A Hospitalist Asks a CPA – “what happened to my paycheck?”

Posted on January 18, 2013 by Dr. David Edward Marcinko MBA MEd CMP™

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Law changes will result in smaller paychecks in 2013

DT&PA number of law changes go into effect in 2013 that will result in employees [like hospitalists, nurses, allied healthcare providers and some pHO members, etc] seeing smaller paychecks, including the expiration of the payroll tax cut, the increase in the Social Security taxable wage base, and the new 0.9% Medicare tax imposed on high wage earners.

The following law changes go into effect in 2013

  • The payroll tax cut, which temporarily lowered the Social Security withholding tax rate on wages earned by employees in 2011 and 2012 from 6.2% to 4.2%, has expired. Accordingly, employees will see a 2-percentage-point bump in the amount of Social Security tax withheld from their paychecks from 2012 to 2013.
  • The Social Security taxable wage base has increased by $3,600, from $110,100 to $113,700.
  • An additional 0.9% Medicare surtax is withheld from wages paid to an employee in excess of $200,000 in a calendar year.

Effect of these changes on paychecks

The following illustrations show the effect of these law changes on employees’ paychecks:

… Employees earning $50,000 in 2013 FICA wages will have $1,000 more in FICA taxes withheld ($50,000 × [6.2% – 4.2%]) than they would have in 2012, due to the 2-percentage-point increase in the Social Security tax rate.

… Employees earning $100,000 in 2013 FICA wages will have $2,000 more in FICA taxes withheld ($100,000 × [6.2% – 4.2%]) than they would have in 2012, due to the 2-percentage-point increase in the Social Security tax rate.

… Employees earning $300,000 in 2013 FICA wages will have $3,325.20 more in FICA taxes withheld than they would have in 2012. This includes $2,202 in additional Social Security taxes due to the increase in the Social Security tax rate ($110,100 × [6.2% – 4.2%]), $223.20 in additional Social Security taxes due to the increase in the Social Security taxable wage base ([$113,700 – $110,100] × 6.2%), and $900 in additional Medicare tax ([$300,000 – $200,000] × 0.9%).

… Employees earning $500,000 in 2013 FICA wages will have $5,125.20 more in FICA taxes withheld than they would have in 2012. This includes $2,202 in additional Social Security taxes due to the increase in the Social Security tax rate ($110,100 × [6.2% – 4.2%]), $223.20 in additional Social Security taxes due to the increase in the Social Security taxable wage base ([$113,700 – $110,100] × 6.2%), and $2,700 in additional Medicare tax ([$500,000 – $200,000] × 0.9%).

… Employees earning $1,000,000 in 2013 FICA wages will have $9,625.20 more in FICA taxes withheld than they would have in 2012. This includes $2,202 in additional Social Security taxes due to the increase in the Social Security tax rate ($110,100 × [6.2% – 4.2%]), $223.20 in additional Social Security taxes due to the increase in the Social Security taxable wage base ([$113,700 – $110,100] × 6.2%), and $7,200 in additional Medicare Tax ([$1,000,000 – $200,000] × 0.9%).

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Assessment

There is also a new 39.6% income tax withholding rate on high wage earners (previously, the highest withholding tax rate was 35%). This withholding rate is used for single taxpayers with annual wages greater than $402,200 and for married taxpayers with annual wages greater than $458,300.

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One Response

  1. Frustrated Hospitalist, on February 25, 2015 at 2:05 PM said:

    Do Hospitalists Lack Patient Advocacy

    Few areas of life are as personal as an individual’s health and people have long relied on a caring and competent physician to be their champion in securing the medical resources needed to retain or restore health and function.

    For many physicians, the care of patients was the foundation of their professional calling. However, in the contemporary delivery organization, there may be little opportunity for generalist physician “gatekeepers” or “specialty hospitalists or intensivists” to form a lasting relationship with patients.

    These institution-based physicians may be called upon to deliver treatments determined by programmatic protocols or algorithm-based practice guidelines that leave little discretion for their professional judgment. In addition, the physician’s personal values may be impeded by seemingly perverse financial incentives that may directly conflict with their advocacy role, especially if a patient may be in need of expensive services that may not be covered in their insurance plan, or are beyond the resources of a patient’s HSA or savings.

    Marcia Angell MD., noted during a PBS interview a decade ago, that the “financial incentives directly affecting doctors…put them at odds with the best interests of their patients…and it puts ethical doctors in a terrific quandary.”

    Thus – Do Hospitalists Lack Patient Advocacy?

    Frustrated Hospitalist

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