August 22, 2008
Question of the Week: Why Did My State Income Tax Withholding Change?
Filed under: News
Vision Payroll

This week’s question comes from Mark, owner of an import company. I receive the same salary every week. All year, my Massachusetts income tax withholding has been the same. Now it’s gone up two weeks in a row. Why did this happen? Answer: In Massachusetts, a deduction of up to $2,000 is allowed on the state income tax return for social security and Medicare tax (also known as FICA). Therefore, in calculating the amount of income tax to be withheld, a deduction is allowed for these taxes. Once the combined social security and Medicare tax equals $2,000, the deduction is no longer allowed. Vision Payroll will automatically make this change for you once the limit is reached. The reason the amount changed twice is that on the first check the deduction may be partially allowed. For example, if the combined social security and Medicare was $1,980 and the current withholding was $50, $20 ($2,000 – $1,980) would be allowed as a deduction and $30 ($50 – $20) would be over the limit and not allowed as a deduction for state purposes. In the next week, the entire $50 would be considered excess and none allowed as a deduction. Since the deduction decreased two weeks in a row, the tax withheld must increase each week. Contact Vision Payroll if you have any questions.


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