Effects of fiscal cliff bill on UO payroll

President Obama signed the act into law on Jan. 2
President Obama signed the act into law on Jan. 2

President Obama signed into law the American Taxpayer Relief Act of 2012 on Jan. 2, and federal income tax rates that have been in effect since 2001 have become permanent as a result.

A new 39.6 percent rate has been added for individuals with taxable income of more than $400,000 ($450,000 for married couples), according to a summary of the act and its potential payroll impacts that was prepared by the UO Business Affairs office.

The act also returns the employee Social Security tax rate to 6.2 percent for all wages paid in 2013. And Section 127 of the Internal Revenue Code, allowing for up to $5,250 in tax-free, employer-provided educational assistance at the graduate level, has been permanently extended.

Social Security Wage Base

The Social Security wage base will increase to $113,700, increased from $110,100 in 2012.

Medicare Tax

As in prior years, there is no limit to the wages subject to the Medicare tax; all covered wages are subject to a 1.45 percent tax.

Effective Jan. 1, the Medicare tax will increase by 0.9 percentage points to 2.35 percent on wages above $200,000 for individuals and above $250,000 for joint filers. The employer rate is unchanged.

A New Deduction Code, “TMA-Medicare Tax, Additional,” will appear on all earnings statements for classified and unclassified employees.

Oregon Taxes

The tax rates for Oregon remain the same in 2013, but the annualized value of a withholding allowance has increased from $2,025 to $2,080. The maximum amount of annualized Federal income tax to be considered in the state computation has also increased to $6,250 from $6,100. Both changes will protect more income from taxation in the state tax calculation.

W-2s

The UO payroll office anticipates mailing W-2s to employees by the third week in January.

Minimum Wage

Oregon’s minimum wage increased on Jan. 1 by 15 cents to $8.95 per hour from $8.80 per hour.

Tax Deferred Investments

The IRS has announced that the 403(b) tax-deferred annuity maximum contribution will increase in 2013. Employees may tax defer up to $17,500 in the Tax Deferred Investment (TDI) program and up to $17,500 in the Oregon Saving Growth Plan (OSGP). Employees age 50 or older may increase this amount by an additional $5,500 for a total of $23,000 in each program. Forms may be found at http://www.ous.edu/dept/hr/benefits/tdi.php.

More information at Payroll Administration.