March 29, 2024

Payroll

2020 Payroll Taxes Will Hit Higher Incomes









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 Update: Some Payroll Taxes Suspended Due to COVID-19

Section 2302 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020 and implemented through IRS Notice 2020-22 and a series of
IRS FAQs, allows eligible employers to defer the deposit and payment of the
employer’s share of Social Security FICA taxes for the period beginning March 27, 2020 through Dec. 31, 2020. The deferred payments must subsequently be paid to the Treasury Department, with half due by Dec. 31, 2021, and the other half by

2021 Wage Cap Rises for Social Security Payroll Taxes

Starting Jan. 1, 2021, the maximum earnings subject to the Social Security payroll tax will increase by $5,100 to
$142,800—up from the $137,700 maximum for 2020,
the Social Security Administration (SSA) announced Oct. 13. The
SSA also posted a fact sheet summarizing the 2021 changes.

The taxable wage cap is subject to an automatic cost-of-living adjustment (COLA) each year based on increases in the national average wage index, calculated annually by the SSA.


Payroll Taxes: Cap on Maximum Earnings


Type of Payroll Tax


2021 Maximum Earnings


2020 Maximum Earnings

Social Security

$142,800

$137,700

Medicare

No limit

No limit

Biden’s Payroll Tax Hike Strategy: Outside of the Donut Hole

What You Want to Know

  • Biden’s approach to impose payroll taxes on significant earners would generate a
  • Substantial-earning consumers could possibly be capable to offset, defer or reclassify profits to steer clear of the more tax.
  • Although there has been minimal chat about this approach recently, lawmakers are properly mindful that the Social Stability and Medicare trust resources have shortfalls that want to be dealt with.

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