Social security tax

Are you asking yourself no matter whether you'll pay alot more taxes in 2012? I've got some negative news: unless Congress and the President act soon, the typical U.S. taxpayer will see in enhance in Social Security taxes for 2012. Read on to get the specifics.

Social security taxes are paid by each staff and the self-employed. For personnel, this is performed through paycheck withholdings. In 2011, you had four.2% withheld on your initial $106,800 of gross wages as reported on Form W-2. In 2012, you'll have 6.2% withheld on your 1st $110,100 of gross wages.

Note that there are 2 aspects to the 2012 Social Security tax raise: 1) The quantity of compensation topic to the tax is growing. In 2011, the very first 106,800 was topic to the Social Security tax. In 2012, that quantity is growing by $three,300 to $110,100. 2) The four.2% tax rate is rising by 2%.

Let's take a closer appear at both of these variables.

The enhance in the maximum income quantity is absolutely nothing new. This quantity is reviewed both year and is improved automatically if an inflation adjustment takes impact. It just so takes place that the wage base quantity has been level for the past 3 years (2009, 2010, and 2011). But alas, there has been adequate inflation lately to trigger the improve for 2012.

So there is truly absolutely nothing you can do about this. It is just the way our government payroll method functions.

As far as the alter in the actual Social Security tax rate, the boost of 2% is honestly a reversion to the old rate of 6.2%, which was in impact for numerous years. In late 2010, Congress and the President passed a law that allowed for a temporary, one-year reduction in the rate from 6.2% to four.2%. As of this writing (late 2011), no legislation has been passed to extend the four.2% rate. So, based on how you appear at it, this modify is either an "raise" or just a transform back to "busy as usual."

Staff will see the effects of the Social Security tax enhance through greater withholdings and small paychecks. For example, if you are creating $1,000/week in gross wages (about $50,000 per year), you will see a $20 lower in your weekly paycheck (or about a $1,000 pay cut over the course of the year). If you are generating $2,000/week in gross wages (roughly $100,000 per year), your weekly paycheck will be $40 less (about $2,000 total for the year).

Self-employed individuals who are needed to make quarterly estimated tax payments ought to take unique note of this Social Security tax improve. If your 2012 revenue is comparable to 2011 earnings, you might should improve your quarterly payments to steer clear of an underpayment penalty.

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