IRS 'adjustment' bites paychecks despite Congress avoiding 'fiscal cliff'

Gary B. Gray • Jan 8, 2013 at 10:01 AM

If you thought you detected a downward bump in your paycheck last week, you weren’t imagining things.

The IRS is implementing a nationwide “adjustment” in payroll tax withholding, and anyone who took possession of that precious pay stub last week — inside the calender year 2013 — likely noticed more than the 2-percent Social Security increase that has been the prominent chatter after Congress allegedly averted the “fiscal cliff.”

Employers received a new, and very complicated, tax withholding table that does not have to go into effect until Feb. 15. But Washington County Finance Director Bobbye Webb said she was advised to begin using the new table immediately.

“It was a surprise,” she said in her office Monday — a place where dozens of employees were showing up with frowns on their faces to ask what was going on. “We were going to begin this year with just the Social Security increase. But we began this, which reflects an increase in withholding beginning with the Jan. 4 pay checks. We released payroll Wednesday, and the calls have been coming ever since.”

Webb said she’s been getting loads of visitors. She also said that the county decided not to wait to make the changes, because it could be responsible for coughing up the difference in what should be taken out and what is being taken out.

The last-minute congressional “deal” included sidestepping — for now —- the reinstatement of almost every tax cut enacted since 2001 that were set to expire. That would have cost the average household about $3,500 a year, according to the Tax Policy Center.

As things stand now — before Congress resumes further haggling — the average American household’s tax bill for 2013 will increase by $1,250, or about $25 a week.

For most Americans, the biggest immediate impact is coming from the expiration of a two-year tax “holiday” enacted in 2010. That former tax break accounts for about 2 percent of wages. Tack on the Social Security withholding increase, and the adjusted withholding table, and you’ve got less take-home pay.

“It’s hard to say the average increase is this or that, because you’ve got one person that files single and another that’s married and another that has certain pre-tax deductions,” Webb said. “One person’s taxes may have gone up 4 percent; another person, 6 percent.”

That doesn’t sound drastic. But consider that your payroll tax rate is now back to where it was in 2009, before Congress cut the tax to help boost the economy. That bit of legislation added an average of about $20 a month to American households. Now? Well, they want it back to help spackle the deficit.

Webb said the county uses software that computes all the various rates and other factors and that she has not yet had time to sit down and figure out how exactly the numbers work out when a person makes a specific amount.

“It’s very complicated,” she said. “It hit our checks, too, and we’re not all that happy.”

Recommended for You

    Johnson City Press Videos