SSA’s first taxable wage base boost in several years means more than just higher taxes for top earners – it may also bring more questions for you.
Here are two answers for you when employees ask, “Why is my paycheck smaller?”:
- The 2012 wage base will be $110,100 – up from $106,800 between 2009 and 2011. The increase in 2012 will be the first hike in several years, which is bound to get some higher-paid workers’ attention.
The maximum Social Security tax employees and employers will each pay in 2012 is $6,826.20. Of the estimated 161 million workers who will pay Social Security taxes in 2012, about 10 million will be affected.
- The FICA tax rate may revert to its former level for employees. The FICA tax rate, which is normally the combined 6.2% Social Security rate plus the 1.45% Medicare tax rate, will be 7.65% in 2012.
Remember, though, that in 2011 employees paid a reduced 4.2% Social Security tax, and employers paid 6.2%. [Tax Relief Act of 2010.]
So far, employees’ Social Security tax rate is scheduled to reset to 6.2% on Jan. 1 (which means higher taxes), but this may change if any of the several bills under consideration in Congress become law.
Remember, there’s no ceiling on the 1.45% Medicare tax. That rate remains unchanged.
You can get more info about the taxable wage base, and cost of living adjustments, here.