Payroll services giant ADP said Wednesday that it has been monitoring the fiscal cliff deal and has been in constant contact with the Internal Revenue Service regarding the changes in tax rates.
Congress passed fiscal cliff legislation late Tuesday, raising the top income tax rate to 39.6 percent for single taxpayers earning over $400,000 a year and married couples with income over $450,000 a year (see Congress Approves Fiscal Cliff Deal). The 2 percentage point payroll tax cut of 2011 and 2012 was not part of the budget deal, so Social Security payroll taxes revert to 6.2 percent in 2013. The IRS issued new withholding tables late Monday that take into account the higher payroll taxes, but it was before the Senate or the House had voted on the fiscal cliff deal, so it does not take into account the tax cut extensions and 39.6 percent tax rate on upper-income earners (see IRS Changes Income Tax Withholding Tables for 2013 to Reflect Expired Tax Cuts). The IRS is likely to modify the tables soon.
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