U.S. Didn’t Go Over the 'Fiscal Cliff:' So Why is My Paycheck Less this Year?

Lakeland Bank discusses tips to offset lower take home page in 2013.

Did you notice a decrease in your paycheck come the New Year? You are not alone. The end of the social security tax holiday took effect in January and has many people asking “Why is my paycheck lower?” Lakeland Bank offers tips which may help you to make up the difference in take home pay and may even save you several hundred dollars a month. With careful planning and budgeting, you may actually come up ahead this year.

These 5 tips may help you adjust to a lower take home pay:

Tip #1: Evaluate your W-4 withholding and/or quarterly estimates to see if you can withhold less federal income taxes. Doing so would increase your monthly take-home pay, but would reduce your federal tax refund when you file your 2013 taxes. This option is recommended only for individuals who usually receive a tax refund. Evaluate your options with a tax professional before making any changes to your W-4.

Tip #2: If you are expecting to receive a tax refund for 2012, fill out your tax return as soon as possible. To receive your refund sooner, you can opt to have the funds electronically deposited to your checking or savings account. If you had earmarked this refund towards a big-ticket purchase, consider saving it instead to meet the shortfall in your budget due to lower take home pay. 

Tip #3: Life events such as a change in marital status, having a child, buying/selling real estate or stocks, and even changes in earnings may have a significant affect on your tax return. Have you experienced (or will you) any of these events and, if so, are you receiving the tax benefits/deductions that may go along with them? Meet with a CERTIFIED FINANCIAL PLANNERTM to make sure you maximize the financial benefits that go along with these events.

Tip #4: 
Keep track of credit card rates and bank fees. If you carry a credit card balance, switching to a credit card with a low APR and/or balance transfer fee may save you money. Most checking accounts now charge a monthly fee so find one with a low fee or one that offers others benefits that offset these fees. 

Tip #5: If you have a mortgage, consider refinancing. Rates are at historic lows so refinancing your mortgage may provide some breathing room each month. The general rule is that if you can refinance one percentage point less than your current rate, then it may be worth refinancing. Speak to a residential mortgage consultant to find out if this is a good option for you. 

Here is why your paycheck may be lower this year:

What changed? For 2011 and 2012, wage earners were granted a payroll tax holiday to stimulate the economy and paid 2 percentage points less in Social Security tax. On Jan. 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 (H.R. 8). This legislation does not include an extension of the 2 percent payroll tax cut for the Social Security (FICA) employee tax. 

What does this mean for you? Starting Jan. 1, 2013, Social Security tax withholding rates for employees returned to the original level of 6.2% (up from 4.2%). The total taxable wage amount has also increased from $110,100 to $113,700 wage base. Of the approximately 163 million workers who will pay Social Security FICA taxes in 2013, nearly 10 million will pay higher taxes as a result of the increase in the taxable maximum, according to the Social Security Administration .

How much will it cost? As an example, workers earning $40,000 (average annual income) will see about $67 less in their monthly paychecks, $800 for the year. Additionally, self-employed individuals will need to make quarterly payments using the combined Social Security and Medicare tax of 15.3% in 2013. Try this Wall Street Journal Calculator to estimate out how much additional Social Security tax you will pay in 2013.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Chuck Ruff March 09, 2013 at 08:36 PM
Bull! The premise necessitating the invasion of Iraq was that Saddam Hussein had weapons of mass destruction that were a 'direct threat' (not potential threat) to the U.S. Bush even stated that if Saddam simply disarmed, then war would be avoided. There were no weapons of mass destruction, and therefore, no necessity to go to war (based on Bush's own words). All the other reasons came after the fact (when no WMD's were found).
g March 09, 2013 at 09:43 PM
Fourscore, The Iraq Liberation Act of 1998 is a United States Congressional statement of policy calling for regime change in Iraq. It was signed into law by President Bill Clinton, and states that it is the policy of the United States to support democratic movements within Iraq. The Act was cited in October 2002 to argue for the authorization of military force against the Iraqi government. Representative Benjamin A. Gilman (Republican, NY-20) introduced the H.R. 4655 on September 29, 1998. The House of Representatives passed the bill 360 - 38 on October 5, and the Senate passed it with unanimous consent two days later. President Clinton signed the Iraq Liberation Act into law on October 31, 1998. The U.S.-led coalition in Iraq dropped far more bombs during the sunset of Bill Clinton�s presidency than under President George W. Bush in the run-up to war in Iraq, RAW STORY has found. Between 1999 and 2001, the U.S. and British-led air forces in Iraq dropped 1.3 million pounds of bombs in response to purported violations of the no-fly zones and anti-aircraft fire from Saddam Hussein.
g March 09, 2013 at 09:54 PM
Democrats wanted the war with Iraq over WMD: "If Saddam rejects peace and we have to use force, our purpose is clear. We want to seriously diminish the threat posed by Iraq's weapons of mass destruction program." President Clinton, Feb. 17, 1998\\ "We know that he has stored secret supplies of biological and chemical weapons throughout his country." Al Gore, Sept. 23, 2002- "We have known for many years that Saddam Hussein is seeking and developing weapons of mass destruction." Sen. Ted Kennedy (D, MA), Sept. 27, 2002-Truth!
Chuck Ruff March 10, 2013 at 01:32 AM
Nice word-for-word cut & paste job from Wikipedia on the Iraq Liberation Act g, but there's one important piece of information you left out. The act only calls for the support of an Iraqi regime change, and specifically prohibits the use of military action on the part of the U.S. "Nothing in this Act shall be construed to authorize or otherwise speak to the use of United States Armed Forces (except as provided in section 4(a)(2)) in carrying out this Act ." http://www.iraqwatch.org/government/US/Legislation/ILA.htm
Tugwalla March 14, 2013 at 12:47 AM
The reason the market went up is because corporation laid off workers, froze pay increases and sent their jobs to China.


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