FOR TOP EARNERS, PAYROLL TAX TAKES BIGGER BITE NEXT YEAR
(RIVERWOODS, ILL., October 20, 1999) â If you are a highly paid wage earner, your taxes just went up by $223.20 for 2000, according to CCH INCORPORATED (CCH), a leading provider of payroll, benefits and tax law information and software. This is the result of a projected increase in the wage base on which Social Security taxes are due, from $72, 600 in 1999 to $76,200 in 2000. CCH's Payroll Management Guide is reporting the increase based on figures released by the Labor Department and the Social Security Administration.
The tax increase will show up in the amount of Federal Insurance Contribution Act (FICA) tax deducted from the paychecks of those earning above the wage base. Although the tax rate for the Old Age, Survivors and Disability Insurance (OASDI) portion of FICA remains at 6.2 percent, the amount of wages subject to the tax can, and usually does, increase each year, based on a national wage index. The taxes paid by employees are matched by identical amounts paid by employers into the Social Security system.
The $76,200 wage base for 2000 is in line with estimates published in the Social Security Administration's 1999 annual report, issued in April of this year. The $3,600 increase in the wage base for 2000 compares with a $4,200 increase in 1999.
The tax rate for the âHospital Insurance,â or Medicare portion, of FICA is 1.45 percent, and it applies to every dollar of earnings. This amount is also matched by employers.
Avram Sacks, JD, Social Security analyst with CCH, noted that taxes for self-employed individuals use the same earnings base, but their rates are double those of employees, since they must also pay the âemployerâ portion of the taxes.
âThis means that high-earning, self-employed individuals may owe as much as $446.40 in additional self-employment tax in 2000,â Sacks said. âHowever, they can recoup some of this amount through a deduction on their federal income tax.â
Future Benefits Also Affected
âThe wage base is also a benefits base,â Sacks noted. âOnly earnings up to the wage base are considered in calculating Social Security benefits. As a result, those who pay more now should receive more later. Some private pensions also use the amount of âcovered compensation' â that is, compensation up to the wage base â in calculating their benefits as well.â
In 2000, there will be a $100 increase in the amount of wages a domestic worker can earn without being subject to FICA taxes. You can pay a domestic worker such as a maid or nanny up to $1,200 in 2000 without having to wrestle with federal withholding on wages.
About CCH INCORPORATED
CCH INCORPORATED, Riverwoods, Ill., is a leading provider of health and human resources information, including the Payroll Management Guide, Pension Plan Guide, Employee Benefits Management, Social Security Reporter and Unemployment Insurance Reports. CCH also provides tax and business law information in print and electronic form for accounting, legal and health care professionals. CCH is a wholly owned subsidiary of Wolters Kluwer U.S. The CCH web site can be accessed at www.cch.com.
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