The maximum amount of earnings subject to the Social Security tax is increasing from the 2011 amount of $106,800 to $110,100 beginning January 1, 2012. Also, the 2011 Social Security tax holiday which reduced Social Security withholding to an effective rate of 4.2% ends December 31, 2011 and will go back to the original 6.2% beginning January 1, 2012.
Of the estimated 161 million workers who will pay Social Security taxes in 2012, about 10 million will pay higher taxes as a result of the increase in the taxable maximum.
Also, based on the increase in the Consumer Price Index from third quarter of 2008 through third quarter of 2011, Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 3.6 percent cost of living adjustment (COLA) for 2012. This is the first COLA since 2009. This 3.6 percent increase in impact more than 60 million Americans who receive these benefits.
Information about Medicare changes for 2012, when announced, will be available at www.Medicare.gov. For some beneficiaries, their Social Security increase may be partially or completely offset by increases in Medicare premiums.
View the SSA Press Release.
To see the effect of the various automatic adjustments, view the SSA fact sheet.
Article Submitted By:
PCS Client Services Team
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