With a new tax scheme comes new tax withholding patterns, and since the fiscal cliff deal is finally officially official, employers will now have to implement the changes in withholding in time for the first few paychecks of the new year. Our dear Internal Revenue Service (which has its hands full with all of the extra resources and manpower they’ll need over the next couple years just to deal with the ObamaCare tax hikes alone, by the way) released the new guidelines today:
WASHINGTON — The Internal Revenue Service today released updated income-tax withholding tables for 2013 reflecting this week’s changes by Congress.
The updated tables, issued today after President Obama signed the changes into law, show the new rates in effect for 2013 and supersede the tables issued on December 31, 2012. The newly revised version of Notice 1036 contains the percentage method income-tax withholding tables and related information that employers need to implement these changes.
In addition, employers should also begin withholding Social Security tax at the rate of 6.2 percent of wages paid following the expiration of the temporary two-percentage-point payroll tax cut in effect for 2011 and 2012. The payroll tax rates were not affected by this week’s legislation.
Employers should start using the revised withholding tables and correct the amount of Social Security tax withheld as soon as possible in 2013, but not later than Feb. 15, 2013. For any Social Security tax under-withheld before that date, employers should make the appropriate adjustment in workers’ pay as soon as possible, but not later than March 31, 2013.
Ah, yes — let us not forget the ‘expiration of the payroll tax cut.’ Just in case you thought you would be shielded from the consequences of our spectacularly terrible federal spending habits because your income does not qualify among the higher brackets… don’t.
That’s because payroll taxes will increase on most workers after Congress decided not to reverse an expiration of a payroll tax cut – a development that was largely expected. Payroll taxes rose to 6.2% under the deal, from 4.2% last year.
The nonpartisan Tax Policy Center estimates that 77% of Americans will see higher taxes because of the elimination of the payroll tax cut, meaning $115 billion less in disposable income. …
A household making $50,000 to 75,000 a year will make $822 less this year than last year, according to Rosenberg’s calculations. Those making $75,000 to $100,000 will see $1,206 less in their paychecks, while those making $200,000 to $500,000 will see a drop of $2,711 in their paychecks.
If the payroll tax cut was only ever meant as a temporary holiday to stimulate a weak economy, then I can’t even imagine what business we think we have raising taxes now…