After a weekend of intense negotiations, the terms of a fiscal cliff resolution have finally been successfully negotiated. Early on January 1, 2013 the Senate and the House of Representatives passed the “American Taxpayer Relief Act”. The President is expected to quickly sign and enact the bill into law. Following are many tax changes that may affect your payroll starting January 1, 2013.
- IRS 2013 withholding tables: Income tax rates are scheduled to increase on January 1, currently an IRS Notice 1036 has updated percentage method tables only and updated Publication 15 has not been released. Use the 2012 withholding table until you implement the 2013 withholding tables. IRS 2013 Withholding Tables
- 2% Social Security employee tax rate: 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 under withholding of social security tax as soon as possible, but not later than March 31, 2013.
- Additional Medicare Tax Withholding: you must withhold a 0.9% additional Medicare tax from wages you pay to an employee in excess of $200,000 in 2013.
- Earned Investment Income Surtax: employees with combined earned investment income exceeding $250,000 may want to voluntarily increase withholdings because of likely additional tax.($125,000 Married filing separately and all others $200,000)
- 2013 supplemental wage: The withholding rate on supplemental wages in excess of $1 million during a calendar year will increase from 35% to $39.6% on Jan. 1, 2013 The supplemental wage withholding rate will increase from 25% to 28% on supplemental wages of $1 million or less in a calendar year.
- Backup withholding rates: The backup withholding rate will increase from 28% to 31% on Jan. 1, 2013.
- State unemployment taxable wage bases and tax rate: Make sure your payroll system will be updated by January 1 to take into account any changes in state and fed tax-free limitations.
- State withholding tables: a release of the 2013 Nebraska Circular EN (new release) is available at Nebraska Circular EN
- Health Flexible Spending (FSA): 2013 Salary reduction contribution limit decreased to $2500 beginning January 1, 2013.
- Health Savings Accounts (HSAs)
Self-only coverage. 2013 plan year limit $3250.
Family coverage. 2013 plan year limit $6450.
- Defined Contribution and Benefit Plans: review contribution limits for employees who participate in 401(k), 403(b), most 457, SEP and SIMPLE plans has contribution limits have increased for 2013.
- Standard mileage rates: Beginning on January 1, 2013 the standard mileage rates for the use of a car will be 56.5 cents per mile for business miles driven, 24 cents per mile driven for medical or moving purposes, 14 cents per mile driven in service of charitable organizations.
- Employer-provided tax-free educational assistance: Through Dec. 31, 2012, employers may provide up to $5,250 annually in educational assistance to an employee on a tax-free basis If the provision does expire, education expenses will only be able to be excluded from an employee’s income if the expenses qualify as a working condition fringe benefit.
Quickbooks Payroll Software updates:
- Prior to processing your 2013 payroll make sure you update any Quickbooks updates to your software.