December 21, 2012 3:47 PM
Are you ready to compute your 2013 payroll?
As we write this, negotiations between President Obama and the Congress on a package of tax and spending cuts to avoid the "fiscal cliff" are in disarray. Because of the failure to resolve the fiscal cliff problem and the underlying uncertainty as to what the income tax rates will be in 2013, the Treasury Department has not issued withholding tax tables for 2013. Instead, the guidance from John Tuzynski, Chief of Employment Tax Policy at IRS, is to continue using 2012 Federal income tax withholding rates until official 2013 tax rates and guidance are issued.
Under existing law, the temporary Payroll Tax Holiday that reduced employee Social Security tax withholding expires on December 31, 2012 and the employee rate reverts back to 6.2%.
The 4nannytaxes.com household payroll calculator for 2013 payrolls will be updated on or before 12/30/2012 as follows:
- Compute employee Federal income tax withholding using the 2012 rate schedules.
- Compute employee Social Security Tax withholding at 6.2%
Clients who write their own paychecks, please confirm your withholding calculations before issuing any 2013 payroll as there are many income tax rate changes!
New York and California employers, please remember that your state's Wage Theft Protection Act obligates you to provide certain pay rate notices, in writing, to your household employees, including their hourly regular and overtime rates of pay.
Also Taking Effect January 1, 2013
2013 Mileage Reimbursement Rate
This IRS Standard Mileage Reimbursement Rate, the figure used by most household employers to reimburse the nanny or housekeeper for 'business use' of their personal vehicle is 56.5 cents per mile in 2013. Providing transportation for children to and from school and other activities and running household errands are all considered 'business use.'
Minimum Wage Updates
Nannies, housekeepers, elder caregivers, and most house managers are considered Hourly, Non-Exempt employees under the Fair Labor Standards Act. This means that most are covered under both minimum wage and overtime laws.
For 2013, ten states increased their minimum wage. They are Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Rhode Island, Vermont and Washington. Additionally the City of San Francisco (CA) minimum wage increased.
Educational Assistance Exclusion Expires
IRC §127, which in part allows employers to provide employees with up to $5,250 in nonjob-related tax-free educational assistance, expires on December 31, 2012. Therefore, amounts paid on behalf of or reimbursed to employees under a §127 educational assistance plan on or after January 1, 2013 are taxable and must be treated as supplemental wage payments. This is true even if the education was provided to the employee in 2012, but the payment is not made until 2013.
Fiscal cliff legislation passed on January 1, 2013 permanently extends the $5,250 annual tax-free employer-provided educational assistance provision and tax-free adoption assistance, which had expired Dec. 31, 2012.
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