What am I missing with the payroll tax increase?

[ilovemk76]

If the cap is $113,000, then the most people will pay is $188.33 per month more, correct?

People are reporting more than that and saying they are seeing $300-$800 taken out of their checks.

There is something wrong then if you are seeing more than that amount taken out.

My husband is an accountant. He is on a backpacking trip in the mountains at the moment without cell service or I would ask him about it.

But I am not quite understanding those of you reporting higher numbers than should be taken out. There is something not right.

If they made exactly that amount of money then you are correct or is you average the number out over the year. If they made twice that number then they would lose 2x$188 for the first 6 months and then the second six months they would lose $0.

 

[nunzia]

Are you surprised that people who make the most are the ones complaining?

If you are referring to the other big thread on this I didn't see big earners complaining (an I'm not a big earner). The OP of that thread asked about budgets with the tax holiday coming to an end and people were just sharing how much less their checks were..and yes, many also mentioned pay freezes, medical going up, etc. The only complaining I noticed were people who were surprised that folks seemed caught off guard by this since the 2% SS witholding was always meant to be temporary and news of it coming to an end was everywhere for those who pay attention.

 

[nunzia]

I wish the government had never given us a tax break, to be honest. I keep hearing people grumble about it as though they had never paid payroll taxes at this rate in their entire lives. It was supposed to be a short-term thing to stimulate the economy. What part of that did people miss?

I'm also in the camp of being offended by certain snarky comments about 'rich' people. I work at a non profit and see those folks being beyond generous with both their money and their time.

 

[DawnM]

I see. Well, it still couldn't be $800 per month, unless as a PP suggested, they are including health insurance increases.

Dawn

If they made exactly that amount of money then you are correct or is you average the number out over the year. If they made twice that number then they would lose 2x$188 for the first 6 months and then the second six months they would lose $0.

 

[DawnM]

I haven't seen ANYONE rich and greedy here.

Several of your posts do across as offensive as they label people. I don't understand the need to do this.

Dawn

I don't really care if someone who is rich and greedy to the point that they feel they should be exempt from taxes is offended.

 

[crashbb]

If it doesn't apply to you then I don't know how it would be offensive. Obviously not all or even most rich people are greedy, but if you are rich and greedy then I think it's a pretty fitting and funny saying.

Except that your statement was written to apply to ALL rich people. It didn't say that *some* rich people are greedy or that *some* rich people didn't get rich by being generous.

That's like saying "poor people didn't get poor by being hard workers" and then being surprised that people took it be offensive. Or to then say, "obviously not all or even most poor people are lazy, but if you are poor and lazy then I think it's a pretty fitting funny saying".

Of course you statement was offensive.

 

[robsmom]

I see. Well, it still couldn't be $800 per month, unless as a PP suggested, they are including health insurance increases.

Dawn

Theoretically someone could have $7049.40 more of social security taken out in their first jan 2013 check then their last dec 2012 check. The $113,000 limit starts at the beginning of the year and is not spread throughout the year. A very higher earner (CEO, law partner types) could make over $113,000 in their first check if they make millions a year. They would therefor have their entire 2013 Social Security taken out of one check and then have nothing but medicare the rest of the year. I would think that said person would not worried about the difference, however I use it as a example to show that the change for the month could be any number from $1 to $7049.40.

 

[MomToOne]

Clearly I am not a math person because I don't understand at all. My dh's paystub did not change, not one penny more deducted from either state or federal taxes. However, his FICA deduction changed from $80 to $426 in ONE check. That is huge. If that keeps up twice per month, we are talking $700. Dh is very nonchalant about the whole thing so I'm sure he won't call his HR or finance dept. Someone else posted about the max FICA can collect but that meant nothing to me. His last paystub from 2012 showed the total as $6574 but his deduction had been $80 for the last 4 months of 2012. I'm confused if they start this very high and then cut it back as the year goes on?

I suspect your DHs paystub has a single "FICA" line item deduction.

FICA is actually made up of two different taxes: a Social Security tax, and a Medicare tax.

The SS tax rate is 6.2% (this year - last year it was 4.2%), until you max out, then it goes to 0%

The Medicare tax rate is 1.45% and you pay it no matter what. There is no maximum. In fact, starting this year, this tax jumps to 2.35% when you hit $200K in income.

Your DH maxed out somewhere during the year on SS - your year end total of $6574 clearly indicates this, since the max SS last year was around $4600 on the first $110K of earnings. You probably maxed out SS at 7 or 8 months into the year, at which point the amount withheld would have dropped dramatically from 5.65% to only 1.45%.

Your DHs check returned to the standard 7.65% rate at the beginning of the year for the combined items. Once you max out SS again, it will go back down to just 1.45% until the end of the year, then the cycle will start all over again in 2014.

Since your husband has this high of a salary, I suspect you've seen this same pattern in previous years, you just weren't watching as closely so you didn't notice it.

I suggest everyone Google the different line items on their paychecks, and get to know what they are about, the rates, maximums etc. If you work in CA, there is SDI, for which the deduction percentage can vary year to year, and there is a maximum amount similar to SS, that also varies year to year. I'm sure other states have similar items. There is plenty of information on it all out there - you just need to look.

 

[Suz D]

If the cap is $113,000, then the most people will pay is $188.33 per month more, correct? People are reporting more than that and saying they are seeing $300-$800 taken out of their checks. There is something wrong then if you are seeing more than that amount taken out. My husband is an accountant. He is on a backpacking trip in the mountains at the moment without cell service or I would ask him about it. But I am not quite understanding those of you reporting higher numbers than should be taken out. There is something not right.

This actually sums up what I was trying to say in my original post. The numbers (300-800) that were being reported by some just weren't making sense. I also didn't know about the cap so it makes even less sense. Not criticizing anyone, just confused by the numbers and assuming that someone making 180,000 would have some cushion in their budget. That probably came across as judgemental and for that I apologize.

 

[ilovemk76]

I see. Well, it still couldn't be $800 per month, unless as a PP suggested, they are including health insurance increases.

Dawn

If they made $40,000 in a month then their 2% increase would be $800. At that rate they would only pay that $800 for two month and in the third month it would got down to $660 and then the rest of the year it would be $0, since they earned $113,000.

 

[pantherlj]

Theoretically someone could have $7049.40 more of social security taken out in their first jan 2013 check then their last dec 2012 check. The $113,000 limit starts at the beginning of the year and is not spread throughout the year. A very higher earner (CEO, law partner types) could make over $113,000 in their first check if they make millions a year. They would therefor have their entire 2013 Social Security taken out of one check and then have nothing but medicare the rest of the year. I would think that said person would not worried about the difference, however I use it as a example to show that the change for the month could be any number from $1 to $7049.40.

This. If you hit $113K anytime before the end of the year you would have 0 taken out on your end of year check and then full amount taken out the first check of the year. To compare apples to apples, compare first pay check of this year to first pay check of last January (excluding anything like health insurance differences)

 

[tasha99]

If they made $40,000 in a month then their 2% increase would be $800. At that rate they would only pay that $800 for two month and in the third month it would got down to $660 and then the rest of the year it would be $0, since they earned $113,000.

Since their previous ss tax was likely 0 (already maxed out in December), the increase would be the whole 6.2. 800 is 6.2% of $12903--so a bit over 150K annually.

Obviously, the perception of this tax increase would be highly affected by whether December-January or previous January-January checks are compared.

 

[DawnM]

AH! Now I get it. Thank you for explaining.

Although it seems these people do think that will be taken out throughout the year.

Dawn

Theoretically someone could have $7049.40 more of social security taken out in their first jan 2013 check then their last dec 2012 check. The $113,000 limit starts at the beginning of the year and is not spread throughout the year. A very higher earner (CEO, law partner types) could make over $113,000 in their first check if they make millions a year. They would therefor have their entire 2013 Social Security taken out of one check and then have nothing but medicare the rest of the year. I would think that said person would not worried about the difference, however I use it as a example to show that the change for the month could be any number from $1 to $7049.40.

 

[leahjade]

We have the right to enjoy the money we earn just like anyone else

We don't make anywhere near half what the OP had quoted, but I still am bothered by the jealousy in this country today. Since when did success become a dirty word? Most people who make over six figures didn't inherit the money - they worked hard and long hours - more than I'd be willing to do to increase my middle class income. Maybe they went back to school for graduate degrees which I wasn't interested in doing. I say congratulations to you, and you have just as much right as anyone to complain about someone raising your taxes! What exactly is the cutoff figure that someone is allowed to complain? Maybe you are complaining with your $40,000 income yet someone who only makes minimum wage thinks you don't have the right to complain either!

 

[CloveLeaf]

We don't make anywhere near half what the OP had quoted, but I still am bothered by the jealousy in this country today. Since when did success become a dirty word? Most people who make over six figures didn't inherit the money - they worked hard and long hours - more than I'd be willing to do to increase my middle class income. Maybe they went back to school for graduate degrees which I wasn't interested in doing. I say congratulations to you, and you have just as much right as anyone to complain about someone raising your taxes! What exactly is the cutoff figure that someone is allowed to complain? Maybe you are complaining with your $40,000 income yet someone who only makes minimum wage thinks you don't have the right to complain either!

THIS +1
I can't stand the jealousy either. Some people work long hours and are smart enough to get the difficult jobs done. That's why they are compensated more. There is nothing wrong with that. They have every right to complain about tax. After all, for people who still get most of their money on W2, it is still true that the more they earn, the more they pay in tax both dollar amount and percentage wise.

 

[rockawaybeachgirl]

We don't make anywhere near half what the OP had quoted, but I still am bothered by the jealousy in this country today. Since when did success become a dirty word? Most people who make over six figures didn't inherit the money - they worked hard and long hours - more than I'd be willing to do to increase my middle class income. Maybe they went back to school for graduate degrees which I wasn't interested in doing. I say congratulations to you, and you have just as much right as anyone to complain about someone raising your taxes! What exactly is the cutoff figure that someone is allowed to complain? Maybe you are complaining with your $40,000 income yet someone who only makes minimum wage thinks you don't have the right to complain either!

I totally agree. I was actually going to start a thread about this bias against 'high income earners'. It doesn't make any sense to me- grow up poor, work hard, succeed on your own merit- uhm, last time I checked that was the American Dream, right?

It's funny, people rant and rave about low- income people when they think they take too much from the government (ie us)- but then there seems to be this invisible line of "too much" income, and a thought that anyone who makes that much not have earned it/by greedy/be against the middle class.

To your point above- I could have been an investment banker, but I wasn't willing to committ to the 100+ hour workweeks, grueling schedule, constant pressure. The trade off wasn't worth it to me. So when I hear how much a first- year analysts makes at Goldman Sachs, I have no right to complain. I just say 'good for them'.

 

[tasha99]

We don't make anywhere near half what the OP had quoted, but I still am bothered by the jealousy in this country today. Since when did success become a dirty word? Most people who make over six figures didn't inherit the money - they worked hard and long hours - more than I'd be willing to do to increase my middle class income. Maybe they went back to school for graduate degrees which I wasn't interested in doing. I say congratulations to you, and you have just as much right as anyone to complain about someone raising your taxes! What exactly is the cutoff figure that someone is allowed to complain? Maybe you are complaining with your $40,000 income yet someone who only makes minimum wage thinks you don't have the right to complain either!

 

[ilovemk76]

Since their previous ss tax was likely 0 (already maxed out in December), the increase would be the whole 6.2. 800 is 6.2% of $12903--so a bit over 150K annually.

Obviously, the perception of this tax increase would be highly affected by whether December-January or previous January-January checks are compared.

You are right. I was using January to January.

We don't make anywhere near half what the OP had quoted, but I still am bothered by the jealousy in this country today. Since when did success become a dirty word? Most people who make over six figures didn't inherit the money - they worked hard and long hours - more than I'd be willing to do to increase my middle class income. Maybe they went back to school for graduate degrees which I wasn't interested in doing. I say congratulations to you, and you have just as much right as anyone to complain about someone raising your taxes! What exactly is the cutoff figure that someone is allowed to complain? Maybe you are complaining with your $40,000 income yet someone who only makes minimum wage thinks you don't have the right to complain either!

 

[momto2girls]

We don't make anywhere near half what the OP had quoted, but I still am bothered by the jealousy in this country today. Since when did success become a dirty word? Most people who make over six figures didn't inherit the money - they worked hard and long hours - more than I'd be willing to do to increase my middle class income. Maybe they went back to school for graduate degrees which I wasn't interested in doing. I say congratulations to you, and you have just as much right as anyone to complain about someone raising your taxes! What exactly is the cutoff figure that someone is allowed to complain? Maybe you are complaining with your $40,000 income yet someone who only makes minimum wage thinks you don't have the right to complain either!

 

[snarlingcoyote]

I know people who have clawed their way up from poverty, but not many and it's getting harder to do that and looking at our educational system from early childhood on thru college, it's being made harder and harder to do that. Almost all the people who are middle class or up that I know had parents who were working class or up. And, let's face it, if you're born privileged, you tend to stay privileged. You've got your parents and other connections that other people lack. You've got access to a good education that not all of the underclasses get. The skids are greased for you to stay in a good earning class if you are born to a good earning class.

I wouldn't say the opportunities aren't there, but they are small, and things are definitely NOT equal. And those opportunities are dimishing day by day by day in this country.