Recently expired legislation affecting Social Security and Federal taxes has prompted several inquiries as to what impact these changes will have to civilian employee paychecks. Below is a brief description of what has changed and what is expected to occur over the next few pay periods.
1. Social Security Increase:
The payroll “tax holiday” enjoyed for the past two years recently expired. The resulting increase in Social Security withholding began with pay period ending (PPE) 12-29-2012, a net 2 percent reduction in take-home pay. This pay period is the first pay period for 2013, and as such, is taxable at the 2013 rate. The increase is visible on the Old Age Survivors and Disability insurance (OASDI) line within the Deductions Category of the Leave and Earnings Statement.
2. Federal Tax Change:
New Percentage Method Tables for Income Tax Withholding were issued January 3, 2013. Internal Revenue Service Notice 1036 (see below) details the new tables and provides guidance on estimating 2013 income taxes. The new income tax withholding will be reflected in PPE 01-12-2013 and will not be retroactive to January 1, 2013.
For further information, please access IRS Notice 1036 at: www.irs.gov/pub/irs-pdf/n1036.pdf OR: virtual Finance FITW calculator: www.my.af.mil/gcss-af/USAF/ep/globalTab.do channelPageId=sA1FBF31D23 D21F6B0123ED377B730575.