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IRS faces tough choices for 2013 withholding tables

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in Office Management,Payroll Management

Next year is shaping up to be complicated for the IRS—and Payroll, too. The question for the IRS: Should it issue the withholding tables based on what the law says is supposed to happen on Jan. 1—the expiration of most income tax rates—or keep the rates the same, and assume that Congress will come to some agreement about the rate structure? So far, the IRS isn’t saying.

To date, the IRS hasn’t even released the 2013 withholding allowance and qualified transportation fringe benefit amounts.

However, we can project what those amounts are, based on increases to the Consumer Price Index (CPI).

2013 withholding allowance amounts

Increases to the personal exemption amount, which doubles as the annual withholding allowance amount, are based on increases to the CPI at the end of August. Reminder: If employees claim more than one allowance, multiply the value of one allowance by the number they’ve claimed. The value of one allowance per pay period in 2013 is:

  • Weekly:  $75.00
  • Biweekly:  $150.00
  • Semimonthly:  $162.50
  • Monthly:   $325.00
  • Quarterly:   $975.00
  • Semiannual:   $1,950.00
  • Annual:  $3,900.00

Qualified transportation fringes

Based on changes to the CPI, the monthly tax-free exclusion for qualified employer-provided parking increases $5, to $245. The monthly tax-free exclusion for transit passes and rides in commuter vehicles remains $125. Reminder: These fringes may be combined and offered on a pretax basis, but can’t be part of a cafeteria plan. Bicycle fringes are $20 a month, and can’t be funded on a pretax basis.

NO SLEEP FOR THE WEARY: Also unsettled is whether the 4.2% employee Social Security rate will be extended through 2013. For all the news and the withholding tables, see "FICA wage base increases to $113,700 for 2013."

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