Kansas-based accounting firm Mize Houser & Company has already begun adjusting its payroll withholding tables in anticipation of the expiration of the payroll tax cut at the end of the year.
President Obama temporarily cut Social Security payroll taxes from 6.2 to 4.2 percent in 2011 and 2012, but the payroll tax cut is not expected to be extended for another year. The White House and lawmakers in Congress have been focused more during their fiscal cliff negotiations on the expiration of the Bush-era income tax rates and the spending cuts mandated by the debt ceiling deal.
In the meantime, Mize Houser plans to adjust its payroll withholding system. “As of this writing, there has been no resolution from the government to avoid the potential ‘fiscal cliff’ caused by the simultaneous expiration of the ‘Bush tax cuts’ and the implementation of deep cuts in federal spending scheduled to take effect January 1, 2013,” the firm said in an email Friday. “Further, the Treasury Department has not yet issued withholding tables for 2013 or any other official guidance on how employers should proceed.
"The IRS issued the following statement on December 21: ‘We are aware that employers have questions with respect to 2013 withholding. Since Congress is still considering changes to the tax law, we continue to closely monitor the situation. We intend to issue guidance by the end of the year on appropriate withholding for 2013.’”
Despite the uncertainty at the IRS, the firm said that the Mize Houser payroll system would nevertheless be changed to withhold 6.2 percent on the employee deduction for Social Security on checks dated Jan. 1, 2013 or later. “Should legislation be passed by Congress to extend the temporary 2% reduction in the Social Security rate, we will adjust the payroll system as soon as possible,” said the firm.
Federal income tax withholding tables for 2013 have not been released by the IRS yet (pending legislation), the firm noted, so Mize Houser will continue with 2012 rates until new tables are released. “We will make appropriate state withholding changes in accordance with tables issued by those states (such as Kansas) whose tax rates change as of the beginning of the year,” the firm added.
In addition, employee deductions for Medicare will change in 2013 for taxable Medicare wages over $200,000, the firm noted. Taxable Medicare wages over $200,000 will be taxed an additional 0.9 percent for a total rate of 2.35 percent. The rate for taxable Medicare wages up to $200,000 will remain at 1.45 percent.
“We will continue to monitor this situation and keep you informed,” said the firm.
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