The Affordable Care Act imposed an additional 0.9% Medicare tax on wages received after December 31, 2012, that exceed the applicable threshold for the individual’s filing status. For married persons filing jointly, the threshold is $250,000; for married persons filing separately, the threshold is $125,000; and for all others, the threshold is $200,000.
IIT will be required to withhold the additional Medicare tax on wages it pays to an employee in excess of $200,000 in a calendar year, without regard to the individual’s filing status. Except for the additional Medicare tax that will go into effect in 2013, the following is a summary of the unresolved payroll tax issues that are set to expire at the end of the year. If Congress does not extend these provisions, your paychecks in 2013 will be lower.
Payroll Tax Cut:
The two-year decrease in the employee Social Security tax rate to 4.2% from 6.2% is scheduled to expire on December 31, 2012. In 2013, the rate is set to rise back to 6.2% on a wage base of $113,700. The 2012 wage base was $110,100. Currently, there is no legislation in Congress that would extend the payroll tax cut beyond Dec. 31, 2012.
Income tax rates are scheduled to increase on Jan. 1, 2013, if Congress does not act before then to keep the rates at the current levels.
Employer-Provided Educational Assistance:
Through Dec. 31, 2012, IIT provided up to $5,250 annually in graduate educational assistance to an employee on a tax-free basis. This provision will expire on Jan. 1, 2013. If the provision does expire, education expenses will only be able to be excluded from an employee’s income if the course is job related.