Does anyone know how the social security tax addback for high income earners works? As you know, for Jan and Feb everyone only withholds
Most folks assume it will never actually go through, but with this Congress, who knows?
The social security FICA limitation assumes that any FICA tax at 4.2 applies only to the first 106,800 annual limit /12 months x 2 months of FICA income, and any additional FICA income that received the
4.2 rate becomes an income tax surcharge. (I assumed that 106800 is the maximum FICA wages subject to FICA tax.)
The wage base in 2012 is $110,100. Two months would equal $18,350. In order to prevent a taxpayer from getting a benefit in excess of 2% of $18350 for that period, the law created a 2% tax for amounts over $18,350. The law instructed the Treasury Secretary to issue guidance on how to carry out that tax. I have not seen the guidance.
Actually the limit in 2012 is 110,100
Also, assuming the payroll tax cut does not get extended, it would make sense to not sell any non qualified stock options in Jan and Feb as these are considered W-2 income.
Change "sell" in the statement above to "exercise." It's the exercise of the NQSO that generates W-2 income, not the sale of the stock.
Katie in San Diego
Have something to add? Share your thoughts — no account required.
Ask the community — no account required