There is much recent discussion of the 'fiscal cliff'. Will the Bush tax rates expire as of 12/31 or will Congress achieve a compromise? Either way, what will PeopleSoft provide for 2013 withholding and OASDI employee tax rates in the interim?
News of legislation passing one or both houses of Congress and getting signed into law isn’t enough by itself for us to deliver tax table changes. The appropriate government agency has to turn enacted legislation into regulations and employer instructions before we can determine what product modifications might be required. For example, Congress might pass and the President might sign legislation making all sorts of tax changes, but until the IRS turns it into actual employer withholding changes, there’s nothing we can provide.
It’s the same situation if the clock runs down to December 31 and Congress does nothing which, in turn, may trigger numerous tax increases. Until the IRS actually issues new employer withholding calculation instructions for 2013, there is nothing we can deliver to customers in response to Congress having decided to do nothing.
What is the PeopleSoft position?
Withholding tables. Income tax rates are scheduled to increase on January 1, if Congress does not act before then to keep the rates at the current levels. It's unclear whether the IRS will release the 2013 withholding tables without congressional action.
PeopleSoft Payroll for North America
position: We will leave 2012 U.S.
withholding tax calculation values in place until the IRS publishes
guidance/instructions for wages paid on or after 1/1/2013.
Supplemental wage withholding rates. The withholding rate on supplemental wages in excess of $1
million during a calendar year will increase from 35% to $39.6% on Jan. 1,
2013, if Congress does not act before then to keep the income
tax rates at current levels. The supplemental wage withholding rate will
increase from 25% to 28% on supplemental wages of $1 million or less in a
calendar year if Congress does not act to keep the income tax
rates at current levels.
PeopleSoft Payroll for North
America position: We will leave 2012
U.S. supplemental withholding tax rates in place until the IRS publishes
guidance/instructions for wages paid on or after 1/1/2013.
Social Security payroll tax cut. The “payroll tax cut” has temporarily lowered the Social
Security withholding tax rate on wages earned by employees in 2011 and 2012
from 6.2% to 4.2%. Currently, there is no legislation in Congress that would
extend the payroll tax cut beyond Dec. 31, 2012, but there has been some recent
talk in Washington about either extending the cut or providing some other
payroll tax stimulus.
PeopleSoft Payroll for North America position: In Tax Update 12-F
we are changing the employee Social Security tax rate back to 6.2% based on
information currently on the Social Security website, and in the absence of any
pending Congressional action to extend the payroll tax cut.
Should Congress take action to extend the payroll tax cut (or make some other modification to the 2013 employee Social Security tax rate) after Tax Update 12-F has already been delivered to customers, we can (a) provide customers instructions on how to manually adjust the previously-delivered 1/1/2013 table entry to re-instate the payroll tax cut, and, depending on the timing, (b) deliver the updated table entry in the late December special posting and in Tax Update 13-A.
Should Congress take action to extend the payroll tax cut (or make some other modification to the 2013 employee Social Security tax rate) after Tax Update 12-F has already been delivered to customers, we can (a) provide customers instructions on how to manually adjust the previously-delivered 1/1/2013 table entry to re-instate the payroll tax cut, and, depending on the timing, (b) deliver the updated table entry in the late December special posting and in Tax Update 13-A.
