This year in 2013 we have new tax rules and surprise…Payroll taxes are going UP!
Did you know that in 2013, the personal tax rate on SECA taxes paid to the government in 2012, has now increased another 2%! What this means to you is that when Lawmakers failed to pass this portion of the Bush tax cuts to remain for 2013, the two-percentage-point cut in the employees share of the Social Security Tax expired and went away. Since the government did not renew this decrease enjoyed in 2013, then your personal tax liability to the IRS for 2013 has now increased 2%.
Why would Lawmakers do this you ask? This is because the government did not want this 2% in Social Security Trust Fund money and have to find the money somewhere else. So the easiest thing to do was simply NOT pass the renewal to keep this Bush tax cut on your SECA in place. Therefore, you as an employee will be getting smaller paychecks! And for all of you who are self-employed, you are not off the hook either. This means the higher SECA tax rate increased your estimated tax payments sent in with the quarterly ES voucher. Uncle Sam just got an instant promotion and 2% more of your income, just like that! It’s called printing money from your paycheck!
But wait…there is more! The high-income earners tax rate increased for the first time since 1993 your income rate has increased to 39.6%. This rate now applies for all of you who may have taxable income over $400k for singles, $425k for heads of household and $450k for married couples filing jointly. High-incomers lose more of their itemized deductions in 2013. For instance, if you have gross income over $250k for Singles, $275k for households or $300k for married, your write-offs went down another 3% for 2013. While tax rates go up, deductions go down and the economy gets tighter.
It’s never too late to start thinking about putting money into an IRA and Roth IRA’s, as the standard tax exemption has now increased in 2013 to $5,500 and if you were born in 1963 or earlier, you can put an additional $1k in savings tax-free. The maximum 401 (k) contribution is now $17,500 this year in 2013, up $500 over 2012 and if you were born before 1964, can put as much as $23k.
So, whether you are employed or self-employed, this is the year to get Uncle Sam off your back and file those taxes current. Get your life back on track with an installment program that works for you and negotiate a settlement.
Start saving and let your money work for you today! For more help with your IRS tax needs and allowable tax deduction questions, please visit us at www.JimMatthewsCPA.com or call us at 972-613-3034 for a free live consultation.