Effective January 1, 2010 

PAYROLL TAXES:

1. INCOME TAX WITHHOLDING
There are six basic tax brackets of 10%, 15%, 25%, 28%, 33%, and 35%. The 2010 Withholding Table (Circular E) issued by the Internal Revenue Service reflects these rates.

2. SOCIAL SECURITY EMPLOYEE TAX TABLE
There are two separate wage bases for the OASDI and Medicare (HI) portions of FICA. Social Security requires a withholding of 6.2% OASDI tax. The related wage base is $106,800. For 2010, Medicare requires a withholding of 1.45% which must be withheld from all wages paid. Employers also must pay Social Security and Medicare taxes on covered employees in the same amount as that withheld.

3. FEDERAL UNEMPLOYMENT TAX
The wage base remains at $7,000. Effective tax rate for 2010 will be .8% and deposits should be made at that rate. Employers are required to make quarterly deposits for unemployment taxes only if the accumulated tax exceeds $500.

4. PENNSYLVANIA INCOME TAX
The Pennsylvania state withholding rate will be 3.07% for 2010.

5. PENNSYLVANIA UNEMPLOYMENT TAX
Wages subject to unemployment contributions remain at $8,000 for 2010. Employer rates vary based on experience and in 2010 their rate will be affected by a 5.8% surcharge on the contribution rate and an additional .65% tax. In 2010, employees will also be subject to a withholding tax at the rate of .08% (80 cents per $1,000) on all wages.

6. NEW JERSEY INCOME TAX
The New Jersey State withholding rates for 2010 range from 1.5% to 9.9% on graduated levels of income for 2010.

7. NEW JERSEY FAMILY PAID LEAVE INSURANCE
The New Jersey family paid leave insurance withholding rate will be .12% for 2010. The related wage base is $29,700 for a maximum withheld amount of $35.64.

8. NEW JERSEY UNEMPLOYMENT TAX
Wages subject to unemployment contributions will increase from $28,900 to $29,700 for 2010. Employer rates vary based on experience. The withholding rate for employees will be .925% for a maximum withheld amount of $274.73.

9. CITY OF PHILADELPHIA WAGE TAX
For 2010 the Philadelphia wage tax rate will be 3.9296% for residents and 3.4997% for non-residents.

OTHER MATTERS:

9.      RETIREMENT EARNINGS TEST FOR SOCIAL SECURITY RECIPIENTS
Employees age 62 through 64 can earn a maximum of $14,160 per year with no reduction in benefits. In 2010 maximum earnings in the year an employee turns 65 will increase to $37,680. However, there is no limit on earnings beginning in the month an employee attains age 65.

10.    401(k) PLAN LIMITATION
The annual employee elective deferral limit is $16,500 for 2010. For employees 50-years-old and above there is an additional permitted deferral of $5,500.

11.    FORMS W-4, W-9, AND I-9
Remind all employees to complete Form W-4 and claim all the allowances to which they are entitled. Be sure to receive Form W-9 for all commissions, interest, rents, etc. paid to individuals. Form I-9 (Employment Eligibility Verification) and the New Hire form are mandatory for all employees and should be completed on the first day of employment. These can be obtained from your payroll service.

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