Now's the perfect time to review and adjust your paycheck: Payroll Tax Rates and Employee Benefit Limits for 2022
Social Security taxIn 2022, the Social Security tax rate is 6.2% for employers and employees, unchanged from 2021. The Social Security wage base is $147,000 for employers and employees, increasing from $142,800 in 2021. Self-employed people must pay 12.4% on the first $147,000. Medicare taxIn 2022, the Medicare tax rate for employers and employees is 1.45% of all wages, unchanged from 2021. Self-employed people must pay 2.9% on all net earnings. Additional Medicare taxIn 2022, the additional Medicare tax remains unchanged at 0.9%. This tax applies to wages and self-employment income over certain thresholds ($200,000 for single filers and $250,000 for joint filers). 401(k) limitsIn 2022, the maximum contributions to traditional and safe harbor plans are as follows:
Employees can contribute up to $14,000 to a SIMPLE 401(k) plan, up from $13,500 in 2021. HSA and HDHP limitsIn 2022, the maximum contributions to a health savings account are as follows:
In 2022, the limits for a high-deductible health plan are as follows:
FSA limitsIn 2022, employees can contribute:
QSEHRA limitsIn 2022, employers with a qualified small employer health reimbursement arrangement can reimburse employees for health care expenses as follows:
Commuter benefits limitIn 2022, employees can contribute up to $280 per month for qualified commuter benefits (e.g., mass transit and parking), up from $270 per month in 2021. This limit includes any employer contributions Adoption assistance exclusion limitIn 2022, up to $14,890 in employer-sponsored adoption assistance may be excluded from an employee's gross wages, increasing from $14,440 in 2021. Remember, these are all federal rates and limits. Be sure to check with the necessary agencies for state and local payroll rates.
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GovCon Resource: The Ins [Pros] and Outs [Cons] of Firm Fixed Price (FFP) Contracts
Understanding Man-Hours
​If fewer man-hours are proposal, have a plan for the extra time. ​​
It may also be possible to have an employees take/coordinate paid time off (PTO) with contract and internal activities in mind. Undoubtedly this will require better and more consistent planning and even company guidelines so it's fair to all. Further, find out as early as possible if/when employees are going to take vacation. If employees are going to be required to use their vacation during a certain time period, check with the HR department or an HR consultant to ensure this does not violate any labor laws and is in compliance with the company handbook and policies.
Wage Increases
When bidding, take into account when employees will be receiving performance reviews, especially if it is done on the employee's anniversary date and not at one time for the entire company.
​ A "bigger picture" question for the company is whether salary increases depend on the financial performance of the contract or solely on one's individual performance. We have experienced companies basing increases both ways. We are not an advocate for a specific method; however, it must be consistent throughout the company.
New Hires
Have there been any new hires? Depending on whether an employee with the necessary skill-set is relatively easy or difficult to find, this could affect the profit positively or negatively.
​This would be an additional cost that most likely could not be foreseen, but the impact should be measured.
Additional Costs (not included in bid)
​​Are there any costs that the company did not account for in the proposal and that are not covered by a separate Other Direct Cost (ODC) line item?
Examples Include:
Indirect Rates
How do the provisional indirect rates compare to the actual indirect rates? If the actual indirect rates are lower, of course this increases profit. Conversely, if the actual indirect rates are higher, this lowers profit. After the EAC is complete, this is an opportune time for the company to review indirect rates, and make cuts if necessary. Reviewing suppliers and vendors on a regular basis is a best practice.
Partway through an FFP Service Contract, check and see whether the 10% profit that was bid is still projected to be 10% or will more likely be closer to 6% or 14% profit. The company may be pleasantly surprised. If not, possibly adjustments can be made. At the very least, the company cannot say it did not have advance warning and can plan accordingly. Focus on the five areas listed above and your company will maximize its profit on FFP service contracts. Tags:
Tax Year 2022 Update: The IRS Responds to Inflation With A Rare Midyear Mileage Rate Change6/21/2022 Tax Year 2022 Update: The IRS Responds to Inflation With A Rare Midyear Mileage Rate Change
Business and Medical Mileage Change
Prices Means Infation"The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices," said IRS Commissioner Chuck Rettig. "We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate." Though the price of fuel is definitely a major factor when it comes to calculating your mileage, there are other factors that have to be taken into account, including the rate at which your car depreciates as well as its insurance and any other fixed costs you might have.
Optional Business Standard Mileage Rate vs. Actual CostsThe optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Taxpayers continue to have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates, although this does require extensive recordkeeping. Midyear increases in the optional mileage rates are rare; the last time the IRS made such an increase was in 2011. Further details are available in IR-2022-124. 
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