The Social Security tax for 2013 reverts back to its normal rates. The tax rate for 2013 is:
- Employee-portion: 6.2% of wage earnings, up to the maximum wage base of $113,700;
- Employer-portion: 6.2% of wage earnings, up to the maximum wage base of $113,700;
- Self-employed persons: 12.4% of net self-employment income, up to $113,700.
The Social Security tax rate had been temporarily reduced for the years 2011 and 2012, in what was referred to as a payroll tax holiday. For these two years, the employee-portion of the Social Security tax was reduced from 6.2% to 4.2%. Self-employed persons also received the same reduction from 12.4% to 10.4%.
The temporary rate reduction for Social Security taxes was not extended as part of the American Taxpayer Relief Act. The reduced Social Security tax thus expired at the end of 2012, as it was scheduled to do.
The payroll tax holiday was enacted as a one-year-only provision for the year 2011 as part of the Tax Relief Act. It was further extended through February 2012 by H.R. 3765, and then extended again through the end of 2012 by H.R. 3630. Even though the tax rate was reduced, Social Security actually received the same amount of revenue as there was a special rule that directed the Treasury to transfer revenues from the General Fund to the Social Security Trust Fund to make up for the tax holiday. (You can read more about this particular provision in my article on Social Security taxes.)
Planning Issues for Self-Employed Persons
The reduced Social Security tax rate will impact year 2012 tax returns, especially for self-employed persons. The self-employment tax on a year 2012 tax return will reflect the reduced 10.4% Social Security tax along with the 2.9% Medicare tax, for a combined self-employment tax of 13.3%.
Self-employed persons will also need to start setting aside funds towards their 2013 taxes and making estimated tax payments. The normal rule for calculating estimated tax payments is to pay in for 2013 at least 100% of the federal taxes that were due in 2012. However, using the default method could result in underpaying taxes since the self-employment tax will be higher for 2013. Now, the IRS will not impose an penalty on underpaying estimated taxes if tax payments for 2013 are at least 100% of year 2012 federal tax liabilities.
Self-employed persons may want to calculate their 2013 estimated tax amounts assuming the full self-employment tax rate of 15.3% so as to be able to set aside enough funds to cover their taxes in full. The planning opportunity I detect is two-fold. On the one hand, it's important to know what the 2013 tax will be so that self-employed persons can set aside enough funds to cover the tax. And to do that, we'll need to look beyond the 2012 tax liabilities figures we see on the tax return and run a calculation using 2013 tax rates. On the other hand, the IRS won't impose an estimated tax penalty as long as estimated tax payments are at least equal to 2012 tax liabilities (which could be lower than 2013 tax liabilities on the same amount of income). In looking at these two factors, self-employed persons may be able to set aside the differential between their 2012 and 2013 federal taxes in a savings account and earn a little bit of extra interest.
Planning Issues for Employees
Employers should start withholding Social Security taxes at the 6.2% rate. Be sure to review your paychecks to confirm that your employer is withholding the correct amounts. The IRS on January 1, 2013, issued temporary guidance to employers regarding tax withholding. The IRS instructed employers:
"For 2013, the employee tax rate for social security increases to 6.2%. The social security wage base limit increases to $113,700.
"Employers should implement the 6.2% employee social security tax rate as soon as possible, but not later than February 15, 2013. After implementing the new 6.2% rate, employers should make an adjustment in a subsequent pay period to correct any underwithholding of social security tax as soon as possible, but not later than March 31, 2013." (Notice 1036, IRS.gov)
I just received my first check of 2013 on January 3rd. It was for work done the last 2 weeks of December 2012. My employer deducted my Social Security tax at the new 2013 rate. They claim that since it was paid in 2013 they must use the 2013 rates. Everyone in our office feels that since we earned it in 2012 those are the rates that should be used. Which is correct?
I had the same thing happen. I have not yet asked my employer. Looking forward to an answer posted here. Thank you.
I have the same problem as Mike and Alli have stated. The time “worked” is for the last 2 weeks of 2012 yet they deducted the new tax rate of 2013. Is this correct?
It’s a payroll tax, not a labor tax. It isn’t considered “payroll” until a check is cut and the employee is paid. The date the money is paid to the employee is the date that determines when it becomes payroll. If it is paid after the 1st it is cnosidered payroll in the new year.
You’re right — you earned it in 2012.
But it was actually paid in 2013. Therefore, it’s 2013 earnings.
Even though it was earned in 2012 you did not actually receive the money until 2013, therefore you have to pay the full 6.2%. On the bright side, the money that was for work done in 2012 and not paid until 2013 is not part of your income for 2012.
Why wasn’t the payroll tax holiday extended as part of the “fiscal cliff” deal? Was it a mutual decision by both Democrats and Republicans or did one party or the other insist on it? All the articles I have seen so far do not mention the politics involved. Middle class families on the bubble are adversely affected by any reduction in income and although happy about no income tax increase. Many seem to feel betrayed by the payroll tax holiday ending–they thought the deal would apply to all types of taxes
So, the time that was worked during December (12/14-12/28) will be part of 2013 earned income, not part of 2012…correct?
Is this based on gross or net pay?
To Heather,
Just like any other tax, this is based upon your gross pay. Net Pay is what you receive after all taxes and other deductions are taken out. Obviously, once it is listed as Net Pay that means the taxes have already been deducted.
Keri – Correct. As an example, I started a new job December 21, 2011 but did not receive a W2 from that employer as the payroll check date was actually Jan. 1, 2012. Technically, the payroll date is the date of the check, not the pay period.
I have been self employed for quite a long time.My accountant has never had me pay a dime in taxes,because of the write offs allowed by law in New York state!!If you work for others you will never control your own money!!
Get use to it folks, more will be coming down the line. Wait until Obamacare goes into full throttle. You young Obama lovers that voted for him are in for a big surprise when you get your first insurance premium bill? I can’t wait! Google it! The younger will pay higher premiums than middle age and up? Yep…just google it. Perhaps next time you’ll do your homework before voting for someone that you think is “cool”.
I had the same thing happen to me and since the new taxes doesn’t go into affect until Jan. why was it applied to my paycheck so soon?
So as an employer I increase my employee’s SS deduction from 4.2 to 6.2% and maintain their medicare deduction at 1.45%?
I agree with Tami.Get use to it. I knew it would not be long before we would start hearing complaints like this. But as we have heard Obama say before ( I WON )
will the new 6.2 tax affect civil service pensions?
Could my employer have issued my payroll check early in order to avoid the 2013 tax increase?
Unfortunately the employers are doing it correctly. New year new tax laws.
Ok – Who here actually thinks President Obama controls the tax code? You guys do understand how bills are passed right? it’s not magic. He can’t just swoop in and raise taxes. The congressmen and women everyone voted for here are the issue. They’re the ones to blame. Vote them out if you don’t agree! But stop blaming everyone else involved in the system.
Also, guess who’s administration passed the original TEMPORARY tax reduction?
The democrats passed the tax holiday for all, even the non tax payers. (Everyone pays social security tax even if they qualify for EIC and additional child tax credit. The SS tax is just deducted from their credits.) The republicans wanted it for just people that actually pay taxes–the middle class, for example.
Some people here are sad. “More coming from this”, such an opinionated nation with a lack of knowledge. Obama is not to blame here, sorry it’s just fact, this is such a regurgitated subject I won’t continue, go do research on how the entire system works.
That’s not rite but it’s not smart to argue with an employer . This is why they gave the date of Feb 15 to comply with new tax regulations . It can be done both ways . It is up to the employer if they want to file your income by the pay date or the annual date . If they sent your w-2s last year reflecting the income by the pay date than they are legitimate . If the start date and the end date are for the first day and last day of the year when they total your income then they are wrong . You would most likely need access to all your paychecks from the same employer for the entire previous year to see if it is a legitimate change . I don’t think it’s even worth doing all that investigation and math to argue about 20 dollars . They will disagree with you even if your rite . If it was a large amount of money I would consider the effort wort while .
Wish it was only 20.00. I was hit with 105.00 taken out every two weeks!!!
My husband received his first pay for the 2013 year and his SS tax taken was more than the 6.2%. Would that be something that is wrong in his companys payroll system. When I did the calculation based on his pay before taxes with an old pay stub with the same # of hours the SS amount with taking 4.2% was correct – the new one with 6.2% was incorrect – it was approx $15 more that it should have been which would equal to about $38 more per pay rather than close to $16. Am I missing something, or does his employer have something wrong?
If you make more than the base wage of $113,700, you would pay more.
I got a raise Jan 1st.. this tax took it all and a few bucks more.. Im depressed now..
Casey, not sure what you are saying about base wage. Everyone pays 6.2% up to base wage which for 2013 is 113,700. If you make more than base, you no longer pay social security tax.
Casey, what do you mean pay more? $7,049 is max on $113,700. Your employer stops after the max.
Casey, I think you mean to say the amount per pay depends on your yearly salary. For instance, if you made $113,700 per year, you would need an entire year to pay in the max SS. If you made $216,000 for your yearly salary, you would pay the max SS tax within 6 months.
I think Casey means that the more your salary, the faster you will pay up to the max.
Can anyone tell me why it is when I do the math by hand from my pay stub, my SS witholding is 6.7% instead of 6.2%?
The Social Security FICA tax just went back to 6.2% what it was before the Bush tax cuts for the rich, Democrats and Obama proposed to lower the “Holiday tax” to 4.2 % Republicans agreed as a condition to extend the taxcuts for the rich 2 more years, so actually president Obama gave us that 2% cut on the FICA tax, but now the rich will pay more taxes as it was before 2001, which in a sense could be better because the economy could expand. Hope this helps.
Yes, But all I am saying is that the White House needs to get their act together and represent the people (the best way they can) who help to put them in the House in the first place. It appears the White House has forgotten or is forgetting that the basic purpose or function of any government is to provide employment, education, security and health for its people. I was also very surprise to see the reduction in my last paycheck. This increase in tax that I paid could be used to pay at lease a portion of my student loan that I have to service every month. I have my BSc. degree and my MBA but I am still not getting the salary that I deserve so that I can live a comfortable life and pay my student loans with ease. I am sure there are many who share the same views as I do. All this is due to the economic mess that we are experiencing. Extending the social security tax should be a priority in the “Fiscal Cliff” deal to help the masses of people who are still experiencing hardship. Instead what the White House did was to wait until the ninth hour – in other words – (Mid-night) as usual to confirm most of the “Fiscal Cliff” deals. Surely the White House should not be a circus and a joke….
Sadly my husband raise for January is no longer due to the increase in ss tax….oh wait…there is more to come. Wait until ObamaCare!!
Anyone know why I had 6.94% withheld instead of 6.2%?
Are 401k contributions subject to SS tax? If I consider my 401k contribution taxable, my witholding is pretty darn close to 6.2%, but that could just be coincidence.
Social security just went back to 6.2 where it was before obama reduced the employee’s portion to 4.2. I ask you this. if the social securty fund is going broke, why would they reduce social security tax in the first place? Why not just reduce federal income tax instead? I never understood that mindless tax reduction. It made no sense whatsoever. In fact when that tax reduction took place, my ss tax decreased but my federal income tax increased. So it just made no sense. I think I got .08 cents more in my paycheck. So what was the point?
The taxes deducted from your last check was done most likely because the actual date of your P/R check was in January, which throws that income into 2013 income. For instance our P/R week ended 12/20/2012 but the check was actually dated 01/02/2013 so that week was thrown into Jan 2013 first P/R quarter of the new year. That’s just the way it works.
You pay 6.2 social Security up to 113,700. but medicare tax which is 1.45 is forever. Doesn’t matter how much you make. There is no wage limit on medicare.
Sorry for the typo error on that date. Our P/R period ended on 12/30/2012 not 12/20
(8) Kari Turner says:
So, the time that was worked during December (12/14-12/28) will be part of 2013 earned income, not part of 2012…correct?
if your P/R check was dated after Jan 1, 2013 that income went into 2013 not 2012.
Your SS taxable wages might not be the same as your gross pay.
Some things (ie cafeteria plan deductions) are exempt from SS tax, but others (401k for example) are not. Additionally certain fringe benefits are SS taxable, i.e. Group Term Life over $50k. You may need to adjust the gross pay number you are using to calculate your 6.2% by the particular pretax deductions or SS taxable fringes that apply to you.
Also, medicare is 1.45% for people who make less than $200,000 but for those who make more there is a .9% surcharge. I believe you don’t pay the surcharge until after you hit the $200,000 during the year, but I am not 100% sure about this new rule.
Thanks everyone for voting for Obama – this is what you get!!!!!!!!!!!! Get use to it.
Why is everyone blaming Obama? He passed the tax break we experienced for 2 years. This is the work of Congress who refused to extend the tax break, while they exerience an automatic raise every year. Write your Congress people and complain!
My payroll check shows an increase of 8.2% in the Social Security line item. Why is jumping to 8.2%? Medicare is staying the same. But I’ve jumped almost half increase in my Social Security deduction.
To all you imbiciles blaming Obama, I suggest you pull your head out of the sand and examine the facts. Obama did not raise the payroll tax. It was at 6.2% in 2010. He is the one was able to lower it to 4.2% in 2011 and 2012 against the will of many Republicans. It was all of Congress that voted to return the payroll tax to its 2010 pre-existing level of 6.2%. Yes, it hurts, but please refrain from letting your personal biases lay blame where it isn’t due.
The problem I have is not being told ahead of time. For that I blame Obama. The bottom line is the only thing talked about was more taxes for people making more than $250,000. Now people making $50,000 get to pay $1,000 more.
I would just like all the facts instead of the surprise!
The reduction in the EE SS tax shoul dnot have been done in the first place. For two reasons, politically its a bear trap as soon as it reverts back to the original rate…..evidence above. taek away the cookie and everyone screams. Secondly, the reduction lowers the amount of money funding a program tha tis already underfunded, duh!.. Of course, that never stopped any politician from raiding the social security “trust fund” and leaving an IOU.
Right now, every American owes more than $50K and Big Ears says the governemnt doesn’t have a spending problem. Really. IMO, all govt employees need to take a pay cut just like the we experienced the last two years.
Hello! There has not been a budget passed in over 1000 days!
We owe more money per citizen than Greece.
So for you Liberals, The increase must mean Obama lost to Bainer. Since the Republicans wanted the raise the taxes as you say. That blows my mind since Obama refused to budge. Now he got a small portion of you and the rest is down the road. But he is your God so we don’t need to address spending. Thats your god’s quote! You win and i’m giving up working for a living and will soon join the majority of the minorities. Might as well get my freebys. Just feel sorry for the next generation they have to want socialism because they will never see retirement benefits. But they can be happy working at Wal Mart with their masters degree.
For Ray, who blames Bush. If I remember theGod quoted going after millionaires and billionaires, than it was 250,000. Now its everybody who dares to be so arrogant and want to work for a living. I watch the mighty god on TV and turn down the volume, but darn it, I still know he’s lying because I see his mouth moving.
I find it interesting that all of the Obama supportors immediately want to remove any blame from Obama and blame the tax increase on Congress. However, when it comes to giving credit for the original 2% decrease, Congress is quickly forgotten and it was all Obama’s doing. I don’t necesarrily give either group all of the credit/blame. I just find it ironic how we all see what we want to see.
So if I was already making the maximum contribution, did my social security tax go up? Or am I just getting to the maximum faster?
That’s what you get when you vote for “change”… They take out dollars from your pocket and give you back small change.
I fail to understand the ignorance of those blaming Obama. If you recall, he wanted the tax breaks to remain for all under 200K per year earners. It was the REPUBLICANS who decided they didn’t care what the majority thought and decided those who have more then they need should not have to help out those who don’t have enough.
This party voting in our government HAS to stop. They need to ask us… as in “WE, the people…”
My annual raise was consumed by this increase as well. Really disappointing.
I didn’t even know until I saw my deposit.
If people would just pay attention to what the government , congress is doing with their vote they would understand how it all transpires. The economy had taken a down turn because of issues that we won’t discuss at this time, however, the republican house was a democratic house when this tax holiday was passed and a trade off was made. The republicans got what they wanted for their wealthy constituents and we, the middle class got the two year tax holiday of 2%. The wealthy didn’t have to pay higher taxes, or their fare share as they will have to now. We got the better of the deal in the long term and will benefit from the exchange for years to come. President Obama and the Democrats are on the right path to recovery and will deliver what Americans need, jobs, healthcare at a cost that is affordable and wages that will again support American families all on due time. Have patience people.
I cannot believe what a bunch of whiners this society has become. Is it really “all about me” now? I remember a time when folks were proud to pay their fair share so that we could have the good things life has to offer–good roads, good schools, an effective and well-staffed police force–all the things our taxes pay for. Nowadays it’s “oh my god, the “government” is taking all my money! Well, folks, I hate to break it to you, but your taxes are what pays for the things that we take for granted. Cut taxes! Go ahead. Try to pay your teachers, your cops, building roads or anything else that keeps our kids, our safety and our comfort going. Look what it has already done. That’s what you should be whining about.
Federal taxes do not pay for local roads, police and fire or education. Those are all paid out of local and state taxes. So quit your whining about people who don’t want to pay federal income taxes.
* these elitist and the rest of these spawns of satan its not bad enough they gouge gas prices and food prices kill children innocent civilians with drones they got to take MORE taxes out I hope they rot in *!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
This country has become obamas america. Only his views and opinions count. He has divided this country and with the libya scandel has put shame on us all. He has no regards to life and morality. His true character is revealed now and I judge him by that alone. Remember there is still hope. For greater is HE that is in you than he that is in the world. Give to caesar what is caesar’s, and to God what is God’s.
It doesn’t seem fair, but it’s true. All payroll taxes go by the date that the payment was made to the employee. If the check is issued in the new year, then it is income for that year, and not the previous one; therefore the new tax rates apply.
A tax holiday for who? The tax cut was only from the employees portion paid into social security. So social security made less from us and the government looked good as if they gave us something. The government has been embezzling our social security for years and they give us a tap on the back and say… here pay less into the social security fund and put it into the economy to help stimulate it; make us look good.
Now you have employees grumbling over the hike. Social security and medicade is a total of 7.65% which the employer matches.
If your paycheck doesn’t break it down to SS and Med, then it looks like you are being overtaxed.
I make $136,000 annually. My take home pay is now $1600 less a month . I have not had a chance to pull up my pay stub. Has the taxes went up this much?
Bonnie, I am not sure about the actual federal income tax. I make under $100k and mine went down slightly (like $3/paycheck).
This article is about Social Security ‘tax’. It increased 2%, but since the max is the same at $113,700, the total ‘extra’ you owe over the entire year would be $2,274.
I would look over your pay stubs because that should only affect you about $190/month.
As for Social Security, it should not really even be called a ‘tax’, it is ‘supposed’ to operate like a retirement plan, your employer matches it and it pays in and when you retire it pays you back what you and your employer both paid in. However as stated, the fund is perpetually empty as the money moves around the different ledgers.
This is actually the first I have heard of this tax holiday and I am appalled that we reduced the rate to 4.2% but were still putting in to the fund based on 2* 6.2% because it took directly from the Treasury.
I would rather pay my extra small amount of money per paycheck than know something else is just taking directly from the bankrupt treasury. We need to stop spending and not raise the debt limit. If it’s chaos to cut half of the federal employees, what do you call it when all employees in the world are unemployeed due to the US destroying the international currency market?
Can you please clarify; say if my anual salary is $175,000, does the 6.2% apply to $175,000 or at the base rate of $113,700??
You will only be taxed on the first 113,700. After you earn $113,700 in this calendar year (determined by check date, NOT pay period) you will no longer be taxed the 6.2%. Basically by August you should stop paying into SS and your net check will increase.
As far as the people before trying to figure out what was withheld or not withheld…. it looks like you were making a few obvious mistakes in trying to figure if 6.2 was withheld correctly. Most likely, you need to consider certain compensation is exempt from social security tax. If you have any deductions (retirement, health, garnishments, etc) or itemized earnings on a pre-tax/non-taxable basis, these will effect your napkin math.
Also keep in mind medicare is also being withheld, which SHOULD come as another line item, though sometimes will be lumped into one if your employer is doing everything manually (combined rate is 7.65%.
Your employer is responsible for making the deductions from your check and paying them. If he ****** up, it will be clear year end.
“(63) Bonnie Driver says:
I make $136,000 annually. My take home pay is now $1600 less a month . I have not had a chance to pull up my pay stub. Has the taxes went up this much?”
Alot of things change between December 31 and Jan 1. Look at your paystubs and do a comparison, but by the end of the year you would have not been paying SS. Also, your income tax calculation is variable depending on the amount per check, the frequency, what was paid YTD, etc.
(48) Ray says:
The problem I have is not being told ahead of time. For that I blame Obama. The bottom line is the only thing talked about was more taxes for people making more than $250,000. Now people making $50,000 get to pay $1,000 more.
I would just like all the facts instead of the surprise!
There was no surprise. Everyone knew this was coming, there was no secret. We knew it 2 years ago, knew it 2 months ago and we knew it 2 weeks ago. Ignorance of the tax code isn’t anyones fault but your own, especially since this was talked about long before it took effect. ****, it was part of the reason it was called “The fiscal cliff”.
As far as the anti-obama garabge….. just lol. I disagree with the man on a fair amount of issues, and he is certainly no messiah, but holy conspiracy theory nut job logical fallacy backwards thinking batman!
Tom
It only applies to the first 113,700.00 on earnings. The tax stops after that until the new year.
So I have 2 different full time jobs. I would individually max out on them. I started the second job just this month. Both my employers are cutting the SS tax at 6.2%. Is that correct. Should I have to pay double the amount and pay the max (6.2 % of 113,700) twice. or should I talk to the employers and have only one of them deduct or let them both reach the limit combined (that way I will reach the limit sooner than my usual August payroll)
Steele, good question. Both employers are required to withhold the Social Security tax. You’ll receive the overpaid Social Security tax back when you file your return next year. This will show up as a credit on your Form 1040. On the year 2012 form, it appears on Line 69. The instructions for that line are located at: http://www.irs.gov/instructions/i1040/ar01.html#d0e32052
Just payed off my student loans last year (took me 13 years). I thought I was home free and could pay down my house, vehicles, etc but not now. With my paycheck $600 less (monthly), there will be no vacations and basically no more closer to getting out of debt for us this year. I do blame Obama because of his lack of leadership !! I did not vote for him either time, but I was “hoping” he would be different and do the right thing instead of making decisions based entirely on politics. I am so disgusted with all of our leaders in congress right now. There is less and less incentive to do well and succeed in this country. Everything is about being “fair”. What is the point to do well, when the harder you work, the harder you get beat down. Guess I am the dumb one….
it need to be at the 2013 rate .. because the earnings will be considered 2013 earnings and apply to the 2013 Tax return, done in 2014
For the past 6 years I held 2 jobs and pay more than &7,049.00 in social security tax each year. Can I claim a refund ?
Leann you lie.
How can your pay check be $600 less a month because of the SS tax holiday ending? By the way, Obama was responsible for the holiday and wanted to extended it.
You would need to make $30K a month to have that 2% equal $600.
Now here is a real problem, that I want answered:
I got a large bonus this year, and crossed the $113,500 mark in March, so I have paid my maximum SS this year. They are talking about reinstating the SS holiday for 2013. If they do, can I get the over paid amount back?
Please help, after doing my first 1/4 taxes i realized the first 2 weeks of my payroll taxes were at 10.4% social security deductions, i see the notice 1036 that we can make up for that during further checks but not after 3/31/13, since i just noticed it now how can I rectify this?
what do i do if i did not adjust the 10.4 percent before 3/31/13
Jeff, I would make the adjustments as soon as possible on your employees pay and withholding, and get the withholding taxes deposited with the US Treasury. You might consider depositing the taxes first, so as to minimize or avoid any late penalties. Make sure your payroll systems are updated for the current tax withholding rates, and make the withholding adjustment starting with the next pay period. Be sure to communicate this to your employees, so they know what’s happening and what to expect in terms of their next paycheck. Your company’s tax professional may have some additional ideas for how to handle this situation. You may also want to call the IRS on their hotline for businesses (1-800-829-4933) to find out if they have any ideas as well.
Those that keep posting that it’s not Obama’s fault are the ones that are still blaming Bush for everything bad under the sun.