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Payroll Tax To Rise In 2013

Payroll tax will increase, as passed by Congress New Year’s Day. 99% of Americans will be protected from a tax increase, but most will still pay more federal taxes in 2013.

Social Security is financed by a 12.4% tax on wages up to $113,700, with employers paying half and workers paying the other half. President Obama and Congress reduced the share paid by workers from 6.2% to 4.2% for 2011 and 2012, saving a typical family about $1,000 per year.

The payroll tax legislation passed on New Year’s Day did not extend this 2% reduction. Consequently, the share paid by workers increased to 6.2% beginning January 1, 2013.

Households making between $40,000 and $50,000 will face an average tax increase of $579 in 2013, while those making between $50,000 and $75,000 will face an average tax increase of $822.

If you have any questions regarding the payroll tax increase or any of the other provisions of the new tax law, please contact MKA Partner Barbara Kogen.

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