Benefits at the edge of the 'fiscal cliff': 4 areas to watch

As congressional leaders and President Obama attempt to hammer out a deal to prevent the nation from going over the “fiscal cliff” — a series of tax hikes for individuals and businesses that economists say could imperil the fragile recovery — HR/benefits professionals can prepare now, write benefit attorneys Diane Morgenthaler and Ruth Wimer, partners at law firm McDermott Will & Emery. Just in case we go over the “fiscal cliff,” Morganthaler and Wimer’s report outlines four benefit and payroll areas that should be top of mind for practitioners. (Images: Thinkstock)

Payroll taxes

The 2% payroll tax cut from 2011 and 2012, which lowered employees’ Social Security payroll taxes, will expire, effective Jan. 1. Although the increase is on employee contributions, the increase also affects an employer’s withholding obligations, Morgenthaler and Wimer note. At the same time, they write, a new 0.9% Medicare payroll tax increase applies (from 1.45% to 2.35%) under the Patient Protection and Affordable Care Act on wages over $250,000 for married taxpayers filing jointly and $200,000 for single taxpayers. Again, though this increase is not an employer liability, employers must be prepared to withhold the additional 0.9% from wages for any employee with wages over $200,000.




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