Payroll departments take note, it has been announced that the Social Security wage base (the maximum amount of wages subject to the tax) for 2013 will increase to $113,700 from $110,100 in 2012, a 3.3% increase. This increase will result in those employees earning $113,700 or more paying $7,049 in social security taxes with employers required to match. Just in case your are interested, when Time & Pay went into business 21 years ago (1992) , the Social Security wage base was $55,500. In 1992, the Medicare wage base was $130,200. In 1994, Congress enacted legislation eliminating the wage base for Medicare subjecting all wages to the 1.45% tax.
For more detailed information on current social security taxes, click here.
Payroll departments should also recall that the employee’s reduction in Social Security tax rate from 6.2 to 4.2% that has been in place for the year 2012 is set to expire on Dec 31, 2012. Most experts do not expect this tax break to be extended.
High income tax payers should also note that, due to ObamaCare, starting in 2013, individuals who earn $200,000 or more will be subject to additional Medicare tax of 0.9%. The statute requires an employer to withhold additional Medicare tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year. To learn more about this and other ObamaCare taxes, click here.