Last month, the House finally approved a bill to prevent the US from falling over the fiscal cliff. Some may question why it took them all the way to the last seconds to actually get something done, but that is for another article. The approved plan maintains tax cuts for those earning less than $400,000/year and couples earning less than $450,000/year. Those individuals earning more will see increased tax rates.
The following are important payroll tax updates for 2013:
- Federal Income Withholding Tax: Income tax rate increases technically took effect immediately on Jan. 1, 2013, and you can see them here.
- Social Security: 2013 Social Security Wage Base was increased to $113,700, an increase of $3,600 from the 2012 wage base of $110,100. As in prior years, there is no limit to the wages subject to the Medicare tax; therefore all covered wages are still subject to the 1.45% tax.
- Medicare: In 2013 taxable Medicare wages paid in excess of $200,000 are subject to an extra 0.9% Medicare tax that will only be withheld from employees’ wages. Employers will not pay the extra tax.
- Expired Payroll Tax Cut resulting in 2% more in employee social security tax withholding – As of December 31, 2012, the 2012 Payroll Tax Cut expired.
Most of us are waiting to see what happens throughout the rest of this year as new deadlines get closer and the fiscal issues and concerns of the day continue to grow.
