Social Security Wage Base Projected to Rise in 2012

The Social Security wage base, now at $106,800, is projected to increase to $110,700 in 2012, according to the annual report of the Social Security Board of Trustees. This projection is based on the intermediate cost assumptions contained in the report. This will increase the social security tax paid by high wage earners from $6,621 to $6,863. This will be particularly noticeable as all wage earners have seen a reduction in their social security taxes due to this years reduction in the tax rate from 6.2% to 4.2%. The intermediate cost assumptions also show an increase in the wage base to $114,900 in 2013 and to $120,000 in 2014. According to the report, the trust fund would exhaust its assets in 2036, a year earlier than predicted last year.

IRS Announces Interest Rates to Remain Unchanged

The interest on tax over payments and underpayments for the calendar quarter beginning July 1, 2011, will remain unchanged, according to Internal Revenue Service. The interest rates will be 4 percent for over payments (3 percent in the case of a corporation), 4 percent for underpayments, 1.5 percent for the portion of a corporate overpayment exceeding $10,000, and 6 percent for large corporate underpayments.  

 IRS Anounces  2012 Inflation Adjusted HSA Deduction Limits

The 2012 deduction limitation on contributions to a high-deductible health savings account for an individual with self-only coverage is $3,100, the Internal Revenue Service announced. For family coverage under a high-deductible plan, the calendar year 2012 inflation-adjusted amount is $6,250, IRS said.

The IRS also noted that the definition of a high-deductible health plan in calendar year 2012 is the same as in calendar year 2011. Such plans have an annual deductible that at least $1,200 for self-only coverage and $2,400 for family coverage with annual deductibles, co-payments, and other amounts (except for premiums) of up to $6,050 for self-only coverage or $12,100 for family coverage.

IRS Planning for Midyear Exemption of 0.2% FUTA Surtax

Since Congress has done nothing to extend a 0.2 percent Federal Unemployment Tax Act surtax past its June 30 expiration date, the Internal Revenue Service plannning to adjust the 2011 Form 940 to account for two FUTA tax rates in 2011.

If Congress continues inaction in this area, new lines likely will be necessary on the 2011 Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, to account for the expiration of the surtax. There would likely be separate lines developed to report liability based on the 6.2 percent rate that applies from January to June, and the 6 percent rate from July to December.

If the surtax expires at the end of June and is not extended for the rest of 2011, the effective FUTA rate for the final six months of 2011 will be 6 percent. Applying the full 5.4 percent credit for state unemployment taxes, many employers, except those in “credit-reduction states,” will have a net drop in FUTA liability. Keep in mind the FUTA wage cap is $7,000 so if Congress does not extend the surtax, this would probaby only affect those employees hired in that latter part of the year.