The Social Security Administration has announced an increase in
the Social Security taxable wage base in 2013 from $110,100 to
$113,700. The $3,600 increase is slightly more than the $3,300
increase from 2011 to 2012. The cap was just $106,800 from 2009 to
2011, as inflation ground to a halt during the economic
The wage cap is the maximum amount of compensation subject to
tax under the Federal Insurance Contributions Act (FICA) for old
age, survivors and disability insurance (OASDI) — typically
called Social Security tax. FICA imposes both Medicare tax and
Social Security tax on compensation received for services at
matching employer and employee rates (with self-employed taxpayers
effectively paying both shares on self-employment income). Although
the Social Security tax is capped, the Medicare portion of FICA tax
applies to total earnings, with no limit on the amount.
The Social Security tax rate is generally 6.2% for both
employers and employees, but under a special temporary provision it
is only 4.2% for individuals in 2012. The rate is scheduled to
revert to 6.2% in 2013 without legislative action. The maximum
total individual share of Social Security tax is capped at
$4,624.20 in 2012 but is scheduled to jump to $7,049.40 in 2013,
with a return to the 6.2% rate and the higher wage cap.
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The IRS has announced that it will cease the processing of paper returns at three IRS campuses over the coming years. The three affected locations are Covington, Kentucky, Fresno, California, and Austin, Texas.
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