Small businesses impacted by US payroll tax legislation under fiscal cliff deal
January 02, 2013
For the past few weeks, lawmakers in Washington have been negotiating back and forth in order avoid going over the fiscal cliff. On late Tuesday, the U.S. House of Representatives passed the legislation after the Senate voted to adopt it earlier during the day. There are many elements in the bill that are set to impact businesses across the country, but perhaps some of the most important are the changes to payroll taxes. Firms will be tasked with implementing these new policies into their current operations and payroll practices. To help handle these alterations, companies can use payroll tax technology
to ensure they are upholding U.S. payroll tax compliance
rules.What are the payroll tax changes? WMAQ-TV highlights
some of the major changes that companies can expect over the next year. The fiscal cliff deal touched on many subjects, including raising taxes on wealthy individuals. However, negotiations were not reached for Social Security payroll taxes, meaning that these taxes will go up for most American workers. The news source states that in 2011, President Obama passed a payroll tax reduction of 2 percent for employees in the hopes of further stimulating the economy by giving consumers more take-home pay. However, those cuts expired on December 31, and the tax amounts are set to increase.
When the payroll tax reduction was enacted in 2011, the amount taken out of employees' paychecks dropped from 6.2 percent to 4.2 percent. Companies have to alter their current policies to ensure that 6.2 percent is being taken out of workers' wages.Payroll tax increase good and bad American Public Media Marketplace broke down
how the payroll tax increase will affect members of the nation's workforce, noting that the development can be seen as both good and bad news for the economy. For an employee earning $50,000 annually, he or she will be paying an extra $1,000 per year in payroll taxes under the fiscal deal. However, the increase will help the nation's current fiscal situation, and many economists agree that it could result in improvement.
To effectively handle these payroll changes, businesses can use payroll software
to maintain and track accurate payroll tax deductions.