Taxes Still Impact Paychecks After Fiscal Cliff Deal
By: Monica Yantosh
Updated: January 2, 2013
In 2010, Congress reduced the Employee Payroll Deductions for Social Security. The rate from 2010-2012 was at 4.2%.
That was set to expire in 2012, and it did at the end of the year. In the Fiscal Cliff deal passed late Tuesday night, Congress did not renew that deduction.
That means that tax rates increased back to previous amounts, up to 6.2%. Paychecks will now see a 2% decrease because of this tax increase.
Eddie Owens with United Supermarkets said his employees will receive their first paychecks of the year this Friday. He's anticipating calls from employees about their lower pay due to the tax increase, but said he and his Human Resource team are working to make sure their employees understand everything coming out of their paychecks.
"We anticipate that there will be some phone calls, immediately there after, so we're preparing for that, we will have company wide information distributed as soon as possible to let folks know what's going on," said Owens.
Financial Advisor Mark Bass, of Pennington, Bass & Associates, explains that this tax increase may be taking money of out paychecks, but is giving money to another fund.
"The reality of it is that it's actual money going toward actual benefits for other folks," said Bass. "You can't be paying out Social Security benefits and not having any money come in to pay for those benefits, so this 2% is a real impact."
"It's kind of like saying 'I'm going to give you a 2% raise, and now I'm taking it back,' well that doesn't feel good to you," said Bass.
Bass also explained how much people may see come out of their paychecks. If someone earns $30,000 a year, they will see about $600 a year come out of their checks because of this 2% increase, which averages to about $50 a month.
That was set to expire in 2012, and it did at the end of the year. In the Fiscal Cliff deal passed late Tuesday night, Congress did not renew that deduction.
That means that tax rates increased back to previous amounts, up to 6.2%. Paychecks will now see a 2% decrease because of this tax increase.
Eddie Owens with United Supermarkets said his employees will receive their first paychecks of the year this Friday. He's anticipating calls from employees about their lower pay due to the tax increase, but said he and his Human Resource team are working to make sure their employees understand everything coming out of their paychecks.
"We anticipate that there will be some phone calls, immediately there after, so we're preparing for that, we will have company wide information distributed as soon as possible to let folks know what's going on," said Owens.
Financial Advisor Mark Bass, of Pennington, Bass & Associates, explains that this tax increase may be taking money of out paychecks, but is giving money to another fund.
"The reality of it is that it's actual money going toward actual benefits for other folks," said Bass. "You can't be paying out Social Security benefits and not having any money come in to pay for those benefits, so this 2% is a real impact."
"It's kind of like saying 'I'm going to give you a 2% raise, and now I'm taking it back,' well that doesn't feel good to you," said Bass.
Bass also explained how much people may see come out of their paychecks. If someone earns $30,000 a year, they will see about $600 a year come out of their checks because of this 2% increase, which averages to about $50 a month.
