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