Of the estimated 161 million workers who will pay Social Security taxes in 2012, about 10 million will pay higher taxes as a result of the increase in the taxable maximum.
Except for pretax medical and tax-free , all wages are subject to the 1.45% Medicare portion of FICA, since no wage base applies to Medicare. (SSA Fact Sheet, 10-19-11)
2012 Social Security tax rates up in the air
The one-year decrease in the employee Social Security tax rate—to 4.2%, from 6.2%—is scheduled to expire at the end of this year.
However, President Obama’s proposed American Jobs Act of 2011 would lower the employee Social Security tax rate further, to 3.1%, for 2012.
The Senate recently voted down the legislation, so it’s not possible to predict what will happen. The Senate Democratic now plans to reintroduce parts of the proposal for consideration on a piece-by-piece basis.
The jobs act would lower the employer Social Security tax rate to 3.1% on the first $5 million in wages paid, and would provide a 6.2% payroll tax credit, worth up to $50 million, for employers that increase wages over wages paid during the previous year. Who would be excluded: Federal, state and local government employers would be excluded from this proposal, but public educational institutions would be covered.
Conventional wisdom says that some form of the Social Security tax reduction will eventually pass. We’ll report on any developments as they happen.
Exempt amounts for retirees
Retirees who want to return to work are a reliable resource, since they already know the ropes. However, those who rejoin the workforce could lose some of their Social Security benefits. How much they’ll lose depends on an earnings test.
Retirees who return to work during the year they reach full retirement age—between 65 and 67, depending on when they were born—are subject to a modified earnings test that applies only to earnings for the months before that birthday. Wages earned after that birthday don’t reduce Social Security benefits. The exempt amount is $38,880 a year; $3,240 a month. For them, $1 in benefits is lost for every $3 they earn.
A separate earnings test applies to early retirees. Employees who retire before they reach full retirement age and who then return to work can continue to earn up to $14,640 a year ($1,220 a month) without losing benefits. For those retirees, $1 in benefits is lost for every $2 they earn.
Tip: Retirees usually think they’ll lose more benefits than they actually will, so informing them of the 2012 figures can ease their minds.
2012 pension COLAs pending
The IRS has yet to release the 2012 cost of living adjustments for pretax contributions into 401(k) plans, pretax catch-up contributions and other inflation-adjusted pension amounts. We will report those figures as soon as the IRS releases them.
Like what you've read? ...Republish it and share great business tips!
Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...
We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.
The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.
" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/28460/fica-wage-base-increases-to-110100-for-2012 "