If you noticed some changes in your paycheck and withholding taxes this year, you’re not alone. September of last year brought a “payroll tax holiday” to many W-2 workers, which allowed employers to defer payroll taxes through Dec. 31, 2020. Notably, the Social Security portion of Federal Insurance Contributions Act taxes did not have to be collected or paid between Sept. 1 and Dec. 31 of last year, equating to a 6.2% increase in your paycheck.
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But the “holiday” was anything but a gift — It needs to be paid back between now and April 1. That extra 6.2% you may have seen in your paycheck if your employer opted to take advantage of the “holiday” will now come out of your check under your Social Security taxes, along with this year’s Social Security withholding taxes. For many Americans, this could really mess with your new year’s budgeting plans.
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Some six-figure earners will also see another change in the withholding section of their paychecks. The Social Security taxable wage base (noted as OASDI on your paycheck, which stands for Old Age, Survivors and Disability Insurance) has increased from $137,700 in 2020 to $142,800 in 2021. That means OASDI taxes will come out of the first $142,800 you earn rather than the first $137,700. The taxable wage base for Medicare tax (HI, or Hospital Insurance) stays the same this year as last.
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