Countdown for long-term care tax collection – Beginning July 1, 2023, the Long-Term Care (LTC) payroll tax goes into effect after an 18 month delay. Employers will be required to withhold 58 cents of every $100 an employees earn from their paychecks. This is an employee-paid tax. If employers don’t collect these funds from employees, then the employer is responsible for paying the tax. An employer will collect and submit the tax to the Employment Security Department (ESD) the same way they do for Paid Leave. Just a reminder that, unlike the Paid Leave tax, LTC does not have a cap — meaning that if you make $5 or $5 million, you will still be paying the tax.
Since the original bill was passed, the Legislature has added to the list of exemptions that do not have to pay the tax. Click here to learn more about the exemptions. If your employee provided you with an exemption letter previously, you should have maintained the letter which will be used to provide the exemption from the tax. It is the employee’s responsibility to inform the employer of any changes in their exemption status and provide their employer with their letter from ESD. Employers are required to keep a copy of any employee’s letter from ESD approving their exemption.
There were a couple of bills introduced during the 2023 legislative session that would have made changes to this law, but none of those bills received public hearings. The business community would still like to see the Legislature at the very least put a pause on this program from going into effect in July. With there being only a few weeks left in the 2023 legislative session, this is not looking like it will happen.