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For Top Earners, Payroll Tax Takes Bigger Bite Next Year
(RIVERWOODS, ILL., October 20, 1999) If you are a highly paid wage
earner, your taxes just went up by $223.20 for 2000, according to CCH INCORPORATED (CCH),
a leading provider of payroll, benefits and tax law information and software. This is the
result of a projected increase in the wage base on which Social Security taxes are due,
from $72, 600 in 1999 to $76,200 in 2000. CCHs Payroll Management Guide is
reporting the increase based on figures released by the Labor Department and the Social
The tax increase will show up in the amount of Federal Insurance Contribution Act
(FICA) tax deducted from the paychecks of those earning above the wage base. Although the
tax rate for the Old Age, Survivors and Disability Insurance (OASDI) portion of FICA
remains at 6.2 percent, the amount of wages subject to the tax can, and usually does,
increase each year, based on a national wage index. The taxes paid by employees are
matched by identical amounts paid by employers into the Social Security system.
The $76,200 wage base for 2000 is in line with estimates published in the Social
Security Administrations 1999 annual report, issued in April of this year. The
$3,600 increase in the wage base for 2000 compares with a $4,200 increase in 1999.
The tax rate for the "Hospital Insurance," or Medicare portion, of FICA is
1.45 percent, and it applies to every dollar of earnings. This amount is also matched by
Avram Sacks, JD, Social Security analyst with CCH, noted that taxes for self-employed
individuals use the same earnings base, but their rates are double those of employees,
since they must also pay the "employer" portion of the taxes.
"This means that high-earning, self-employed individuals may owe as much as
$446.40 in additional self-employment tax in 2000," Sacks said. "However, they
can recoup some of this amount through a deduction on their federal income tax."
Future Benefits Also Affected
"The wage base is also a benefits base," Sacks noted. "Only earnings up
to the wage base are considered in calculating Social Security benefits. As a result,
those who pay more now should receive more later. Some private pensions also use the
amount of covered compensation that is, compensation up to the wage
base in calculating their benefits as well."
In 2000, there will be a $100 increase in the amount of wages a domestic worker can
earn without being subject to FICA taxes. You can pay a domestic worker such as a maid or
nanny up to $1,200 in 2000 without having to wrestle with federal withholding on wages.
About CCH INCORPORATED
CCH INCORPORATED, Riverwoods, Ill., is a leading provider of health and human
resources information, including the Payroll Management Guide, Pension Plan Guide,
Employee Benefits Management, Social Security Reporter and Unemployment Insurance
Reports. CCH also provides tax and business law information in print and electronic
form for accounting, legal and health care professionals. CCH is a wholly owned subsidiary
of Wolters Kluwer U.S. The CCH web site can be accessed at www.cch.com.
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