SR 12-02 Dated 01/12

STATE OF NEW HAMPSHIRE

INTER-DEPARTMENT COMMUNICATION

SUMMARY

This SR releases the annual updates to the:

·   withholding rates for FICA (Social Security) and FIT (Federal Income Tax); and

·   FICA income ceiling.

FICA and FIT withholding rates are allowed in determining self-employment income for all programs and nursing facility and HCBC employment expense disregards. Employment expense disregards are based on allowable FIT and FICA withholding deductions.

POLICY

FICA (Social Security)

·   The FICA withholding rate for both employees and employers has not changed and will remain 7.65%. This subdivides into 6.20% for the Social Security (OASDI) share and 1.45% for Medicare’s (HI) portion.

·   The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (PL 111-312) reduced employee’s payroll OASDI contribution from 6.20% to 4.20% for the calendar year 2011. The employer’s portion remained the same. It is unclear at this time if the tax holiday will continue through 2012.

·   Self-employed individuals pay a FICA withholding rate of 15.3%. These individuals may deduct from income tax one half after the deduction. The Tax Relief, Unemployment Insurance Reauthorization, of the 15.3% paid for the year as a business expense. The actual rate becomes 7.65% and Job Creation Act of 2010 (PL 111-312) also reduced self-employed individuals tax rate by 2%.

·   For employees and employers, the Medicare portion of the FICA rate is 1.45% on 100% of earned income; for a self-employed individual, the rate is 2.9% on 100% of earned income.

FICA Income Ceiling

·   The income ceiling subject to the full FICA withholding rate has increased from $106,800 to $110,100.

·   There is no ceiling to the amount of gross earned income from which Medicare may be withheld.

FIT (Federal Income Tax)

District Offices use IRS Circular E to determine the applicable federal income tax (FIT) withholding rate. The federal withholding rates are not expected to change this year. As of January 1, 2012 the 2011 Circular E is obsolete. Copies of the January 2012 IRS Circular E will be sent to each District Office under separate cover when they are received from the IRS.

Federal Minimum Wage

The Federal minimum wage remains at $7.25 per hour. This rate became effective July 24, 2009.

POLICY MANUAL REVISIONS

Revised Family Assistance Manual Topics

PART 601, TABLE H  Federal Information, Taxes, Income Ceilings, and Minimum Wage Standards

Revised Adult Assistance Manual Topics

Section 603.03   Employment Expense Disregard

Revised Food Stamp Manual Topics

PART 601, TABLE H  Federal Information, Taxes, Income Ceilings, and Minimum Wage Standards

IMPLEMENTATION

All policy changes in this SR are effective January 1, 2012.

CLIENT NOTIFICATION

No client notification is required as the information is for agency staff use.

TRAINING

No training is planned or necessary.

DISPOSITION

This SR may be destroyed or deleted after its contents have been noted and the revised manual topics released by this SR have been posted to the On-line manuals.

DISTRIBUTION

This SR will be distributed according to the electronic distribution list for Division of Family Assistance policy releases. This SR, and revised On-Line Manuals, will be available for agency staff in the On-Line Manual Library, and for public access on the Internet at www.dhhs.nh.gov/DFA/publications.htm, effective January 30, 2012. Additionally, this SR, and printed pages with posting instructions, will be distributed under separate cover to all internal hard copy holders of the Adult Assistance, Family Assistance, and Food Stamp Manuals.

DFA/LRB:s