SARASOTA - While the fiscal cliff may have been avoided, everyone with a job will still see a tax increase on their next paycheck.
“It’s going to hurt people's paychecks.” Local CPA Beth Ebersole is talking about the effects of the now expired payroll tax discount everyone has seen in their paycheck for the last two years. “In late 2010, Congress passed a law stating that the Social Security portion of your payroll taxes went from 6.2% to 4.2%, a 2% reduction.”
Many call that 2% decrease in the Social Security withholdings a payroll tax holiday. The reduction was part of the job creation act, and was supposed to help stimulate the economy. But with the new year, that tax holiday came to an end, resulting in the Social Security portion of your payroll taxes going back to what it was in 2010.
“What this means, for somebody making $50,000, their take-home pay for the year is going to be $1,000 dollars less in 2013 than it was in 2011 or 2012.”
But some say the benefits to the Social Security program is worth the pay reduction. “More people are now retiring, the Baby Boomers and such, and there’s not enough people paying in, so adjustments have to be made. We see it’s going to go bankrupt soon, and some people think it’s just fine to do nothing.”
Some officials feel there is a chance Congress will revisit the issue and retroactively extend the payroll tax holiday. But in the meantime the next time you go and cash your check, it will be for less money.