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Federal Tax Changes

January 04, 2013

To: UT Faculty and Staff
From: Rob Chance, Director of Payroll
Re: Federal Tax Changes

Legislation passed earlier this week by the U.S. Congress will affect taxes deducted from paychecks beginning this month.

It's important to know how these tax changes will affect your pay.    

Paychecks issued on Tuesday, Jan. 8, to employees paid biweekly will reflect the changes, and employees paid monthly will notice the changes in paychecks issued on Jan. 31.  

Below is a summary of the changes passed by Congress:

Social Security Payroll Taxes (2 percent increase)

  • The employee Social Security tax rate will increase from 4.2 percent to 6.2 percent due to the expiration of the payroll tax holiday enacted two years ago. This tax applies to Social Security wages of $113,700 or less.
  • Estimates of the additional taxes employees will pay each month based on sample incomes are available at: http://payroll.tennessee.edu/2013taxchanges.htm.
  • This tax will not be assessed on employees who are not subject to social security withholding, such as student workers.

Medicare Tax Rate

  • The current Medicare tax rate of 1.45 percent will continue for 2013, but an additional Medicare tax of 0.9 percent will be withheld on wages paid to an employee in excess of $200,000 during the calendar year.

Federal Withholding Tax Rates

  • Withholding tax rates also will increase for employees with annual incomes of more than $400,000 once the 2013 tax tables are released by the IRS.

You may contact the UT System Payroll Office with questions about the tax changes at (865) 974-5251 and http://payroll.tennessee.edu/. Campus and institute payroll offices also are available to help.

In some cases, employees may wish to adjust federal withholding amounts on W-4 statements as a result of these changes. Staff in the payroll offices can answer questions about this process and provide forms.