Welcome to the Fiscal Cliff. Just received this notice from payroll dept…
Important changes to your tax withholding amounts effective January 1, 2013
The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that was signed into law in December 2010 will expire on December 31, 2012. What this means to you:
· The temporary 2% cut in employee Social Security withholding (from 6.2% to 4.2%) effective on January 1, 2011, will expire, and the rate will change back to 6.2%.
· The Social Security wage base is increasing from $110,100 to $113,700, resulting in the maximum tax being increased from $4,624.20 to $7,049.40.
· In addition, the Patient Protection Affordable Care Act of 2010 increases the Medicare part A payroll tax by 0.9% (from 1.45% to 2.35%) for all income above $200,000.
Other possible changes effective January 1, 2013:
Tax-related provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) also are set to expire on December 31, 2012 impacting Federal Income Tax withholding. What this means:
· The 10% income tax bracket is eliminated; the lowest bracket will be 15%. The top four brackets will change as shown below. To:
25% to 28%
28% to 31%
33% to 36%
35% to 39.6%
· Optional flat rate tax on Supplemental Wages up to $1 million in a year increases from 25% to 28%.
· Mandatory flat rate on Supplemental Wages over $1 million in a year increases from 35% to 39.6%.
The information above reflects the legislation currently in effect. If the laws change, we will send an update as early as possible in January 2013.