2012 public protection Tax growth Is coming (Maybe)
Are you wondering whether you will pay more taxes in 2012? I've got some bad news: unless Congress and the President act soon, the typical U.S. Taxpayer will see in increase in collective safety taxes for 2012. Read on to get the details.
2012 public protection Tax growth Is coming (Maybe)
Social safety taxes are paid by both employees and the self-employed. For employees, this is done via paycheck withholdings. In 2011, you had 4.2% withheld on your first 6,800 of gross wages as reported on Form W-2. In 2012, you will have 6.2% withheld on your first 0,100 of gross wages.
Note that there are two components to the 2012 collective safety tax increase: 1) The number of recompense subject to the tax is increasing. In 2011, the first 106,800 was subject to the collective safety tax. In 2012, that number is expanding by ,300 to 0,100. 2) The 4.2% tax rate is expanding by 2%.
Let's take a closer look at each of these factors.
The increase in the maximum income number is nothing new. This number is reviewed each year and is increased automatically if an inflation adjustment takes effect. It just so happens that the wage base number has been level for the past three years (2009, 2010, and 2011). But alas, there has been sufficient inflation recently to trigger the increase for 2012.
So there is de facto nothing you can do about this. It's just the way our government payroll law works.
As far as the change in the actual collective safety tax rate, the increase of 2% is de facto a reversion to the old rate of 6.2%, which was in result for many years. In late 2010, Congress and the President passed a law that allowed for a temporary, one-year allowance in the rate from 6.2% to 4.2%. As of this writing (late 2011), no legislation has been passed to expand the 4.2% rate. So, depending on how you look at it, this change is whether an "increase" or naturally a change back to "busy as usual."
Employees will see the effects of the collective safety tax increase via higher withholdings and smaller paychecks. For example, if you're making ,000/week in gross wages (about ,000 per year), you'll see a decrease in your weekly paycheck (or about a ,000 pay cut over the course of the year). If you're making ,000/week in gross wages (approximately 0,000 per year), your weekly paycheck will be less (about ,000 total for the year).
Self-employed habitancy who are required to make quarterly estimated tax payments should take extra note of this collective safety tax increase. If your 2012 income is similar to 2011 income, you may need to increase your quarterly payments to avoid an underpayment penalty.
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