“Fiscal Cliff” may be one of the banned words of 2013, but it will likely stay on your staffers’ lips for a quite a while.
That’s because the after-the-fact legislation that yanked us back has given Finance a decent sized to-list … much of which has to be done right now.
Check out the five provisions that impact Finance most directly in the just-signed American Taxpayer Relief Act (ATRA):
1. No more Payroll Tax holiday
With so much attention being given to the bullet most Americans dodged when it comes to tax hikes, many folks will likely be thrown when their first paycheck of 2013 is smaller than their last one in 2012.
That’s because even though we avoided a major income tax hike, Payroll Tax Holiday everyone enjoyed in 2011 and 2012 for employee Social Security taxes did expire.
That means the 4.2% rate returns to 6.2% on employee wages (up to the $113,700 taxable wage base).
In 2012, the maximum Social Security tax an employee paid was $4,624.20. In 2013, that amount increases to $7,049.40 – an additional $2,425.20 for your company’s higher wage earners.
This is something Payroll will want to address, pronto; preferably before employees see those first pay stubs.
2. Increase in supplemental wage withholding rate
One more task for Payroll in the new law. But this one will only impact your highest wage earners and specifically those with non-traditional pay arrangements.
For supplemental wage payments over $1 million made in a year after Dec. 31, 2012, the withholding rate increases from 35% to 39.6%.
3. A return to higher commuter benefits
If your company offers a hand to employees who rely on public transportation to get to and from the office, A/P has new info to keep track of, thanks to the new law.
The ATRA establishes parity between the limits for parking and mass transit benefits (at the start of 2012, parking limits were raised but mass transit limits were slashed.
That makes the limit $240 tax-free per month for both parking as well as public transportation and vanpool expenses. And it’s retroactive from Jan. 1, 2012 and will go through Dec. 31, 2013.
4. Education benefits forever
Here’s another popular benefit that can remain in A/P’s hands.
Employers can now provide money for educational assistance tax-free – forever. The exclusion for employer-provided educational assistance becomes permanent, under the ATRA.
You can exclude from an employee’s income up to $5,250 per year. This includes undergrad and graduate classes.
5. Accelerated bonus depreciation
It’s like the tax break who cried wolf! Every time they vow this is the last we’ll see of accelerated bonus depreciation, they extend it again.
The ATRA gives you another year accelerated “bonus” depreciation of business investments in new property and equipment. So it may be time to decide whether you’ll need to fast-track any of your company’s growth plans to take advantage.
Cite: American Taxpayer Relief Act of 2012, HR 8.