Vision Payroll

This week’s question comes from Courteney, an office manager.

Courteney asks:

I just received my first 2013 paycheck and it is a lot less than my last check from 2012. Why did my paycheck go down in 2013?

Answer: The biggest impact most employees will see is the impact of the social security tax rate reverting to 6.2% after being 4.2% for 2011 and 2012.

Net Pay to Decrease 2% for Many Employees

For employees whose wages are subject to social security tax, many will see net pay decrease by 2% of gross pay. Employees who participate in a §125 cafeteria plan must reduce gross wages by the amount allocated to the cafeteria plan. Other adjustments to gross pay that reduce social security wages may also impact the calculation.

Social Security Wage Base Increases To $113,700 for 2013

The social security wage base increased from $110,100 in 2012 to $113,700 in 2013. Combined with the increase in the rate to 6.2%, the maximum social security tax withholding went from $4,624.20 in 2012 to $7,049.40 in 2013, or an increase of over 52%.

Federal Withholding Essentially Unchanged for Most Employees in 2013

With the release of Notice 1036 in January 2013, Vision Payroll has revised its withholding to comply with the guidance from the Internal Revenue Service (IRS). Most employees will see a small decrease of anyway from a few cents to just under $10 on a weekly paycheck, depending on federal taxable wages. Employees who earn more than $7,991 on a weekly basis will see federal withholding gradually increase over 2012 amounts. Since the highest rate is now 39.6% in 2013 compared to 35% in 2012, the differential will increase as taxable wages increase.

Vision Payroll Now Using Revised 2013 Withholding Tables for Federal Income Tax Withholding

As noted above, Vision Payroll has implemented the revised 2013 withholding tables for federal income tax withholding that were released by the IRS in Publication 1036.

According to the US Department of Labor, in the week ending December 29, the advance figure for seasonally adjusted initial claims was 372,000, an increase of 10,000 from the previous week’s revised figure of 362,000. The 4-week moving average was 360,000, an increase of 250 from the previous week’s revised average of 359,750.

Advance Seasonally Adjusted Insured Unemployment Rate Remains Unchanged

The advance seasonally adjusted insured unemployment rate was 2.5% for the week ending December 22, unchanged from the prior week’s unrevised rate.

Advance Seasonally Adjusted Insured Unemployment Increases

The advance number for seasonally adjusted insured unemployment during the week ending December 22 was 3,245,000, an increase of 44,000 from the preceding week’s revised level of 3,201,000. The 4-week moving average was 3,224,250, an increase of 6,500 from the preceding week’s revised average of 3,217,750.

The beginning of a new year is a great time to internally audit some of your HR-related practices. Employers should work toward establishing their Human Resources priorities and improving their organization’s Human Resources functions.

Six HR Areas to Review During 2013

The following six areas are ones that all employers should review to ensure compliance with legal requirements and with HR best practices.

• Employee Handbook
• Paid Time-Off Benefits
• Performance Management System
• Health Care reform requirements
• Posters
• OSHA 300A Summary

Learn More About These Six Hot HR Areas for 2013

To learn more about each of these tips, be sure to read the featured article by the HR pros at MyHRSupportCenter, New Year’s Tips from Your Human Resources Professionals. If you’re not yet signed up or would like a free trial of MyHRSupportCenter, contact Vision Payroll today.

The temporary decrease of the social security tax rate to 4.2% has expired with the end of 2012. Beginning in 2013, the social security tax rate on employees reverts to 6.2%.

Net Pay Will Decrease Approximately 2%

Employees will notice a decrease in net pay by about 2% of gross pay. For example, if gross pay is $1000, net pay would decrease by $20. An adjustment must be made for items that reduce social security taxable wages such as §125 cafeteria plans.

Employers Social Security Tax Rate Had Not Decreased

There will be no change in the tax rate on employers as there had not been a provision to reduce it. The rate on employers remained at 6.2% throughout 2011 and 2012.

2010 Tax Act Had Temporarily Reduced the Rate To 4.2%

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act) reduced the social security tax withholding rate from 6.2% to 4.2 % effective with payments made after December 31, 2010. Although initially effective only for 2011, it was later extended to include 2012.

Contact Vision Payroll for Further Information

Contact Vision Payroll if you have any further questions on the social security tax rate.