The primary payroll-tax related provisions of the American Taxpayer Relief Act of 2012 include:
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Expiration of the "payroll tax holiday." The expiration of this provision means the employee Social Security tax rate will go from 4.2 percent back to 6.2 percent, up to the 2013 taxable wage limit of $113,700.
- Extension of the lower "Bush era" income tax rates for individuals earning up to $400,000 and households earning up to $450,000. The tax rate for earnings in excess of those thresholds will now increase from 35 percent to 39.6 percent.
The payroll tax holiday, first enacted in 2011 and then extended through 2012, was intended to be a temporary tax break for American workers to help spur spending during the height of the recession. With the passage of this Act, the Social Security tax rate returns to 6.2 percent and is expected to impact a majority of American workers. For example, a worker earning $50,000 per year will now see $1,000 less in their net take-home pay as compared to 2012.
Since many American households earn less than $450,000 a year, most will likely not be impacted by the higher income tax rate for high wage earners. Small businesses that file tax returns as individuals should note the higher rate and consult with their tax advisor.
"Paychex has a dedicated team of tax and payroll compliance professionals who have closely monitored every development related to the fiscal cliff," said Martin Mucci, president and CEO of Paychex. "As soon as Paychex received the new tax tables from the IRS this morning, our team implemented the changes, and they are now in place for our clients' payrolls effective tomorrow. I am proud of the Paychex employees who have not only closely monitored the complexities of these changes, but have quickly put them in place for our clients, continuing our commitment to provide exceptional service."
The higher Social Security tax rate has already been calculated into the payroll of Paychex clients as of January 1, 2013 and will be reflected in the first paychecks of the New Year.
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Note: The foregoing is provided for informational purposes only, and is not intended to be tax or legal advice. Consult your licensed attorney, accountant, or other tax professional to discuss your particular facts, circumstances, and how these opportunities might apply to your business.
Media Contacts
Lisa Fleming
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585-387-6402
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