In a recent article published in the online edition of the paper, Forbes Contributor Tony Nitti discussed the recent and controversial higher rate of payroll taxes. Nitti explains what he views as the reality behind the payroll tax rates that are now in effect.
In the fiscal cliff deal that extended the income tax rates for almost all Americans, there was one provision that was notably not extended—the reduction to an individual employee’s share of payroll taxes. The 2% reduction was applicable during both 2011 and 2012. During these years, employees only paid 4.2% of the wages they earned towards Social Security. The reduction was not renewed, resulting in a reversion to the original 6.2% rate.
While many taxpayers may not have noticed that the rate of payroll taxes changed as the fiscal cliff talks were unfolding, they will probably notice the change, however, when their first paychecks of 2013 are handed out. Assuming that the individuals were making the same amount as last year, they will most likely see a 2% decrease in their current paycheck.
If you have any questions on how any of the new rates will affect you in the coming year, speak to your knowledgeable tax professional.
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