As most of you have undoubtedly already seen, paychecks have shrunk in the New Year. This is a combination of items, one of which is the direct result of the “Fiscal Cliff” chicanery that dominated Political news for the past several months.
The social security payroll tax holiday of 2011-2012 expired, which resulted in a payroll tax increase of 2%, which affects those of us who are wage-earners. Further, any state payroll taxes, such as employee withholdings for Unemployment or Disability in New Jersey, or Disability in New York, also restarted for the year as of January 1, 2013. These will gradually phase themselves out throughout the year, depending on your earnings, but will still produce a noticeable change to your check for the time being. Make sure to plan accordingly.
Also as a result of the “Fiscal Cliff” settlement, tax rates climbed on the highest earners in America, those who are making $400,000 as a single taxpayer, and $450,000 as married taxpayers. Further, in order to fund the PPACA, otherwise known as “Healthcare Reform”, a new tax of 3.8% will apply to all investment income above those $400,000 and $450,000 threshholds.
There are a myriad of other changes as a result of the fiscal cliff, although those are the most notable. Should you have further questions on the fiscal cliff, or any questions regarding the upcoming tax filing season, please let us know.