If the House passes the Fiscal Cliff Deal today, the 2% payroll tax cut will lapse. However, anyone making under $450,000 will not see their income taxes rise.
Let's hope the House passes the deal today.
Make that any individual making under $400,000 and any couple making under $450,000 will not see their income taxes rise.
Yes, the House passed the bill. Now it is on to the debt ceiling. This has to be resolved by the end of February.
Posted By: SWK
Re: Payroll Tax Cut Will Lapse - 02/16/13 09:15 PM
Sandra-This is something that confuses me. Can you clarify? Since the payroll tax cut lapsed, our paychecks are smaller, even though we make MUCH less than $450,000.
But you say our income taxes won't rise?
So, the gov't is taking more out of our paychecks, but we won't owe any more--which would mean that we'll, in essence, probably get a large refund next year, assuming we change nothing on our W-4's, since we're paying more per paycheck than we did last year?
Or are these not connected?
Sorry about that. I didn't make that very clear. Let me try to clarify. Our federal income taxes are staying the same. However, the Social Security Tax (Payroll Tax) is going back up by 2%. The Payroll Tax had been temporarily cut for a few years but now it is reverting to its previous level - hence a 2% increase from last year's payroll deduction.
So although you will not owe more taxes on your gross earnings, you will have to pay more into Social Security. This will reduce your weekly earnings. So no large tax refund.
I hope this explains it better. Let me know if you have any more questions. And Thank You for the questions. I'm glad to be able to try to get the right information out there to everyone.
Posted By: SWK
Re: Payroll Tax Cut Will Lapse - 02/18/13 09:43 AM
Ok--Thanks for clarifying!