Are Orange County Businesses Ready for the 2013 Tax Changes?

There was a lot of attention earlier this year when Congress made what was referred to by the press?as a ?fiscal? cliff? deal.?The deal included important tax changes which affect payroll deductions and increase the need?for employers to use a payroll service solutions company.

Some of these changes have specific implications for business owners who are required to withhold funds from their payroll. Payroll service solutions can easily?implement these changes for employers.

Some changes affect all workers. Others will only affect single people who earn over $400,000 or couples who earn more than $450,000. Here are the major changes in the law that everyone should be concerned with, particularly employers who will need to adjust their payroll withholding criteria. Payroll service solutions can help employers implement the new payroll withholding requirements.

1. Expiration of Social Security Tax Cut.

Congress failed to extend the Social Security withholding reduction and allowed the previous higher level to be reinstated. This change affects every employee. It is not actually a tax increase, but allows a previous 2 percent tax cut to expire. For the last two years, the withholding level was 4.2 percent on incomes up to $110,100. It is now 6.2 percent on incomes up to $113,700. This is an area where a payroll service solutions company can?aid employers.

This increase can mean as much as $80 less that an employee will now be taking home on a monthly basis. A worker earning $50,000 will see their taxes increase by about $1,000 annually based on this change alone. Employers continue to pay 6.2 percent, the same they have paid for the last few years.

The change means that employers and employees each pay a maximum of $7,049.40. Payroll service solutions will automatically effectuate this change to employer?s withholding requirements. The increase on the amount?to be withheld may be?as much as?$2,425.20.

Employers must begin this payroll withholding by Feb. 15, 2013. Employers who use a payroll service solutions company will have the new calculations automatically prepared for them.

2. Medicare Tax Rate Increased for Some Employees.

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The base Medicare tax rate did not change. Employers and employees each pay 1.45 percent on all income. A new Medicare tax of 0.9 percent was added for employees who earn over $200,000 in a calendar year. The tax will be imposed in the month the wages exceed that level and will continue until the end of the calendar year.

The employer pays no portion of the tax increase. It is all withheld from the employee?s wages. A payroll service solutions company will implement the withholding at the proper time so that you, the employer, do not have to concern yourself with monitoring when the withholding level is reached.

3. Tax Rate Increased for High Earning Employees.

For single employees who annually earn more than $400,000 and married employees who earn over $450,000 a year, the tax rate has increased from 35 percent to 39.6 percent. All workers, but particularly workers in these income levels, should review their W-4 withholding form and consider revising it in order to avoid a large tax bill at the end of the year.

If you, as an employer, do not already use a payroll service solutions company, you should consider doing so. A payroll service solutions company like PAYDAY Workforce Solutions will ensure accurate application of the new payroll withholding tax laws and will provide you with accurate records. This relieves you of spending time studying new tax laws and simply hoping you interpret them correctly.

Source: http://www.paydayonesource.com/are-southern-calif-businesses-ready-for-the-2013-tax-changes/

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