Now that Election Day has come and gone, Congress has a long road ahead of them between now and year-end to get our 2012 tax rates set and the paperwork to the IRS. But, regardless of what Congress does in the next few weeks, there are a few certainties set to take effect in January that are worth noting.While it's unsure whether the employee's tax rate will be 4.2 percent or 6.2 percent, the Social Security wage base is set to increase, and workers will need to pay Social Security tax on their first $113,700 of income. This is up from a wage base of $106,800 in 2011. In addition, a .9 percent Medicare surtax will be charged on all income above $200,000 for singles and $250,000 for couples. This is a brand new tax and while it's been somewhat publicized, I still anticipate a few people being surprised by the increase.For those receiving Social Security, the benefits will increase by 1.7 percent starting in 2013. This is much less than 2012's 3.6 percent cost of living adjustment, but better than 2011's flat rate. For those both working and collecting Social Security, if you are between 62 and 66, you'll be able to make up to $15,120 before you lose any benefits.For those focused on retirement savings, there's some good news on the horizon. Contributions to 401(k)s will increase from $17,000 to $17,500 for 2013. Those over age 50 can contribute another $5,500 as part of their catch-up provision to a maximum of $23,000. SIMPLE plan contributions will be limited to $12,000 with an additional catch-up contribution of $2,500. And, those with a Keogh or profit-sharing plans will see their contribution limit increase by $1,000 to $51,000.Traditional and Roth IRA's will see changes as well. The annual pay-in limit will increase to $5,500 for each IRA type, with those 50 years or older allowed to contribute another $1,000. Remember, these limits apply to your 2013 contributions, so be sure not to contribute these amounts for 2012 or you may find yourself faced with a penalty. IRA contributions can only be made if you are under certain income levels. For traditional IRA's, contributions phase out for incomes between $59,000 and $69,000 for individuals and $95,000 and $115,000 for couples. Roth IRA contributions phase out for incomes between $112,000 and $127,000 for individuals and $178,000 and $188,000 for couples. Because of these income limits, I always recommend that you complete your tax return before making your contributions if you are close to the income limits, but remember that the contributions are due by April 15th, not the extended deadline of a return.There are still dozens of deductions and tax rates to be hammered out by Congress, so it's too soon to tell what's coming in the future, but if you keep these rates and limits in mind, these are the ones pretty sure to be in place starting Jan. 1, 2013.Michele Knight, owner of Knight Accounting & Technology, is a CPA and QuickBooks ProAdvisor based in Dillon. For more info and to contact her, visit www.cpamichele.com.
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