American Taxpayer Relief Act of 2012

After seemingly endless negotiations and down-to-the-wire drama, Congress has passed legislation to avert the tax side of the so-called "fiscal cliff."  The American Taxpayer Relief Act permanently extends the Bush-era tax cuts for lower and moderate income taxpayers, permanently "patches" the alternative minimum tax (AMT), provides for a permanent 40 percent federal estate tax rate, renews many individual, business, and energy tax extenders, and more. In one immediately noticeable effect, the American Taxpayer Relief Act does not extend the 2012 employee-side payroll tax holiday. As a result of the expiration of the payroll tax holiday, everyone who receives a paycheck or self-employment income will see an increase in taxes in 2013.

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2013 Mileage Rates

Effective January 1, 2013, the Standard Mileage Rates are revised as follows:

  • Business Rate = 56.5 cents per mile (up from 55.5 cents)
  • Medical and Moving Rate = 24 cents per mile (up from 23.5 cents)
  • The Charitable Rate remains unchanged at 14 cents

PA Employer W-2 Locality Reporting

Act 32, which changed local earned income tax (EIT) withholding for 2012, also changed the way W-2s are to be prepared. Instead of typing the locality name in box 20, you are now required to list the first 2 digits of the Political Subdivision Code (PSD) where the withholdings were remitted. This will generally be the employer's location. For example, an employer located in New Britain Township (NBT) should list "09" as the locality name instead of "New Britain Township." The PSD code for NBT is 090506. The first two digits - "09" - are what needs to be reported in box 20 on the W-2. Using this coding indicates a Bucks county employer who remitted tax to Keystone Collections Group.

2013 Social Security Update

The maximum taxable wage base for Social Security for 2013 will rise to $113,700 from $110,100. Monthly Social Security benefits will increase 1.7 percent, increasing the average monthly benefit to $1,261 from $1,240. For retirees under full retirement age, the retirement earnings test exempt amount will rise to $15,120 from $14,640. For every $2 of earnings above this limit, $1 of benefits will be withheld.

Planning for the 3.8 Percent Medicare Tax on Investment Income

Effective January 1, 2013, the health care reform package (the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010) imposes a new 3.8 percent Medicare contribution tax on the investment income of higher-income individuals.  To find out more, click here to read the article in Dunlap Deductions.

Social Security Statement Now Available Online

From the SSA: Last year the Social Security Administration (SSA) suspended the mailing of the annual benefit estimate statements due to federal budget considerations. Recently, the agency resumed sending the statement, but only to people who are 60 and older and who are not yet on benefits; people younger than 60 will not have a statement mailed to them. However, an online service is now set up that allows people age 18 and older to register and create a personal My Social Security account, where you can get benefit estimates, view your yearly earnings history and also get general information about Social Security. Visit http://www.ssa.gov/ and click on "Get Your Social Security Statement Online."