Herrington MacFarland & McLeod


Recent Tax Issues




Federal Income Tax Withholding and Social Security and Medicare Tax Rates

Congress did not extend the employee social security tax rate for 2013. Therefore, it will revert back to the full 6.2% effective January 1, 2013. The 4.2% employee tax rate for social security applied only to 2011 amd 2012.


However, the empoyer tax rate for social security has remained unchanged at 6.2%. The 2013 social security wage base limit is $113,700. up $3,600 from the 2012 base of $110,100. The Medicare tax rate for both employers and employees remains unchanged at 1.45%. There is no wage base limit for the Medicare tax.


With the late hour 2012-2013 congressional session action, many of the provisions of the "Bush Tax Cuts" were extended or modified, which results in various changes in tax rates for 2012 and 2013. Subsequent to the Congressional action, IRS has updated the Percentage Method withholding tables for 2013. Employers should implement the 2013 withholding tables as soon as possible, but not later than February 15, 2013.





FUTA Tax Rate Dropped Effective July 1, 2011

June 27, 2011


The 0.2% FUTA surcharge was not extended beyond June 30, 2011. Employers have been required to pay a flat rate of 6.2% on the first $7,000.00 of each employee’s annual wages for FUTA prior to this date. The 6.2% FUTA rate included a temporary 0.2% surcharge that was first added in the 1970’s. The FUTA rate was reduced from 6.2% to 6.0% effective July 1, 2011. Employers will still receive the 5.4% credit for paying state unemployment on time, reducing the FUTA rate to .6% on wages paid up to the annual FUTA limit of $7,000.00.


This rate change is NOT retroactive to January 1, 2011 but picks up on any tax amounts to be paid after July 1, 2011


Here are the links for the current versions of the needed software and forms:




IRS No Longer Mailing Out Forms 941


Beginning in 2011, the Internal Revenue Service no longer mails out Form 941 packets quarterly to taxpayers.


The forms are available for download on the IRS website in PDF format. The forms can be filled in, printed and saved by the use of the Adobe Acrobat Reader software which is available for free download from Adobe.


Here are the links for the current versions of the needed software and forms:





2013 Auto Mileage Rate Change Effective 01/01/2013

The Internal Revenue Service announced an increase in the optional standard mileage rates effective January 1, 2013. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.


The rate is 56.5 (up from 55.5 cents in 2012) a mile for all business miles driven after December 31, 2012. This is an increase of 1 cent from the 55.5 cents rate which has been in effect since July 1, 2011.


The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. The new six-month rate for computing deductible medical or moving expenses will also increase by .5 cent to 24 cents a mile. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.


The new rates are contained in Announcement 2012-95 on the optional standard mileage rates. Taxpayers usually have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.




IRA transfers to Charities

Taxpayers aged 70 1/2 and older can transfer up to $100,000 tax free from their IRAs to charity. Note that payouts received by IRA owners in December 2012, possibly of the RMD requirements, can qualify for this special tax treatment if they transmit the funds to a charity before February 1, 2013. Also, taxpayers can elect to treat direct transfers made in January, 2013, from their IRAs to charity as if the transfers were made in 2012.



The above explanations are for informational purposes only and may not contain all the specifics of the provisions discussed. Clients should contact us to determine if a specific item applies to your situation.


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