Saturday, October 1, 2011

Rumors and Speculations about FICA Limits 2012

FICA Limits 2012 -- Probable To Return to 2010 Limits

2011 saw non permanent tax cuts for workers there was a two% reduction of FICA taxes for all personnel. Generally, FICA taxes are collected on 7.65% of earnings. Prior to 2011, the fee has been seven.65% since the 1990s, but with the tax break, the 2011 FICA tax rate for employees was decreased from seven.65% to five.65%.

Origins of FICA

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In 1939, the part of the Social Protection Act that ruled tax collection - Title VIII - was taken out. The tax collection mechanism for Social Protection was moved to the Internal Profits Tax code and named FICA, or Federal Insurance Contributions Act. FICA has since been the legislation beneath which payroll taxes for both Social Protection Benefits and Medicare are collected. It is most frequently referred to basically as the FICA tax.

There are 4 things that FICA taxes contribute to: the federal method of old age, survivors, disability and hospital insurance coverage. Old age, survivors, and disability insurance are all portion of Social Protection although hospital insurance policy is component of Medicare. The FICA tax fee, then, has two components: one particular part is for Social Security and one more for Medicare.

2010 FICA Tax Charges and Social Safety Limits

In 2010, as currently stated, the FICA tax price was a total of 7.65% of the worker's gross cash flow. six.two% of this went to Social Safety and 1.forty five% went to Medicare. The Social Protection tax could be collected on up to $106,800 of cash flow creating the maximum Social Safety contribution $six,621.sixty.

FICA Limits 2011

In 2011, the two% tax break arrived from the portion of the tax that contributes to Social Safety. This reduced the Social Safety price for personnel only from 6.two% to four.2%. The amount of taxable cash flow remained at $106,800 so the highest worker contribution was decreased from $6,621.60 to $4485.sixty.

FICA Limits 2012

Since the two% tax break was for 2011 only, the FICA limits for 2012 are anticipated to return to 7.65% of gross revenue, the very same as they have been in 2010.

Software of FICA Limits 2012

Fred is an employee at your company. His gross revenue is $75,000. What does the 2011 tax break and the most likely return to 2010 price mean to him? At the 5.65% charge, Fred payed $4327.fifty in FICA taxes for the 2011 12 months. In 2012, if the price returns to seven.65%, he will pay $5737.fifty. This signifies he will see a roughly $120 a month reduce in his get house spend.

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Learn about new 2012 Optimum 401k Contribution 401k contribution limits for 2012 have been introduced by the IRS. The contribution limits are set to remain the very same as they have been in 2011. This signifies that the pre-tax contribution restrict for 401k options stays at $16,five hundred with an index for inflation set at $500 increments.

2012 Greatest 401k Contribution Over 50 Enhanced By "Catch-Up" Contributions

Nonetheless, the highest 401k contribution more than fifty years of age is larger than $16,500.

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As a result of the Restoring Earnings to Lift Individuals and Empower Families (RELIEF) Act of 2001, people of age 50 or over are authorized to make "catch-up" contributions to their 401k plan. These contributions are created to support individuals who got a late begin or have been procrastinating on their retirement cost savings be prepared to retire.

The 2012 limit for the these more than fifty catch-up contributions is $5,five hundred. This also has an index for inflation set at $500 increments.

Blended, the standard contribution restrict and the catch-up contribution limit include up to a pre-tax maximum 401k contribution in excess of fifty of $22,000.

Why is the Maximum 401k Contribution Above fifty Greater?

The majority of individuals do not have cost savings ideas that are on track for retirement many folks do not even know how significantly they want to have saved.

Below is information from a sequence of surveys carried out by the Worker Rewards Study Institute (EBRI). The table reveals the sum of cash employees have calculated (utilizing a retirement financial savings desires calculation vehicle) that they need to have saved for retirement.

Sum of Cost savings Employees Calculated They Need to have For Retirement

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In 2010, the huge vast majority (70%) calculated that they need to have over $250,000 saved for retirement, and that's without taking into consideration the extra eleven% that either refused to solution or are unsure. When this is in comparison to the somme cost savings reported amongst staff, the results communicate for by themselves.

Somme Savings Documented Among Workers

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In 2010, only a 3rd of folks had saved $50,000 this is only a fifth of $250,000, the bare minimum quantity that 70% of people require to help save for retirement. 43% have saved significantly less than $ten,000 and $10,000 is drastically a lot less than the bare minimum contribution for peoples underneath age 50.

Simply because of figures like this, the catch-up contributions were a component of the RELIEF Act of 2001 to support staff be far better prepared for retirement. As retirement attracts nearer, the contributions give workers a a lot needed way to "catch-up" on their retirement price savings options.

If you would like to know far more about the EBRI survey, the entire launch can be viewed right here:

If you have fallen behind on your 401k prepare and you would like suggestions on how to catch up, if you would like to know a lot more about the larger maximum 401k contribution in excess of fifty, or if you have any queries, make sure you contact your 401k advisors. @identi @kewego @photobucket @sugarsync @tinypic @wordpress @yahoo @zooomr 2012 maximum 401k contribution over 50 401k plan catch-up contributions contribution limit contribution limits general contribution limit Maximum 401k Contribution pre-tax contribution limit retirement savings retirement savings plans

Haven't used this to cover work-related information, but I'm willing to give it a go.

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