Another year is upon us and with the New Year comes changes in
our tax regulations. As you may know, The American Tax
Payer Relief Act passed last week by the U.S. Congress will
affect your paycheck beginning this month. In addition, there
are some changes resulting from the Affordable Health Care
Act.
To help explain these changes below you will find a summary of
those affecting your paycheck as well as changes to your
benefits:
Social Security Payroll Tax
The tax rate for Social Security has increased from 4.2% to
6.2%. This increase is a result of the expiration of the
payroll holiday enacted two years ago. This tax will apply to
social security wages of $113,700 or less.
Additional Medicare Tax Rate
The current tax rate of 1.45% will continue for 2013. An
additional new tax of 0.9% will be withheld on wages paid to
employees with incomes over $200,000. This tax will apply
once an employee's income exceeds $200,000.
Federal Tax Withholding Rates
The federal tax tables have been revised for 2013. Employees
who file Single on their W4 tax form and have taxable wages over
$400,000 will be taxed at the new rate of 39.6%. Employees
who file married on their W4 tax form and have taxable wages over
$450,000 will be taxed at the new rate of 39.6%. For all
other employees there may be minor withholding differences due to
inflation adjustments in the new rates.
New York State Withholding Rates
The withholding tax rates for New York State have been revised to
reflect the cost of living adjustment. Most employees will see a
small decrease in their State tax.
Maximum Employee Contribution to 403(b)
For calendar year 2013 employees can contribute to their pension
plan up to $17,500 and employees age 50 and over can contribute up
to $23,000.
Taxable Tuition
Congress has permanently extended the exclusion of $5,250 for
employees taking graduate-level courses. This exclusion was
expected to expire this year. Now the exclusion is permanent
allowing us to continue to exclude as taxable income up to $5,250
in graduate-level tuition. Please note this exclusion does
not apply to your dependents or spouse.
Qualified Transportation Expense Account
(QTE)
The American Tax Payer Relief Act increased the 2013 maximum
monthly dollar amount that an employee may withhold for qualified
transportation expenses from $125 to $240. This restores the 2011
limit.
Flexible Spending Account (Healthcare reimbursement plan
only)
The Affordable Health Care Act reduced the annual maximum allowable
election from $5,000 to $2,500. The maximum allowable election for
the dependent care flexible spending account remains unchanged at
$5,000.
2012 W2 form
The Affordable Health Care Act requires us to provide our employees
with both the employer and employee cost of medical and dental
plans. This information will appear in box 12DD of your 2012
W2 form. This amount is not taxable. The purpose of
reporting this amount is to provide you with the actual cost of
your medical and dental plans.
Based on the above information, you may wish to adjust your W4
federal withholding amount or increase your 403(b)
contributions. As always the Payroll and Benefits staff are
here to assist you with any questions or concerns. Please
feel free to contact us at (718) 990-5946.