Fiscal cliff averted: New law sets 2013 withholding rates; ‘payroll tax holiday’ expires

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in Compensation and Benefits

In the waning hours of New Year’s Day, Congress passed a bill averting a plunge off the "fiscal cliff" and setting 2013 tax rates. The overdue legislation means employers can finally begin making solid plans for 2013 payroll operations.

H.R. 8, the American Taxpayer Relief Act of 2012, made permanent Bush-era tax rates for all but the highest earners. That means no tax increase this year for employees taxed at the 10%, 15%, 25%, 28% and 33% rates. President Obama is expected to sign the bill this week.

For individuals earning over $400,000 and married couples earning over $450,000, the top tax rate rises immediately from 35% to 39.6%.

Coincidentally, on Jan. 1, the IRS released the 2013 withholding tables. However, they will now need to be reissued to reflect H.R. 8’s income tax rates.

Congress declined to extend the “payroll tax holiday” economic stimulus, which in 2011 and 2012 lowered employees’ share of the Social Securi...(register to read more)

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