Payroll Tax Wage Caps

Earn a Wage Cap Windfall Every Year

• Wage-Cap Raises
  
  
  • Unemployment insurance and Social Security wage caps
    
    
    • Federal Unemployment taxes (FUTA) have an annual wage cap of $7,000, beyond which the tax rate is zero;
      
      
    • The wage cap for state Unemployment taxes (SUI) varies from state to state;
      
      
    • The Social Security portion of FICA has a wage cap in 2005 of $90,000;
      
      
    • The Medicare portion of FICA has no wage cap.
      
      
  • Division payroll taxes drop significantly
    
    
    • Division payroll taxes drop by several percent when the UI wage caps are exceeded;
      
      
    • Division payroll taxes drop further when the Social Security wage cap is exceeded;
      
      
    • These savings are passed on to P.A.C.E. Division Managers in the form of higher wages.
      
      
  • A side benefit for your retirement plan
    
    
  • As your wage increases, so does your division's pretax contribution to your retirement savings plan.

   

• It's Your Windfall
  
  
• We have prepared a second Sample Division Payout Report that shows what happens to your earnings when your year-to-date wages exceed the wage caps for federal and state unemployment insurance and for the Social Security tax.
  
  
• This Sample Division Payout Report is identical to the first example, except that the UI and SS taxes are now zero, and they no longer appear in the Taxes Details box.
  
  
• Payroll taxes for the monthly payroll in this example are reduced from $1467.97 to $440.25. The savings is passed on to you, the Division Manager, as follows:
  
  
  • Gross Wage: Taxable gross wage increases from $11,305.96 to $12,324.96;
    
    
  • 401(k): Your division's tax-deferred contribution to your retirement savings increases from $1,630.83 to $1,777.82.
    
    
• Ordinary staffing vendors (temp agencies, contract employment agencies, etc.) with fixed margins keep these payroll tax savings.
  
  
  • Ordinary staffing vendors gain a significant windfall when the annual wage caps for UI and SS are exceeded;
    
    
  • For obvious reasons, ordinary staffing vendors love highly compensated contractors on long contract assignments.
    
    
• The unique P.A.C.E. Solo W-2™ business model passes the employer's share of wage-cap savings on to you.
  
  
  • With P.A.C.E. the wage-cap windfall is yours;
    
    
  • And you get a nice raise for the remainder of the year.
    
    
• Your wage-cap raise has two components:
  
  
  • First -- Your division pays no tax for UI and the employer's share of SS, and these savings fall directly to your division's bottom line, and your gross wage;
    
    
  • Second -- The employee's share of SS is no longer taken from your payroll, and this further increases your net pay.

 

• Important Considerations
  
  
• Based on annual wages
  
  
  • Wage-cap raises are based on year-to-date wages;
    
    
  • The wage-cap counter is reset to zero on January 1 of every year.
    
    
• Based on Continuous Employment
  
  
  • Your wages continue to count toward your UI and SS wage-cap raises as long as you remain continuously employed by P.A.C.E.
    
    
  • Even when you move from assignment to assignment, or have multiple assignments at the same time, your cumulative wages continue to count toward your wage-cap raises.
    

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• Contact P.A.C.E. today:
  
  
  • Phone: (925) 680-0200
    
    
  • E-mail: information@pacepros.com, or
    
    
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