The so-called “fiscal cliff” has been avoided, or at least deferred for a few months, by the passage and signing of the American Taxpayer Relief Act of 2012. This act continues the graduated federal income tax withholding rates of 10%, 15%, 25%, 28%, 33% and 35%. A new top rate of 39.6% has been added and will impact individuals earning more than $400,000 and couples earning more than $450,000. Because the existing federal income tax withholding rates were maintained, employees will not see an increase in the amount of federal income tax withheld from their paychecks in 2013. In fact, most employees will see a slight decrease in federal income tax withholding because the wage brackets have been adjusted for inflation.
The FICA (Social Security) withholding rate for employees had been reduced from 6.2% to 4.2% for calendar years 2011 and 2012. The reduction in the FICA withholding rate was not extended. This increase in the FICA withholding rate will decrease the amount of your take home pay.
As noted in the December 17, 2012 Connection, you can estimate the impact of the FICA rate change by viewing a recent pay stub. Login to your Employee Dashboard and select the Employee Online navigation tab 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 hand side of your pay stub and 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 beginning with your January 15, 2013 paycheck.
If you have any questions, contact Steve Jordan, Payroll Specialist, at sjordan@aea11.k12.ia.us or ext. 14908.
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