IRS Changes Income Tax Withholding Tables for 2013 to Reflect Expired Tax Cuts

Payroll taxes to increase by 2% from 4.2% to 6.2% in year 2013.

The Senate passed legislation in the early hours of Tuesday
morning on New Year’s Day to extend income tax cuts for single taxpayers
earning under $400,000 a year and married couples under $450,000 a year (see Senate Approves Post-Midnight Fiscal Cliff Deal, Shifting
Pressure to Boehner). Under the deal approved by the Senate, the top
rate for income above those levels would rise to 39.6 percent, up from 35
percent.

However, the temporary payroll tax cut on Social Security
withholding taxes of 2 percentage points was not part of the deal. The House is
expected to take up the bill on Tuesday.

In issuing the guidance, the IRS said it takes note of the fact
that Congress is currently considering legislation that could affect these
rates. If the legislation is enacted, IRS will issue new, corresponding tables
at that time.

The updated tables issued late Monday show the new rates for
2013, which reflect the expiration of the 2001 and 2003 tax cuts. In addition,
employers should also begin withholding Social Security tax at the rate of 6.2
percent of wages paid following the expiration of the temporary
two-percentage-point payroll tax cut in effect for 2011 and 2012.For full story
go to: Payroll taxes to increase by 2% from 4.2% to 6.2%