The term “Fiscal Cliff” was coined to refer to the convergence of several major events at the close of 2012. These events included the expiration of the “payroll tax holiday” and the two-percent reduction in employee paid Social Security tax, the expiration of the “Bush-era” federal income tax rates and large automatic spending cuts by the government.
On January 1, 2013 the American Taxpayer Relief Act of 2012 (ATRA) was passed by both houses of Congress and is expected to be signed by the President within days.
Key highlights of the ATRA include:
Continuation of the “Bush-era” income tax rates for individuals earning up to $400,000 and households earning up to $450,000. The rate for those exceeding these amounts will increase from 35 percent to 39.6 percent.
The act does not extend the “payroll tax holiday”, so employees Social Security tax rates will go from 4.2 percent back to 6.2 percent up to the 2013 taxable wage limit of $113,700.
ProPayroll has updated our systems to reflect these changes. All 2013 payrolls that have already been processed have had the proper Social Security tax withheld, and the federal income tax tables are now being updated.
Our team continues to monitor all regulatory changes and updates and stand ready to implement any changes required.