The Social Security Administration has announced an increase in the cost of living benefit for Social Security benefit recipients for 2012. The benefit will increase 3.6 percent, the first increase since 2009.
Along with the benefit increase, the SSA has announced an increase in the Social Security maximum wages for 2012 - from $106,800 in 2011 to $110,100 in 2012. Earnings from self-employment are also subject to the Social Security maximum in calculating self-employment taxes (Social Security and Medicare tax for self-employed individuals).
What This Means for Your Business
Wages paid starting in January 2012 are subject to the $110,100 limit in Social Security withholding. Your payroll processing service should be tracking wages and stopping Social Security deductions at the limit. If you are doing your own payroll processing, you will need to track wages to make sure no employee has more than the $110,100 limit deducted from his or her pay.
Medicare deductions are not affected by this limit; all wages are subject to the Medicare deduction.
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