Payday takes bitter taste as payroll tax spikes

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Jaws will drop, shoulders will sulk and family budgets will shrink Friday as many Hoosiers receive their first paycheck impacted by the increase in the 2013 payroll tax.

For two years, Congress lowered the payroll tax, the amount taken out of each paycheck to go toward Social Security, from 6.2% to 4.2%.  Lawmakers decided against extending the payroll tax holiday during their infamous fiscal cliff negotiations and allowed the cut to expire.

A person earning $30,000 is expected to see $50 less in take-home pay each month for a total of $600 less per year.

Tax professionals at Jackson Hewitt told Fox 59 News the 2013 payroll tax hike does not affect filers’ 2012 tax returns, but will next year.

However, the timing of the fiscal cliff negotiations is impacting Americans’ wallets another way: delayed refund checks.

The Internal Revenue Service announced this week it would delay the opening of E-filing tax returns until Jan. 30, rather than the previously announced date of Jan. 22.  That also means early filers depending on that refund check must wait those eight days for their money back as well.

Indianapolis-area Jackson Hewitt franchise owner Brenda Shipp said lawmakers put the IRS in that position because the fiscal cliff deal waited to extend certain tax credits until the vote on Jan. 1.

“They do need to make changes to their programming in their systems.  They need to update their forms and also test the system,” Shipp said.  “That’s unfortunate that the laws were passed so late that we’ve had this delay in them getting back their refund, but we’ll get it back to them as soon as possible.  The IRS is still saying that they should get their return back within 21 days after filing.”

Still, not everyone will be able to E-file Jan. 30.  The IRS won’t have certain forms ready for filers who take specific business credits and education credits until late February or March 1, Shipp said.

Shipp said Jackson Hewitt already updated its software to account for the changes, so anybody can come in, have their tax returns prepared and then just wait to officially submit them.  Shipp also described E-filing and using direct deposit as the quickest way to receive a refund check, if the taxpayer is entitled to one.


  • Catherine Hurcomb

    Please remember the Social Security rate has been 6 .2% since 1990. The tax rate was lowered in that (OMG) Stimulas plan. If you we're paying attention you would have realized this "holiday" was coming to an end and NOT ONE politician objected.

  • duke of Hurl

    This tax goes to fund Social Security which is already going broke. Elections have consequences. We could have had lower income taxes which would have offset the return of the payroll tax to whereit should have been anyway. Oops, but we reelectd Barry the tax, borrow, and spend, spend, spend socialist.

  • Kendra

    How is it a spike when its going back to the level that it has been over 20 years? If social security is underfunded then I assume the money is needed and the holiday is over.

  • ClanSmokeJaguar

    How are you 0bama supporters feeling now?

    lol…he was supposed to take from the rich and give to the fat and lazy but your paycheck is being chipped at too.

    Suffer fools!

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