The Internal Revenue Service issued new 2013 income tax withholding schedules yesterday and they are fully integrated with our online tax calculator now. We are fielding a lot of inquiries about new paycheck amounts and will try to address the common questions here:
Q. Why did my nanny paycheck go down $25 this week?
A. The temporary "Payroll Tax Holiday" expired on December 31, 2012. This was a temporary economic stimulus measure. As a result, every worker (nannies, housekeepers, teachers, computer programmers, everyone!) has an additional 2% being deducted from 2013 paychecks.
Q. Is my employer getting a break then?
A. NO. Your employer never experienced any tax holiday, they have paid the full 6.2% employer contribution all along. Smaller employee net paychecks don't change your employer's expenses at all and they are legally obligated to begin collecting at these new tax rates for all 2013 payroll.
Q. My paycheck today covers the last week of December. Shouldn't that be at the lower rate?
A. No, unfortunately income is taxed when received, not when earned. This means that two years ago when the taxes went down temporarily your last week of 2010 was taxed at the lower 2011 rate too!
Q. I need my Form W-2 so I can file for my income tax refund. It is January 4, when will I have it?
A. The last 2012 payroll was issued December 28 and we are busily doing annual reconciliations on employer accounts. We expect to begin pushing W-2 forms out to the online platforms about January 15. Please bear in mind that the IRS will not open 2012 e-filing until January 22 - delayed a week this year - because of the Fiscal Cliff negotiations going so long. This may be pushed back a bit further according to some industry analysts as the IRS programs several retroactive tax changes passed on January 1, 2013.
Employees whose employers subscribe to our premium service have 24/7 online account access - however online accounts require that you be pre-enrolled. The employee self-service enrollment completes the next business day!
Q. I am worried I am going to owe money with my taxes (or my refund is too big and I need more money in my paycheck). What do I do?
A. Workers should review their withholding every year and if necessary, fill out a new Form W-4 and submit it to their employer. (Note as of January 4, 2013 the 2013 W-4 is not available except in draft form.)