016, up from $413,200 in 2015. For married taxpayers filing a joint return, the threshold amount will be $466,950, up from $464,850.

Phone Numbers

•800-829-4933—the toll-free number established by the Internal Revenue Service to help businesses with questions on employment taxes.

•866-455-7438—the toll-free number for the IRS Information Reporting Program.

•800-772-6270—the toll-free number for the Social Security Administration.

•202-693-0067—the number for the Labor Department's Fair Labor Standards Act team on wage and hour issues.

•800-372-1033—the toll-free Bloomberg BNA customer service number.

Toward 2016: Bloomberg BNA's Year-End Clearinghouse is available on the Payroll Library website, which also offers additional information.