Tax Updates for 2013

Tax UpdatesSocial Security:

The Social Security tax rate for employees returns to 6.2% as of 1/1/13.

*The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reduced the Social Security payroll tax rate by 2% on the portion of the tax paid by the worker in 2011.  This reduction was extended through the end of February 2012 by the Temporary Payroll Tax Cut Continuation Act of 2011 and then extended again through December 2012 under the Middle Class Tax Relief and Job Creation Act of 2012.

Medicare:

Beginning January 1, 2013, the Additional Medicare Tax applies to an individual’s Medicare wages, Railroad Retirement Tax Act compensation and self-employment income that exceeds a threshold amount based on the taxpayer’s filing status.

Employers are responsible for withholding the 0.9% Additional Medicare Tax on an individual’s wages and compensation paid in excess of $200,000 in a calendar year and are required to begin this in the pay period in which wages and compensation exceeds $200,000 to an employee.  An employer has this withholding obligation even though an employee may not be liable for the Additional Medicare Tax because, for example, the employee’s wages or other compensation together with that of his or her spouse (when filing a joint return) does not exceed the $250,000 liability threshold.  Any overages in withheld Additional Medicare Tax will be credited against the total tax liability shown on the individual’s income tax return (Form 1040).

There is no employer match for the Additional Medicare Tax.

For additional information, see the IRS questions and answers.

Reciprocity:

Although attempts were made by Minnesota and Wisconsin, a reciprocity agreement was not reached for these states for 2013.  Click here for more details.

Retirement Plans COLA:

COLA increases for dollar limitations on retirement plan contributions have been released by the IRS for 2013.  The max deferral amount for 401k, 403b, 408k and 457b plans increased to $17,500 with the catch-up contribution amount for those over 50 years of age remaining at $5,500.  Simple plan limits increased to $12,000 with the catch-up contribution limit remaining at $2,500 for any person over 50 years old.  Click here for more from the IRS on the new limits.

 

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

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