BY: THOMAS S. GROTH, ESQ (@tsgESQ)
More employment taxes; more tax problems
Well, that didn’t take long. The IRS has already released guidance (Notice 1036) alerting employers to the changes they will need to make in payroll withholding for 2013.
This increases create an additional burden for employers. The increases in taxes will increase non-compliance. And failure to make deposits of employment taxes, is, of course, one of the most serious actions a business can make, at least according to the IRS. Payroll tax problems, the IRS treats most severely. First the IRS will look to shut down a business, and then the IRS may look to assess the trust fund penalty, so that those responsible are personally assessed for any unpaid trust fund taxes.
First up is the additional 2% employee portion of the payroll tax. Yes, every working American will be paying more taxes in 2013. Any employees making over $200,000 will have an additional 0.9% withheld from their paychecks for the Medicaid contribution tax (aka the Obamacare tax). Every single dollar of ordinary income was already subject to a total of 2.9% with no cap (1.45% on both the employer and employee side), and that hasn’t changed.
Employers are urged by the IRS to make the adjustment as soon as possible. For most tax payers – the result will be a 3%-5% reduction in take-home pay. But if employers don’t make the change until they are required to do so (not later than February 15th), they will have to make up for over a month of underwithholding in “a subsequent pay period.” They must make up the difference no later than March 31, 2013. So yes, almost everyone’s taxes went up in 2013 – thanks Washington! The worst part, though, is the upfront financial pain that will be inflicted on many as a result of the government’s delay in passing the fiscal cliff legislation.
So, what are the “Percentage Method Tables for Income Tax Withholding” for 2013? Read More…