Enter your email address below
to sign up for our

FREE Newsletter,
The Payroll Advi$or!

Payroll Tax Rates in Limbo for 2013

As Congress and White House jockey over position as they try to balance on the fiscal cliff, payroll departments are wondering what payroll tax policy is going to designate come Jan 1, 2013. Of particular concern is the expiration of social security tax reductions and income tax rate increases that are scheduled for year end. Usually, by now, payroll tax rates would have been determined, IRS tables developed, payroll software updated and tested allowing for a smooth transition to the new year.

One thing is certain. Most employees will experience a tax increase if no agreement is reached and the “Bush tax cuts” are allowed to expire.

While many states have released income tax tables for the year 2013, the IRS is waiting for Congressional action before it releases its tables for 2013. If no agreement can be settled on between the White House and Congress by the end of the year, the treasury secretary can choose to keep at least some tax rates at current 2012 levels if there is a reasonable expectation an agreement can be reached to extend those rates into 2013.  He can choose to keep all rates the same or he can choose to just keep some, choosing to raise the rates on employees earning $200,000 or more. However some of the factors Treasury needs to take into account is if Congress is actually going to raise rates or are they going to increase revenue by reducing deductions.

If no no fiscal agreement is made by the end of the year and Treasury chooses not to intervene, then on Jan 1, 2013, all Bush tax cuts will expire and the 4 highest percentage federal tax rates would increase. The top tax rate will increase from 35 to 39.6%, 33 to 36%, 28 to 31% and 25 to 28%. The supplemental wage tax rate (such as a bonus payment), which is tied to the  lowest rate of the top four, would thus  increase from 25 to 28%. It should also be noted that the IRS’s backup withholding rate, the rate applicable to those taxpayers who have been identified by the IRS as those individuals who provided incorrect tax payer ID numbers, would increase from 28 to 31%.

Publication 15 for the year 2013, the publication all taxpayers and payroll depts rely on to determine payroll taxes,  will probably not be released until Congress has reached an agreement on taxes and spending. As a result, the IRS will probably also not issue a new form w-4 until Publication 15 has been finalized.

Likewise, if a fiscal agreement is not reached, the format for form 941 for 2013 will probably not be  determined until well into the first quarter of 2013 as decisions need to be reached regarding social security tax rates. The current employee social security tax of 4.2% is set to expire at the end of the year. While most experts think the this payroll tax reduction will not continue, the Obama administration has not yet indicated what their intentions are regarding this reduction and whether they plan to push for an continuation of the tax break. If it is not extended, form 941 will have to be redesigned to accommodate the revision.

One thing that is certain, and that the new form 941 will accommodate, is that those employees who earn more than $200,000 will be subject to a .9% Obamacare tax surcharge on that additional income above $200K.  While ObamaCare adds the .9% tax on salaries and wages that exceed $125,000 for single taxpayers and $250,000 for married taxpayers, the IRS regulation requires employers to withhold this additional tax when employee wages reach $200,000 regardless of the employees filing status.  While employers are not required to notify employees of this additional tax, it is suggested that Payroll depts. inform those  employees of this new tax so that it will not be a surprise when that surcharge kicks in. Taxpayers should note that investment income (interest, dividends, capital gains, etc.) may also be subject to new ObamaCare taxes depending on the level of that type income .

Posted in News
Time & Pay is a  godsend for a small business like mine. I no longer have to worry about paying my employees or my payroll taxes accurately or on time!  Time & Pay takes care of everything for me!
-B M – Stellar Studios, Johnson City, TN

“As a former customer of one of those big national firms, not only does Time & Pay perform better in the payroll processing area with better products and services, but you are also way ahead of them in the customer service area. It is a pleasure working with your staff knowing that any help we need is readily available.”
-C – Comprehensive Community Services, Johnson City, TN

“Opening up a large retail operation, the last thing I wanted to concern myself with was payroll and all the compliance hassles. Time & Pay takes care of all my payroll needs. With their services, my payroll worries are eliminated. We would recommend your services to any one.”
-D K – DW Express LLC, Bristol, VA

“From the start, Time & Pay has worked with us in many aspects of payroll and HR as we have grown from a single facility to a multi-state operation. They have allowed us to concentrate on that expansion while they have focused on keeping us compliant with payroll and timekeeping regulations. There customer service is exemplary! They are great to work with.”
-J G – Prime Choice Foods, Denver, CO

“After working with one of the national firms, the transition to Time & Pay was easy and beneficial. Their products and services exceeded what we were getting, were more cost effective, and their customer service goes above and beyond. We are very happy we made the change.”
-R V – Mountain Treasure Corral, Kingsport, TN

A while back, the state came to our office to audit our payroll records. When the auditor found out Time & Pay did our payroll, she stopped, packed her briefcase and informed us there was no need for the audit. She was very confident we were compliant.
-K B – GR&P Co. Bristol, TN

“We have been using Time & Pay for a number of years. Their customer service is outstanding. I would recommend their products and services to anyone looking to get the most out of the payroll process and stay compliant with federal and multi-state payroll regulations.”
-M W – Royal Brass, Knoxville, TN

“We had been doing payroll in-house for years and was looking for a cost effective alternative. Your systems and services have been able to provide us with information and reports we were not able to produce with our old system. You have freed our time to concentrate on more important accounting aspects of our business. With the excellent services you provide, we would not consider any other payroll processing system.”
-Kwick-Way Transportation Co, Gray, TN

“As a new company to Johnson City, we were glad to find a local quality payroll service provider. We had used a national provider in Florida and were well aware of the advantages of outsourcing. Time & Pay offers all that the big national firms provide and more, including local, prompt and courteous customer service!”
-K H – JD Squared, Johnson City, TN

“Time & Pay saved us from hiring another employee to do our payroll. Along with providing great payroll services, they have given us the ability to easily track our labor cost for job costing.”
-J K – American Calendar, Greeneville, TN

7-15-2014

FMLA Benefits Now Include Same Sex Marriage Couples

Under a proposed rule issued June 20th by the Dept. of Labor, the Family and Medical Leave Act (FMLA) will now apply to eligible employees in legal same-sex marriages regardless of what state they live in and that state’s same-sex … Continue reading

READ MORE

6-30-2014

Minimum Wage to Increase in Some States

Mid 2014 brings minimum wage increases to a number of locations. The hourly minimum wage rate is to increase July 1 in two states and the District of Columbia, with rate changes coming over the next few months in other states. … Continue reading

READ MORE

6-20-2014

Payroll News

Changes in FLSA expected in November: In response to President Obama’s executive order declaring that the FLSA protections should cover more employees, the Dept of Labor has declared that they expect to announce the FLSA OT wage cap in November … Continue reading

READ MORE

Find us on Facebook! Find us on LinkedIn! Follow us on Twitter!
Independent Payroll Providers Association Member            Registered IRS E-Filer

Website designed and developed by Stellar Studios