Easy come, easy go. As an American, the last 2 years brought us 2% of our paychecks back that we didn’t have in 2010 thanks to the “Payroll Tax Holiday” that gave us all a break of 2% on Social Security payroll taxes.
However, one expiring provision that was not given new life during the fiscal cliff deal – which extended the income tax rates for 99% of Americans – was this 2% reduction to an employee’s share of Social Security payroll taxes. For 2011 and 2012, employees paid only 4.2% of their wages towards Social Security. Beginning January 1, 2013, that burden has reverted back to 6.2%. As a result, if you earn a salary, you may have noticed that your first paycheck in 2013 was 2% lighter than your last check in 2012, assuming equal pay.
And that has some people awfully mad about this tax hike… however, there’s just one problem with this: The expiration of the payroll tax reduction is not a “tax hike.”
When initially enacted in December 2010, the 2% reduction was originally scheduled to only last for one year, its ending even denoted in its description in the statute as a “payroll tax holiday.”
The point of the provision was to help lower and middle-class taxpayers weather the recession by putting more after-tax cash in their pockets. But as 2011 drew to a close and the sun was due to set on the payroll tax cut, Congress did what it does best, agreeing to a last-minute, ill-conceived two-month extension an then in February, doing it again but this time extending the 2% reduction through the end of 2012.
Throughout this time, Americans got accustomed to their fatter paychecks. But if they’d been paying attention, they would have noticed that the end was near.
One way us Americans can try to ease the pain of this “loss” of money to our paychecks is through the seeking out of a professional accountant to do your taxes. A professional tax preparer can help you find money to claim that most of us not in the industry have not a single clue we’re even able to claim.
The average American who does their own taxes on a 1040 EZ vs. hiring a professional, who can walk you through deductions for many things like attending school or putting gas in your car, is on average over $500. A big help to the $600 the average 30K per year salary will be missing now that the “Payroll Tax Holiday” is over.
For more information on tax deductions and to see how much you can get back this year to off-set the end of the “Payroll Tax Holiday”, call Beaton Accounting today at 631-921-6894 for a free consultation with an accounting professional.
Have a question or a certain topic that you’d like to see addressed in our next blog post? Just leave a comment or email us at info@beatonaccounting.com.