FICA Increase, FUTA Credit Reduction, & Federal Withholding Tables

We'd like to let you know about some federal tax changes that will affect you in the next several weeks.

FICA Tax
Employee FICA is scheduled to revert to pre 2011 rates - i.e. employee FICA will be 6.2% (up from 4.2%) on a base of $113,700. Medicare remains at 1.45% with an unlimited base. The employee portion of Medicare will be increased by .9% for wages over $200,000 in 2013.

Federal Withholding Tables
The IRS is intending to issue guidance on 2013 tax tables in the next week. You should continue to use 2012 tables until new tables are released. This is consistent with the recommendation of the American Payroll Association.

FUTA Tax
In November of 2012, the U.S. Department of Labor announced the final list of states that have outstanding federal loans for 2012. The states involved have not paid their Title XII loans in full, the conditions of which require all employers in those states to lose a portion of the credit against the full FUTA tax for 2012. Eighteen states plus the U.S. Virgin Islands failed to pay their loans in full in 2012 and as a result their FUTA credit has been reduced, subjecting employers in those states to higher unemployment taxes retroactive to January 1, 2012.

• Employers in the U.S. Virgin Islands must pay an additional 1.5% in FUTA taxes.
• Indiana employers must pay an additional 0.9%(max $63 per employee) in FUTA taxes.
• Employers in the following 14 states are required to pay an additional 0.6% (max $42 per employee) in FUTA taxes: Arkansas, California, Connecticut, Florida, Georgia, Kentucky, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Rhode Island and Wisconsin.
• Arizona, Delaware and Vermont employers must pay an additional 0.3% (max $21 per employee) in FUTA taxes.

You should pay the additional FUTA tax due with your 2012 Form 940. To quickly calculate the additional amount of FUTA tax owed, review the your Company Totals for YTD Taxable Wages for FUTA and multiply the wages by the additional percentage:

• For IN, multiply those wages by .9% (max $63.00 for employees over the $7000.00 limit).
• For AR, CA, CT, FL, GA, KY, MO, NV, NJ, NY, NC, OH, RI, and WI multiply those wages by .6% (max $42.00 for employees over the $7000.00 limit).
• For AZ, DE and VT, multiply FUTA wages by .3% (max $21.00 for employees