The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants

Law changes will result in smaller paychecks in 2013

A 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%).

###

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.

Channel Surfing the ME-P

Have you visited our other topic channels? Established to facilitate idea exchange and link our community together, the value of these topics is dependent upon your input. Please take a minute to visit. And, to prevent that annoying spam, we ask that you register. It is fast, free and secure.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

• PRACTICES: www.BusinessofMedicalPractice.com
• HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
• CLINICS: http://www.crcpress.com/product/isbn/9781439879900
• ADVISORS: www.CertifiedMedicalPlanner.org
• FINANCE: Financial Planning for Physicians and Advisors
• INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
• Dictionary of Health Economics and Finance
• Dictionary of Health Information Technology and Security

Filed under: Accounting, Taxation | Tagged: FICA, hospitalists, medicare surtax, new 0.9% Medicare tax, Social Security withholding tax rate, what happened to my paycheck? | 1 Comment »