LEGISLATIVE UPDATE

eye on Washington
2013 Federal Tax legislaTion - WhaT To expecT
Congress and the Administration continue to deliberate possible changes to tax laws that may affect payroll and employment tax administration in 2013. In the event that no consensus is reached and the relevant laws remain unchanged, the following is provided to help ADP clients and their U.S. workers understand what to expect in early 2013. Effective 1/1/2013, the 2% reduction of the employee Social Security tax rate, most recently extended through 2012 by the Middle Class Tax Relief and Job Creation Act of 2012, will end. Employee Social Security tax rates will return to 6.2% unless new legislation is enacted. be prospective, only affecting subsequent payroll checks. Any 2013 paychecks calculated prior to issuance of new tables will not be recalculated. Clients may wish to consider a proactive explanation to employees as 2013 payroll dates approach. The Patient Protection and Affordable Care Act enacted a new Additional Medicare Tax of 0.9% on employee earnings over $200,000, which will go into effect in 2013. This additional tax will be automatically be calculated on earnings over $200,000, regardless of filing status. For additional information on the Additional Medicare Tax, please visit the IRS website and our previous Eye on Washington alert on this topic.

Current income tax rates and other measures that were originally adopted in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA); modified by the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), and extended by the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010 (TRUIRJCA), will expire on December 31, 2012. Significantly, the EGTRRA reduced Income tax rates in four tax brackets and created a new 10 percent income tax bracket. A lthough these laws will expire after 2012 absent legislation to extend or modify them, initial paychecks issued in 2013 may be calculated using 2012 withholding rates. A recent telephone call with senior IRS officials confirmed that, until the U.S. Treasury Department issues revised withholding tables, employers should use existing (2012) tax rates. This may cause some confusion, as employees may be surprised to see no change to their income tax withholding in January. I f revised withholding tables are subsequently issued, changes to withholding calculations will be effective for payrolls processed after implementation. ADP is poised to implement any revisions very quickly. However, any changes will

About ADP
ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to minimize your administrative burden across the entire spectrum of payroll, tax, HR and benefits, so that you can focus on running your business. Neither the content nor the manner in which this notice is presented reflects the thoughts or opinions of ADP or its employees. This notice is provided as a courtesy to our clients, to assist in understanding the impact of certain regulatory requirements, and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages interested readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded. Contact your local ADP client service team if you have any questions regarding our services or call 1-800-CALL-ADP.

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