The latest “fiscal cliff” battle in Congress are only one example of how the New Year arrived with some substantial challenges.
2013 has finally arrived; with it comes tax law changes that will affect both payroll and employment tax compliance.
Top of the list is the American Taxpayer Relief Act of 2012 (ATRA), which will soon be signed into law by President Obama. The ATRA includes a multitude of changes to payroll tax laws, especially for individuals earning more than $400,000 and families earning more than $450,000.
Employee Social Security tax rates have returned to the 6.2 percent level for 2013 wages, up to the taxable wages limit of $113,700. Prior to this, the Social Security tax rate was only 4.2 percent.
In addition to the ATRA, the Patient Protection and Affordable Care Act for 2013 created a “Medicare Tax” of .09 percent. This new Additional Medicare Tax will apply to single individuals earning over $200,000 and married couples earning more than $250,000 and file jointly.
Employers must retain Additional Medicare Tax from all workers, regardless of marital status, from wages above $200,000. This employee Medicare tax rate, normally 1.45 percent, will rise to 2.35 percent on earnings over $200,000, regardless of filing status. The employer Medicare tax rate will remain at 1.45 percent. There is no taxable wage limit for Medicare taxes.
Human resources professionals need to be aware of all the modifications in the tax law, if they haven’t already. Payroll specialist ADP has also been carefully monitoring the changes in the tax law and is available to lend a hand.
Read more at PRNewswire.com…