Saturday 27 October 2012

2013 Social Security Wage Base & Retirement Plan Limits Announced

2013 Social Security Wage Base & Retirement Plan Limits Announced

Posted by Nancy Mullin on Fri, Oct 26, 2012

2013 social security wage base and pension limitsThe Federal government recently announced the Old-Age, Survivors, and Disability Insurance (OASDI) or Social Security?taxable wage base, limitations for pension plans and retirement plan contribution limits for 2013.

2013 Social Security Taxable Wage Base

The Social Security Administration (SSA) announced that the 2013 Social Security wage base will increase to $113,700, up $3,600 from the 2012 wage base of $110,100.? The Social Security taxable wage base change represents a 3.3 percent increase over 2012.? As in prior years, there is no limit to the wages subject to the Hospital Insurance (HI) or Medicare tax; therefore all covered wages are still subject to the 1.45% tax.? Of the estimated 163 million workers who will pay Social Security taxes in 2013, about 10 million will pay higher taxes as a result of the increase in the taxable wage base.

Access the 2013 Social Security Fact Sheet

The FICA payroll tax rate, which is the combined Social Security (OASDI)?tax rate of 6.2% and the Medicare?(HI) tax rate of 1.45%, will be 7.65% for 2013 up to the Social Security wage base.? The maximum Social Security tax employees and employers will each pay in 2013 is $7,049.40.? This will be an increase of $2,425.20 for employees and $223.20 for employers.

Wages for high income earners, paid in excess of $200,000 in 2013, will be subject to an extra 0.9% Medicare payroll tax, going from 1.45% to 2.35%, that will only be withheld from employees? wages.? The employer portion of the FICA Medicare tax would remain unchanged at 1.45%.

It is important to note that the 2012 FICA tax rate is 4.2% for employees and 6.2% for employers under the Middle Class Tax Relief and Job Creation Act of 2012, which extended the two percentage point payroll tax cut for employees.? Under current law, this temporary reduction expires at the end of December 2012.? The FICA tax rate is scheduled to be 6.2% for both employees and employers in 2013, unless the federal government acts to extend or change the rate.

2013 Pension Plan & Retirement Plan Limits

The Federal government sets dollar limits as to how much an employee can contribute to their 401(k) account?or?retirement plan each tax year.? These limits are based on the cost-of-living index.?

If an employee reaches the age of 50?by the end of the current tax year, they?may?be eligible for catch-up contributions.? A catch-up contribution allows an employee to make additional contributions,?above the normal contribution limit, to their employer-sponsored retirement plan because?of their age.? Catch-up contributions are designed to help employees put away more savings in the years leading up to retirement.? Not all employer-sponsored retirement plans allow catch-up contributions so be sure to check the plan rules.

The Internal Revenue Service (IRS) announced the 2013 limits pertaining to 401(k) retirement plans and other defined contribution plans.? The Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans and requires that the Commissioner annually adjust these limits for cost-of-living increases.? Other limitations applicable to deferred compensation plans are also affected by these adjustments.

In general, many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.? However, other limitations will remain unchanged.

Here are some of the 2013 retirement and pension plan highlights:

  • The 2013 elective deferral or contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government?s Thrift Savings Plan increases from $17,000 to $17,500.
  • The catch-up contribution limit under those plans, for those aged 50 and over, remains unchanged at $5,500.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $59,000 and $69,000, up from $58,000 and $68,000 in 2012.? For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $95,000 to $115,000, up from $92,000 to $112,000.? For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple?s income is between $178,000 and $188,000, up from $173,000 and $183,000.
  • The limitation regarding SIMPLE retirement accounts increases from $11,500 to $12,000.
  • The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $200,000 to $205,000.?
  • The limitation for defined contribution plans under 415(c)(1)(A) is increased in 2013 from $50,000 to $51,000.

For More Details Read:? IRS Announces 2013 Pension Plan Limitations; Taxpayers May Contribute Up to $17,500 to Their 401(k) Plans in 2013

Why Contributing to Your 401(k) Retirement Plan Makes Smart Tax Sense

According to a recent CBS MoneyWatch article by Ray Martin, 401(k) contribution limit to rise in 2013, surveys of retirement plan participants continue to show that only about 5 percent of the 60 million 401(k) plan participants make the maximum contributions.? Making these contributions is more affordable than you think.? When you make 401(k) contributions from your pre-tax pay, it reduces the taxes deducted from each paycheck.? So while contributing $17,500 a year may sound like a lot of money, it's only about $215 per week after the tax savings are factored in.? Another way to look at it is that when you make pre-tax contributions of $17,500 to your 401(k) plan, you can save approximately $6,400 in federal and state income taxes each year.

For Additional Retirement Tax Savings Tips, Read the Full CBS MoneyWatch Article: 401(k) contribution limit to rise in 2013

?

Source: http://blog.primepay.com/payroll-business-experts-blog/bid/83697/2013-Social-Security-Wage-Base-Retirement-Plan-Limits-Announced

holocaust remembrance day chesapeake energy dick clark death yom hashoah yolo liquidmetal gsa scandal

No comments:

Post a Comment