What Business Owners Need to Know About the Washington Cares Fund Payroll Tax
Authored by: Charlie Miracle, CPA – Financial Advisor – Member – Director of CAS
The Washington Cares Fund (WA Cares) premium tax is back and goes into effect for payroll checks paid on or after July 1, 2023. The premium tax of 0.58% of gross wage is solely borne by non-exempt employees. However, employers have a big responsibility to collect and remit the premiums.
All employers should know the following:
WA Cares is a long-term care program allowing beneficiaries to access up to $36,500 in lifetime benefits for certain services such as professional care, medical equipment, home safety evaluations, etc. The Fund was approved in 2019 to address the increasing costs and the growing demand for long-term care.
Employers are responsible for deducting the premium from non-exempt employees. The premiums are remitted to the State every quarter, similar to the Family Medical Leave Act premiums. Employers may not retroactively deduct the premiums. As an employer, if you forget to deduct, you must remit the full amount of premiums to the State anyway.
So, it is essential for employers to deduct the proper amount of tax starting the first payroll in July, as you will not get a second chance.
Some employees may be exempt from the tax. Employees with existing long-term care policies in place in 2021 may have received an exemption letter from the State. This exemption is no longer obtainable, but the exemption letter is still valid. There are four new exemptions that employees may qualify for, including living outside Washington, being a spouse of an active-duty service member, having a non-immigrant work visa or being a veteran with a 70% or higher service-connected disability rating.
Employees (not employers) must apply for and receive an exemption letter from the State. Employees must provide employers with this letter for the employer to stop deducting the premium. Exemptions become effective starting the first day of the quarter following the quarter the exemption was granted.
For more information about employer and employee responsibilities, please visit wacaresfund.wa.gov.
As an employer, you need to be prepared to collect your employees' wages and hours and pay premiums to report each quarter. It's best to contact a tax and accounting professional who can help guide your business through these changes. For more information or if you wish to contact our team, visit our website at cnccpa.com. Call any of our qualified advisors, CPAs, or accountants at (509) 663-1661, and we'll begin helping you, your family, or your business today.
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