The forces of change continue to dominate payroll, and 2021 will see even more changes for employers in how they handle worker pay. PayrollTimes.com’s exclusive “out and in” for 2021 gives practitioners a glimpse at what is going away as the new year starts, and what will come into play as 2021 progresses.
However, many key payroll-related numbers for 2021 will remain the same as 2020 (although there always is the possibility that legislative changes could impact these as well in 2021). The elective tax-free deferral limit for 401(k)-type programs ($19,500), for example, remains the same as in 2020, as is the over-50 additional catch-up amount ($6,000).
Other figures that remain the same are: flat tax rate on supplemental wage payments (22%; 37% once $1 million in supplemental wage payments is reached); the general tax rates for individuals remain the same in 2021 as 2020 (10%, 12%, 22%, 24%, 32%, 35%, 37%); the Social Security payroll tax rate stays at 6.2% up to the new wage base (see below); Medicare/Hospital Insurance tax rates remain the same as well at 1.45% for most and 2.35% for individuals with incomes generally higher than $200,000, once that amount has been reached for the year.
But, beyond that, here are the major things in payroll that are going “out” and coming “in” in 2021!
| OUT | IN |
| Working at Home | Office/Home work blend |
| New Form W-4 | New Form 941X |
| State/Local Withholding Based on Company Sites Where Employees Worked | State/Local Withholding Taxes Based on Where Employee Works Remotely |
| COVID-Related Employment Tax Credits Under March 2020 CARES Act | Claiming Past Credits |
| Social Security Tax Deferrals Under CARES Act and President’s Order | Additional Social Security Tax Payments |
| COVID-Related Mandated Paid Time Off Under March 2020 FFCRA Law | Generally Mandated Paid Time Off |
| Paycheck Protection Program Under March 2020 CARES Act | Paycheck Protection Program Audits |
| Suspended Withholding on Student Loans | New Student Loan Withholding Orders |
| COVID-Related Emergency Unemployment | Higher Unemployment Tax Contributions |
| Social Security Wage Base = $137,700 | Social Security Wage Base = $142,800 |
| Standard Business Mileage Rate = 57.5 cents-per-mile | Standard Business Mileage Rate = 56 cents-per-mile |
| Employees Accessing Pay on Payday | Earned Wage Access/On-Demand Pay |
| Manual Reconciliations | Automated Reconciliations |
Total Defined Contribution Tax-Free Limit = $57,000 | Total Defined Contribution Tax-Free Limit = $58,000 |
| Form 1099-MISC | Form 1099-NEC |
Where to go from here
As in 2020, the payroll professionals who kept a good deal of the economy going despite illnesses, lockdowns, and social and political upheaval can expect more of the same for much of 2021.
Although most see a light at the end of the tunnel for 2021, those in payroll will need to stay focused on their commitment to process accurate and timely pay under continued trying circumstances, just like the general public is being urged to stick with personal protection protocols until the infection curve declines.