February 13, 2013
Robert Pesce, Partner-in-Charge of the Firm's New York City Accounting Services Department, Featured in Reuters Article "How to Deal with your Shrunken Paycheck in 2013"
By Amy Feldman
The payroll tax cut quietly expired at the end of 2012, and for many American families who are struggling to keep pace in a tight economy, that has raised questions of what to do.
The tax, which covers Social Security, is deducted from your paycheck automatically. It is based on your income, up to a maximum of $113,700 for 2013. Income above that amount is exempt from Social Security taxes. A tax cut to stimulate the economy shaved 2 percentage points off the payroll tax, but now it has been restored to 6.2 percent.
As a result, you will owe as much as $2,274 in taxes this year that you did not have to pay in 2012.
"You have to put it into perspective: It's (a maximum of) around $40 a week," said Robert Pesce, a partner at accounting firm Marcum LLP in New York City. "That is real money, but I don't know that it warrants panic."
If you already owe tax in April or received only a small refund last year, however, Pesce warns that he would not advise changing withholdings to add to your paycheck. After all, come tax time, you would have to come up with the extra cash.
"You're just postponing the problem for later," Pesce said. "In my experience, dealing with the problems in the moment is better than later on. They get worse later on."