°ÄÃÅÁùºÏ²Ê×ÊÁÏ¿â

Update Jan. 2: The "fiscal cliff" deal did nothing to stop an increase in Social Security withholding (OASDI), effective Jan. 1, according to news reports out of Washington, D.C. The rate is back up to 6.2 percent (after two years at 4.2 percent) and this may explain why your net pay went down on your January paycheck. There was a chance that President Obama and Congress would extend the "temporary" tax cut but °ÄÃÅÁùºÏ²Ê×ÊÁÏ¿â payroll could not wait for a decision and still get January paychecks out on time. So, °ÄÃÅÁùºÏ²Ê×ÊÁÏ¿â boosted the withholding rate to 6.2 percent, and announced that paychecks would be adjusted later, to credit employees for the overcharge, if the president and Congress ultimately decided to maintain the withholding rate at 4.2 percent. As it turned out, the cut "fell victim ... to other priorities," according to The Associated Press. So, the withholding rate is 6.2 percent and °ÄÃÅÁùºÏ²Ê×ÊÁÏ¿â paychecks for January are correct as issued.

°ÄÃÅÁùºÏ²Ê×ÊÁÏ¿â payroll will deduct more for Social Security withholding, effective Jan. 1. For most °ÄÃÅÁùºÏ²Ê×ÊÁÏ¿â employees, the change will take effect with the first pay date after Jan. 2.

Withholding goes back to the historical rate of 6.2 percent (from 4.2 percent), and the taxable wage base increases to $113,700 (from $110,100). All this could change, however, as a result of ongoing negotiations between the president and Congress to keep the federal government from going over the so-called fiscal cliff at year's end. As of today, no agreement had been reached.

Therefore, because °ÄÃÅÁùºÏ²Ê×ÊÁÏ¿â payroll will be processed before the winter break, °ÄÃÅÁùºÏ²Ê×ÊÁÏ¿â has no choice but to go ahead with the changes. The same thing happened last year; eventually, the government extended the 4.2 percent withholding rate, and °ÄÃÅÁùºÏ²Ê×ÊÁÏ¿â subsequently adjusted employees' checks to return the overcollection of Social Security withholding, retroactive to Jan. 1.

Another extension, through 2013, would mark the third consecutive year of the 4.2 percent withholding rate which was enacted as a "temporary" tax cut in 2011.

Other payroll changes effective Jan. 1:

• Employees earning $200,000 or more will see a 0.9 percent increase in their Medicare withholding, to 2.35 percent, under the Affordable Care Act.
• New California income tax rates will take effect, resulting from voter approval Nov. 6 of Gov. Brown's income and sales tax initiative, Proposition 30.

As for federal tax rates, °ÄÃÅÁùºÏ²Ê×ÊÁÏ¿â will continue to use the 2012 schedule "until Congress and President Obama reach agreement, and the IRS (Internal Revenue Service) provides guidance for the federal tax withholding rates for 2013," according to a issued today (Dec. 14) by the °ÄÃÅÁùºÏ²Ê×ÊÁÏ¿â Office of the President.

"As soon as the IRS publishes official guidance, the university will update our payroll system to begin withholding at the new tax rates," the statement declared. "The payroll system will not make any retroactive adjustments once the new rates are implemented."