On Jan. 1, 2013, the American Taxpayer Relief Act of 2012 was approved by Congress.
What does this mean to you and your paycheck?
Social Security tax: The “payroll tax holiday” that was extended by the Middle Class Tax Relief and Job Creation Act of 2012 expired Dec. 31, 2012 and is not extended by the new law. Therefore, effective Jan. 1, 2013, the employee share of the Social Security tax for all employees has increased from 4.2 percent to 6.2 percent.
Reminder: Effective Jan. 1, 2013, the new wage base limit for Social Security will be $113,700.
Federal Income tax rates: Marginal Federal income tax rates established initially by the Economic Growth and Tax Relief Reconciliation Act of 2001 have become permanent on income up to $400,000 (individual filers), $425,000 (heads of households), and $450,000 (married filing jointly) for taxable years beginning after Dec. 31, 2012. Income beyond the above thresholds is subject to a tax rate of 39.6 percent for taxable years beginning after Dec. 31, 2012, up from the current 35 percent. The Internal Revenue Service has published revised tax tables and the payroll system will be updated before the next payroll is processed.
Reminder: As part of the Patient Protection and Affordable Care Act of 2010, a marginal Medicare Tax rate of 0.9 percent applies to wages in excess of$200,000. Therefore, effective Jan. 1, 2013, the first $200,000 of your taxable gross earnings will continue to be taxed for Medicare at 1.45 percent and earnings above $200,000 will be taxed at 2.35 percent. There is no wage base limit for Medicare.