Tax change affecting 2013 Payroll
The House and Senate have passed H.R. 8, the American Taxpayer Relief Act of 2012 (ATRA), which includes several changes to tax laws affecting payroll and employment tax administration in 2013. President Obama is expected to sign the bill into law within 24 hours.
Income Tax Withholding Rates
The American Taxpayer Relief Act effectively maintains the reduced income tax rates adopted in 2001 and 2003 for individuals earning up to $400,000 and families earning less than $450,000.
Income above those levels will be taxed at 39.6%, up from 35%. The expanded 15% bracket for joint filers, commonly referred to as the marriage penalty relief, has also been extended. These tax rates have been extended permanently for wages paid after December 31, 2012.
Employee Social Security Tax Rate Returns to 6.2%
The reduced 4.2% rate for employee Social Security taxes that was in effect for 2011 and 2012 has expired.
The employee Social Security tax rate will return to 6.2% for 2013 wages up to the taxable wage limit of $113,700.
Consequently, employees’ net pay under the taxable wage limit will decrease accordingly. The maximum Social Security tax that an employee would pay will be $7,049.40 for 2013.
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