How the New Tax Legislation Will Affect You

Last week Congress made some significant tax decisions that will have a direct impact on your paycheck. Due to these recent Congressional actions, the temporary reduction in the Social Security payroll tax (FICA) has expired and the result will be a 2% increase in Social         Security payroll tax deductions. This increase will impact all USF System employees*.

Social Security is financed by a 12.4% tax on wages, with employers paying half and workers paying the other half. From 1990 to 2010, the Social Security payroll tax deductions for employees held steady at 6.2% of gross pay. The Tax Relief Act of 2010 reduced the employee deductions from 6.2% to 4.2% for 2011 and 2012 as part of an economic stimulus plan. Congress voted to allow that temporary reduction to expire this week. This expiration will raise the percentage of the Social Security payroll tax deducted from employees back up to 6.2%, effective immediately. Therefore, paychecks beginning Jan. 11, 2013 will reflect this 2% increase in the Social Security payroll tax, resulting in a lower net pay.

Separately, Congress voted to increase other tax rates, but these tax increases will not impact the net pay of the majority of employees. A new increase to the personal income tax rates will only affect individuals earning more than $400,000 dollars per year. Workers earning taxable Medicare wages higher than $200,000 per calendar year, beginning Jan. 1, 2013, will be affected by a new requirement for employers to withhold increased Medicare tax, in addition to the 1.45% Medicare tax already being withheld. The 2013 tax tables were released on Jan. 3, 2013, and will be implemented beginning with the Jan. 11 payroll.

Should you have any questions, please contact the USF Payroll Department at