“Fiscal Cliff” Withholding Tax Information

In a December 3 Connection article, we noted that the federal “fiscal cliff” discussions could have implications for reducing your take home pay beginning in January 2013. A few people have inquired about the extent of the impact on their paychecks. 

Unless Congress takes action, your employee FICA (Social Security) tax rate is scheduled to increase from 4.2% to 6.2% in January 2013. If you access a recent pay stub via Employee Online, you can estimate the impact of this change. To access Employee Online, login to your Employee Dashboard. Employee Online is one of the navigation tabs at the top of the page, just like the Intranet or Leave Online tabs. 

Once in Employee Online, go to the left-hand navigation and click on the link that says Pay Stub to find your pay stubs. Locate your current FICA deduction (at 4.2%) shown in the POST-TAX DEDUCTIONS box on the right side of your pay stub with the FICA Contribution (at 6.2%) shown under the EMPLOYER PAID BENEFITS section of your pay stub. The difference between these amounts is the amount your net pay may decrease after January 1, 2013. 

In addition to the increase in your FICA tax deduction your federal withholding may increase. However, it is simply not possible to estimate the potential impact on your net pay if the so-called “Bush-era tax cuts” are allowed to expire on December 31, 2012. That’s because the 2013 federal withholding tax tables won’t be available until after fiscal cliff decisions are made by the federal government. If the Bush-era tax rates are allowed to expire and rates default back to prior rates, then likely most taxpayers will see an increase in the federal income tax withholding on their paychecks, meaning less take-home net pay. 

We continue to closely monitor this situation and will keep you informed. If you have any questions, contact Steve Jordan, Payroll Specialist, at sjordan@aea11.k12.ia.us or ext. 14908.