2022 Annual Payroll, Pension And Other Tax Information Update

January 3, 2022



1)  FICA
The wage base for 2022 increased to $147,000 on the Social Security (OASDI) portion, subject to 6.2% (amount withheld) each for the employee and employer (12.4% total). There is no wage base limit for Medicare tax; all covered wages are subject to 1.45% each for the employee and employer (2.9% total). The maximum withholding amount for 2022 is $9,114.00 for Social Security and an unlimited amount for Medicare.  

Additional Medicare Tax 

An employer must withhold the additional 0.9% Medicare tax from wages it pays to an individual in excess of $200,000 in a calendar year, without regard to the individual’s filing status or wages paid by another employer. There is no employer match for the Additional Medicare Tax.

2)  Federal Withholding Tax Tables 

Please refer to the 2022 Federal Income Tax Withholding Methods Publication 15-T on the IRS website:–dft.pdf

3)  Federal Unemployment Tax (FUTA)

The FUTA tax rate for 2022 will remain at 0.6% (net of 6.0% less 5.4% credit) and subject to the first $7,000 of wages paid to each employee. Employers are required to deposit FUTA taxes by the end of the month following the end of the quarter only when their FUTA tax liability exceeds $500. This amount is paid by the employer.

In 2021 California was not a credit reduction state. The U.S. Department of Labor will announce the 2022 FUTA credit reduction states in November 2022.

4)  Payroll Tax Deposit Requirements

Please refer to the 2022 Employers Tax Guide (Circular E) on the IRS website. The IRS will notify each employer prior to the end of the year for determination of its depositor status.

5)  S-Corporations

S-Corporation shareholders that provide services to the company should generally be paid a reasonable compensation, which would also be subject to employment taxes for both the S-Corporation (employer) and shareholder (employee). The IRS defines reasonable compensation as the value that would ordinarily be paid for like services by like enterprises under like circumstances. If this compensation for services is not paid, the IRS has the ability to re-characterize owner distributions as salary and impose payroll taxes, interest, and possible non-deductible penalties.

Additionally, S-Corporations are required to include health insurance premium costs as additional wages on Box 1 of each greater than 2% shareholder-employee’s W-2. The amount included as additional wages are not subject to any employer payroll taxes. The failure to include this information could result in the non-deductibility of these premium costs. This requirement applies only to owners of the S-Corporation W-2’s and not to any other employees. You may review the IRS publication on this requirement by going to:

6)  Employer-Provided Vehicles 

All employers who furnish vehicles to employees for the employee’s personal use are required to add the personal use value of the vehicle to the employee’s W-2. As an option, the employee can reimburse the employer for the value of the personal use of the employer-provided vehicle in lieu of adding the value to the employee’s W-2. For more information, please see the IRS publication 15-B Employer’s Tax Guide to Fringe Benefits or contact our office to discuss this matter. 

7)  Electronic Federal Tax Payment System (EFTPS) 

EFTPS is a tax payment system provided by the U.S. Department of Treasury. You can pay federal taxes electronically via the Internet or phone 24/7. Businesses are required to make federal tax payments electronically. Businesses with payroll tax liabilities of less than $2,500 are exempt from this requirement and may send a check along with their annual or quarterly payroll tax returns.

Taxpayers may enroll in the Electronic Federal Tax Payment System, at It may take up to 15 days to receive a confirmation package, PIN and instructions on obtaining your Internet Password. Please see the IRS publication for more information.

8)  New Hire Reporting Requirements 

All employees must complete Form I-9 Employment Eligibility Verification and Form W-4 Employee Withholding Allowance Certificate upon initial employment. Employees must complete Form W-4 at the beginning of each subsequent year of employment and return them to you for safekeeping in your files. 

9)  Household Employment 

If you pay wages to people who work in or around your home, you may be considered a household employer. You must register with the IRS and Employer Development Department (EDD) if your household is in California. You must file Schedule H on your Form 1040 with the IRS and Form W-3 and each employee’s Form W-2 with the Social Security Administration. EDD requires you to make payroll tax payments and file forms DE9 and 9C quarterly unless you meet exceptions. If a government agency or third-party agent reports and pays the employment taxes on wages paid to your household employee under its own employer identification number (EIN), you do not need to file payroll forms mentioned in the above to report those taxes.

For more information, see the IRS publication 926 Household Employer’s Tax Guide and EDD publication DE 8829 Household Employer’s Guide

10) Employer-Provided Health Coverage Informational Reporting Requirements 

The IRS requires that employers filing 250 or more Forms W-2 in the previous tax year to report the total value of certain employer-sponsored health benefits on employees’ Forms W-2. This is not required for businesses filing less than 250 Forms W-2 in the previous tax year.


1)  State Disability Withholding (SDI) 

The SDI taxable wage base for 2022 increased to $145,600. The SDI tax rate is 1.10%. The maximum SDI withholding for 2022 is $1,601.60.

2)  State Unemployment Insurance (SUI) 

The Employment Development Department will notify you of your 2022 SUI rate. The employer is required to pay this rate on the first $7,000 of wages paid to each employee. You can also look up your SUI rate online at

3)  California Withholding Tax 

Please refer to the 2022 California Employers Guide sent to you by the Employment Development Department or check

4)  New Hire Reporting Requirements 

File Form DE 34 Report of New Employee(s) to the Employment Development Department within 20 days of hiring any new employee(s).

5) California Statewide Paid Sick Leave Law

Any employee (i.e., full-time, part-time, temporary) who works in California for 30 or more days within a year from the beginning of employment is entitled to paid sick leave. An employer must provide the employee with one hour of sick pay for every 30 hours worked beginning at the start of employment. An employer can cap the total amount at 6 days per year, for San Diego the employer has to provide 5 days minimum, the rest of California will remain at 3 days. An employee can start using accrued days after their 90th day of employment.

Failure to comply with this mandate can trigger various penalties. Please see for more information.

An employer must provide an employee with written notice that sets forth the amount of paid sick leave available. An employer must display a poster in each workplace: .

An employer with a paid sick leave or PTO policy that was in effect prior to January 1, 2015 is not required to provide an additional three paid sick days pursuant to the Act if the policy meets the accrual method described above. However, an employer should review their existing policies with legal counsel in order to accommodate the new rules and make any necessary revisions. 

6) California Minimum Wage Law 

The California minimum wage will increase to $14.00 per hour for employers with 25 employees or less, and $15.00 for employers with 26 employees or more in 2022. The City of San Diego’s rate will be $15.00 per hour.


The maximum 401(k) plan employee contribution for 2022 is $20,500 for employees under the age of 50 and $27,000 for employees aged 50 and over. Employees may want to consider making contributions to a designated Roth 401(k) if the plan includes this program. Contributions to a Roth 401(k) are not deductible up front but qualified distributions are tax free. The maximum contributions of $20,500 and $27,000 apply to the sum of both traditional and designated Roth 401(k) contributions.

The maximum contribution may be limited for highly compensated employees (generally those with 5% or more stock ownership or those included in the top 20% of employees when ranked on the basis of compensation). Check with your plan administrator to determine if any employees are considered highly compensated and if their contributions will be limited.


California sales tax standard statewide rate is currently 7.25%. The minimum combined state, county and local sales and use tax rate for most of San Diego County is 7.75%. Certain cities such as Chula Vista, Del Mar, El Cajon, Imperial Beach, La Mesa, National City, Oceanside, and Vista have enacted additional rates that increase the combined tax rate beyond 7.75%. To look up a tax rate by address, visit The California Department of Tax and Fee Administration (CDTFA) notifies you when a tax rate changes if you sign up for CDTFA updates. Sign up at to receive email notices regarding tax and fee updates, special news releases, other announcements and more.

Generally, the same types of items that are subject to sales tax are subject to use tax. Sales and use tax apply to the sale or use of tangible personal property in California. To find a publication for your industry, please visit A sale or use of certain tangible personal property is exempt from both sales and use tax.  Examples include cold food products and prescription medicines. A list of items the sale of which are not subject to sales or use tax can be found in Publication 61 (Sales and Use Taxes: Exemptions and Exclusions) at the CDTFA website

The requirement to obtain a seller’s permit or a use tax account applies to:
Individuals, partnerships, corporations, organizations, husband/wife co-ownership, LPs, LLPs, and LLCs

You must obtain a seller’s permit if you:

  • Are engaged in business in California
  • Intend to sell or lease tangible personal property that would ordinarily be subject to sales tax if sold at retail (this includes wholesalers, manufacturers and retailers.)

You must obtain a use tax account if you meet all of the following conditions:

  • Receive at least $100,000 in gross receipts from business operations per calendar year. Note: Gross receipts are the total of all receipts from both in-state and out-of-state business operations
  • Are not required to hold a seller’s permit or certificate of registration for use tax (6226 of the Revenue and Taxation Code)
  • Are not a holder of a use tax direct payment permit as described in section 7051.3 of the Revenue and Taxation Code
  • Are not otherwise registered with the California Department of Tax and Fee Administration (CDTFA) to report use tax

A use tax return is required even if there is no use tax due. If no use tax is due, file the return with zeroes. Because the penalty for failure to file is based on 10% of the tax liability, there will be no penalty for failure to file if there is no tax liability. However, taxpayers who do not file will continue to receive notices from the BOE.

California issued new use tax collection requirements for In-State and Out-of-State Retailers. Beginning April 1, 2019, any retailer whose sales into a district exceed $100,000 or who make sales into a district in 200 or more transactions in the preceding or current calendar year is considered to be engaged in business in that district and is required to collect that district ‘s use tax on sales made for delivery in that district. This requirement will apply equally to in-state and out-of-state retailers.

Please refer to the following link for more information:
Other states may have different filing requirements, so please check that state’s website for further information or you may contact us with any questions.


The standard mileage rate for business driving has increased to 58.5 cents per mile for 2022. The mileage rate for use of an automobile to obtain medical care or moving purposes has increased to 18 cents per mile. The mileage rate relating to services of charitable purposes remains at 14 cents per mile.

A taxpayer may not use the business standard mileage rate for a vehicle after claiming a deduction for depreciation for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.


The due date for filing 2021 Forms W-2 and W-3 with the Social Security Administration is January 31, 2022, whether you file using paper forms or electronically. For more information, please see W-2 and W-3 General Instructions

The due date for filing 2021 Forms 1099-NEC reporting non-employee compensation is January 31, 2022. This deadline applies regardless of whether the forms are filed electronically or on paper. The filing dates remain unchanged for Forms 1099-MISC reporting rents, royalties, other income, etc. and other Forms 1099 (1099-INT, 1099-R, 1099-DIV, etc.). These forms are due by paper on February 28, 2022 or electronically by March 31, 2022. For more information, please see 1099 General Instructions 

The sum of payments made for services rendered in the course of your trade or business, which aggregate to at least $600 during calendar year, are reportable as non-employee compensation on Form 1099-NEC. 

If any of the following criterion is met, a 1099-NEC must be issued. 

  1. The payments are made to an individual that is not your employee;
  2. The payments are made to an individual/company that is not a corporation (e.g. partnership or an LLC);
  3. The payments are made to doctors whether incorporated or not; or,
  4. The payments are made to attorneys whether incorporated or not.

The IRS requires that you obtain a completed Form W-9 Request for Taxpayer Identification Number and Certification from each independent contractor and outside vendor to be kept for your records. These forms can be downloaded from the IRS website at

California requires that you file Form DE-542 within 20 days of paying an independent contractor $600 or more or entering into a contract that calls for a payment of $600 or more. These forms can be downloaded from the EDD website at

We must stress the importance of filing information returns. There are substantial penalties for not filing the returns and the IRS is strictly enforcing compliance in this area. Please contact us if you need assistance with the filing of your forms. 

For COVID-19 information please refer to our website

Please do not hesitate to contact our office if you have any questions regarding the information contained in this letter. We wish you a healthy and prosperous New Year!

Gatto, Pope & Walwick, LLP
Certified Public Accountants