Several software manufacturers have published new tax tables to be effective March 1, 2012 that raise the Employee portion of Social Security back to the 6.2% withholding rate up from the 4.2% rate that has been in effect since January 1, 2011. Word on the street has it that the Tax Cut could be extended – we’ll just have to wait and see what happens as of the end of the month when the current tax cut expires. If the tax cut for the Employee portion of the FICA tax is not extended again, employers who use an in-house Payroll software, like MAS 90/200, will need to adjust the Employee Portion of FICA from the current 4.2% rate to 6.2% for any Payrolls that happen as of March 1, 2012. Stay tuned – we’ll let you know whether an extention to the extention passes!
Oregon employers also need to verify that the right amount of Oregon State Withholding Tax is being deducted from their Oregon employees. It would appear that the new State of Oregon Tax Calculations for 2012 are meant for “Withholding Wages” and not “Gross Wages” paid. The new tax calculations, combined with the new tax statuses for employees who make more than $50,000 annually but have either a 401k Plan, or a Cafeteria Plan that reduces their Withholding Wage, have resulted in employees not having enough state tax withheld. An example is an employee who makes $55,000, and has a 401k Plan that takes out $500 per month. The tax status for the employee apparently should not be one of the “more than $50,000” tax statuses, since the employee’s annual withholding wage is only $49,000 ($55,000 – [$500 x 12 months]). Please double check your employee’s withholding amounts – we’ve found many employees who are making between $42,000 and $49,000 who are only having $28 of Oregon State Withholding taken out each paycheck because of the combination of the Oregon State Tax statuses and the Withholding Wage being less than $50,000 – and that is just not enough tax being taken out.
