End of "payroll tax holiday" means more taxes in 2013 - KTIV News 4 Sioux City IA: News, Weather and Sports

End of "payroll tax holiday" means more taxes in 2013

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Anyone who works in 2013 will take home less pay because of a return to a 6.2 percent payroll tax that goes toward Social Security funds. Anyone who works in 2013 will take home less pay because of a return to a 6.2 percent payroll tax that goes toward Social Security funds.
SIOUX CITY, Iowa (KTIV) -

Joe Mohrhauser has been an accountant for 20 years. So, he's always been about crunching numbers. In 2010, he remembers Congress making a small change to put more money in people's pockets.

"People got used to that 'payroll tax holiday' very, very quickly and they might think of it as an increase, but what really happened is they gave it to us for two years and now they're taking it away again," said Mohrhauser, a CPA/PFS for King, Reinsch, Prosser & Co., L.L.P. 

Thanks to a deal struck between President Obama, and Congress, lawmakers allowed the "payroll tax holiday" to expire at the end of 2012. So, payroll taxes will go up 2 percent. That's back to where they were in 2010. The money will go to the social security trust fund—a fund that some lawmakers worried was drying up.

"It was seen as weakening that trust fund by not having that money go directly from the employees into the fund," said Mohrhauser.

Mohrhauser says raising the payroll tax 2 percent may be necessary, especially as the national debt approaches $20 trillion.

"Each year that is growing. So, what the whole fiscal cliff discussion was about how do we reduce that deficit each year," said Mohrhauser.

So, as the rate rises, Mohrhauser says employers are still having questions.

"Income taxes will be going up for higher income folks in 2013, but the payroll taxes will impact everyone," said Mohrhauser.

To put it in perspective, the "payroll tax holiday" meant an extra $1,000 in the pockets of folks making $50,000 a year. Now, that money will go to the government. You'll see this money again, but not until you retire.

"One thing that you might consider is that that money is more likely to be there in the future," said Mohrhauser.

And he says that may make folks breathe a little bit easier.

Mohrhauser says employers contributed that 6.2 percent figure to the Social Security fund during the past two years.

The only thing that's changing is your contribution, which comes out of your paycheck.

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