Happy New Year! Your taxes just went up.
Tyler Valentine, 30, doesn’t make a habit of examining his paychecks, watching pennies move from one column of income to another of taxes. So even though he had heard news about increases in payroll deduction taxes that were coming with the new year, he didn’t know last week how they would affect him.
And, he suspects, neither do most of his employees at Dos Amigos Burritos.
“It’s not really been a hot topic at work. Maybe 19-year-olds don’t pay much attention to their bank accounts,” Valentine said on Friday, the day he got his first paycheck of 2013, reflecting the end of the 2 percent decrease in Social Security taxes instituted two years ago.
“Without kids, without as many financial constraints, I don’t think we’ve noticed as much,” Valentine said. “It’s not constraining my lifestyle.”
That was the general consensus of Concord shoppers last week: if they knew about the tax increase, they hadn’t checked their own pay stub yet, and if they had, they weren’t overly concerned about the change they saw.
The increase returns the employee contribution to Social Security to 6.2 percent of wages earned, after two years at 4.2 percent. Employers also contribute 6.2 percent, and have throughout the recession.
Still, “I don’t think it’s going to be anything to get worked up about,” said Don Hawkins, a truck driver from Belmont, who hadn’t yet looked at his electronic pay stub in the early afternoon on Friday. “I’ve seen all about it on the news, but I take those things with a grain of salt. It’s inevitable anyway.”
Brenda Perry and Christina Cassella said they joked at lunch on Friday that the increase almost negates a 3 percent raise their nonprofit employer gave them in November.
“It was supposed to come through in July, I think, but it just came through,” Cassella, who lives in Nashua, said. “So, this will bring me right back to before my raise. Not a big change.”
The Social Security increase is the biggest change in deduction taxes but not the only one, especially for higher-income earners or those who receive a large portion of their income from investments.
As part of the Affordable Care Act, workers earning more than $200,000 will start to see an additional 0.9 percent of tax on income above that first $200,000. Income from investments will also face an additional 3.8 percent tax for Medicare once it crosses the $200,000 mark, according to Muriel Schadee, a certified public accountant and a principal with local firm Nathan Wechsler and Co.
“People are calling,” Schadee said. “We sent out an email blast on the 2 percent (Social Security tax increase) right away, and the next day on the income tax changes. We’re getting questions from clients more in terms of the investment side, but I’ve never seen so many emails come through in terms of information from sources like the IRS, all the different investment and teaching places, the research places. We’ve been inundated for four days time.”
The issue caused a similar flood of calls for payroll supervisors and human resources directors at some of the region’s larger employers.
Officials from Concord Hospital, Grappone Automotive Group and the Concord School District all said they sent notices to employees as soon as they learned the effects the federal deficit deal would have on payroll deductions.
“We sent them all a notice this week, but not prior to this, because we had no idea of what was going to pass or not pass and what it would all mean,” said Larry Haynes, CEO and president at Grappone. “It’s something we wanted to do as a courtesy and to avoid any confusion. This impacts their paycheck and their livelihood. It’s always better to be proactive.”
It seemed to have worked, as the human resources department told Haynes they hadn’t received any questions by late Friday. That wasn’t the case at the school district, despite a similar early warning to employees about the changes.
Payroll Manager Debbie Converse said Friday morning she had already received “quite a few calls and emails.
“Mostly it’s because folks didn’t understand that the change in Social Security taxes wasn’t really relevant to the fiscal cliff deals. Some folks still thought it was on the table to be kept at the lower rate, but I was watching to see if it would be part of the discussions and they would mention it every once in a while only to say that it was going back to the higher rate.”
So, when employees noticed a little extra off the top of their checks on Friday, despite all the big sighs of relief from Washington talking heads, they called Converse.
They’re upset, but they’re not blaming the messenger, she said.
“They don’t really complain a whole lot but you can just hear the disappointment, and I understand it,” she said. “It’s hard to say ‘Happy New Year’ and ‘Your check has just gone down 2 percent’ at the same time.”
(Sarah Palermo can be reached at 369-3322 or
firstname.lastname@example.org or on Twitter @SPalermoNews.)