PAYDAY Workforce Solutions Blog

New Payroll Tax Tables Show Expired Tax Cuts

On Jan 10, 2013

Payroll Tax for 2013Congress passed legislation New Year’s Day that has extended the 2001 and 2003 Bush tax cuts, but allowed the temporary 2% payroll tax cut on Social Security withholding to expire.

As a result, the Internal Revenue Service released updated income-tax withholding tables for 2013 reflecting the changes by Congress.

The updated tables, issued Jan. 3, 2013 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.

The employee tax rate for Social Security has gone up 2% to 6.2% of wages. The tax rate that employers pay for Social Security remains the same at 6.2%. The Social Security wage base limit is now $113,700. The Medicare tax rate is 1.45% percent each for the employee and employer, unchanged from 2012. There is no wage base limit for Medicare tax.

New 2013 Tax Tables

Employers and payroll companies like PAYDAY Workforce Solutions will handle the withholding changes, so workers won’t need to take any additional action. However, the IRS urges employees to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms.

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The IRS recommends employers start withholding the correct the amount of payroll taxes and immediately implement the 6.2% employee share of Social Security taxes as soon as possible in 2013, but not later than Feb. 15, 2013.

Additional Medicare Tax Withholding

In addition to withholding Medicare tax at 1.45%, employers must now withhold a 0.9% Additional Medicare Tax from wages paid to an employee in excess of $200,000 in a calendar year. Employers must begin withholding the Additional Medicare Tax in the pay period in which they pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. For more information on what wages are subject to Medicare tax, visit the IRS website and search for Notice 1036, or talk to your payroll specialist at PAYDAY Workforce Solutions today.

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