Dear Client:The following is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.Social security taxes going up next year. All employees and self-employed persons will face higher social security taxes next year due to an expiring tax break. Higher earners may also face increased tax because the Social Security wage base is increasing to $113,700 from $110,100 and a higher Medicare tax applies to higher earners.The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers—one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).For 2013, the FICA tax rate for employers is 7.65% each—6.2% for OASDI and 1.45% for HI. For 2013, an employee pays:
By contrast, for 2012, the OASDI rate for employees is 4.2%; the OASDI rate for employers is 6.2% and the HI rate for both employers and employees is 1.45%. For 2013, the self-employment tax imposed on self-employed people is:
By contrast, for 2012, the self-employment tax rate is 13.3%: 10.4% for OASDI, reflecting the two percentage point drop in the OASDI rate for employees, plus 2.9% for HI. By contacting us, we can tailor a particular plan that will work best for you. Very truly yours, Shams Khan, CPA, CFP |
