Feds see paychecks shrink with payroll tax hike

Bruce Rolff/Shutterstock.com

Federal employees will see less money in their first 2013 paycheck because of the end of the payroll tax holiday.

The payroll tax holiday officially expired on Jan.1, and Congress did not renew it as part of the final compromise on the fiscal cliff. The government reduced the payroll tax funding Social Security for individuals from a rate of 6.2 percent to 4.2 percent in 2010 and 2011 to help stimulate the economy. For individuals, the rate has now reverted to 6.2 percent of annual wages up to $113,700, which means most Americans will see their paychecks shrink this year. Employers and individuals each pay 6.2 percent, with the combined 12.4 percent going to finance Social Security.

Feds will see less money for the wages they receive for the pay period ending Dec. 29, 2012. The official pay date for that pay period is Jan. 4.

The change could come as a surprise to some feds who were expecting to see the increase later this month. Individuals earning $50,000 per year will see their monthly paycheck decrease by $83 and will take home $996 less annually. Those earning $100,000 annually will see $167 less in their monthly pay, and $2,004 less for the year.

Federal civilian employees can find the change on their leave and earnings statement under the OASDI (Old Age, Survivors, and Disability Insurance) category. Military personnel should look under the FICA (Federal Insurance Contributions Act) category for Social Security withholdings.

Increases in allowances, pay raises and promotions could affect service members’ net pay, according to a Jan. 4 report from the American Forces Press Service. “Service members could see an increase in net pay or a decrease,” military personnel and readiness officials told AFPS. Active duty personnel will see adjustments in their mid-January paycheck, AFPS reported.

For civilian employees, the change likely means less money overall, particularly in light of the continued pay freeze. President Obama issued an executive order lifting the pay freeze on March 27, but there’s no guarantee Congress will let that happen.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care


When you download a report, your information may be shared with the underwriters of that document.