Quick Links
Social Security Tax Rate Goes Up
The Social Security tax rate paid by employees has increased to 6.2%.
As has been widely reported, Congress on New Year's Day approved legislation to extend certain provisions of the Middle Class Tax Relief and Job Creation Act of 2012 that expired on Dec. 31, 2012.
Although the legislation averted many of the year-end tax hikes and spending cuts that were set to take effect on Jan. 1 (commonly referred to as the fiscal cliff), it did not extend the TRA 2012's temporary reduction of the Social Security tax rate paid by employees for wages received through the end of December 2012. As a result, this tax rate has increased by two percentage points -- from 4.2% to 6.2% -- for all wages received beginning on Jan. 1, 2013.
Federal tax rules explicitly require employers to use the tax rate that is in effect on the day that pay is officially issue-dated (i.e., the date printed on the paycheck). Because the December 2012 payroll was issue-dated on Jan. 1, 2013, the 6.2% tax rate is applicable.
The 4.2% rate temporarily provided by the TRA 2012 was applied to a full 12 months of pay, not 11. Specifically, Social Security tax withholdings relating to the December 2011 payroll -- which was issued-dated on Jan. 1, 2012 -- were calculated at the lower (4.2%) rate.
Read a letter from the Controller's Office here.
Read info from the IRS regarding tax withholding here.