Unless things change, effective January 2013, several provisions of legislation like the Economic Growth and Tax Relief Reconciliation Act (2001), the Temporary Payroll Tax Cut Continuation Act (2011) and the Middle Class Tax Relief and Job Creation Act (2012) will expire December 31, 2012 creating changes in your net pay. We want to ensure employees are aware of the expiring tax cuts to allow you to plan and are notifying you now of the changes that are may take effect January 2013. Among the possible changes are:
Income Tax Cuts – Income tax brackets will increase. The lowest bracket is currently 10% and is set to revert to 15%. All other brackets will also increase.
- Payroll Tax “Holiday” – This “holiday”, enjoyed by employees for the past two years, provided for a 4.2% Social Security tax withholding rate. The Social Security tax rate will revert to 6.2% and the Medicare will remain 1.45%.
- The pretax medical flexing spend limit is set to decrease to $2,500.
- Educational Assistance – Non-job-related educational assistance becomes fully taxable to the employee. UMW is working to revise our policy to comply with the new regulations.
Employees are encouraged to be prepared to have less take home pay beginning with the first pay date in January. We will keep you posted as to any changes as they become known.
Allyson P. Moerman, CPA.CITP, CGFM
Associate Vice President for Finance and Controller
University of Mary Washington
1301 College Avenue
Fredericksburg, VA 22401
(540)654-1162 – fax