If you noticed that your paycheck has been smaller, you’re not alone. Congress failed to address payroll taxes in the American Relief Act of 2012 causing payroll tax rates to spike.
During the 2011 and 2012 tax years, individuals paid less in Social Security tax because of a temporary payroll tax cut. The temporary legislation, known as the payroll tax holiday, reduced the employee-share of Social Security taxes, the OASDI portion of FICA, from 6.2 percent to 4.2 percent. To make matters worse, beginning on January 1, 2013, the wage base for determining the maximum amount of income subject to Social Security Taxes increased from $110,100 to $113,700. The increased wage base means that in 2013, employees and employers will each pay a maximum of $7,049.40 in Social Security Tax (OASDI).
As in prior years, there’s no limit on the amount wages subject to Medicare taxes. An employee’s and employer’s rates remain at 1.45% for a total of 2.9%. In 2013, if you are an employee earning taxable Medicare wages in excess of $200,000, then you are subject to an extra 0.9%. The Medicare tax rate remains unchanged at 1.45 percent for the employer’s portion of tax.
The Law Offices of Todd S. Unger, Esq. LLC is devoted exclusively to resolving New Jersey and Federal tax disputes and collection matters. If you have a dispute involving a payroll tax matter or audit, contact the Law Offices of Todd S. Unger, Esq. LLC for a confidential consultation.