Local employers are playing a waiting game while the “fiscal cliff” impasse in Congress continues.
Central to the impasse is a fight over how much tax people should pay.
Until there’s a resolution, employers plan to withhold income taxes at 2012 rates.
“They have to. They have to get payroll out the door,” said Robert Gialamas, president of Paytime, a payroll processing company affiliated with SS&G, an accounting business with offices in Bath Township.
Gialamas and local employers interviewed Friday said that as talks go on, the Internal Revenue Service has put off releasing 2013 tax withholding tables.
“You have no choice but to use the 2012 tables,” Gialamas said.
John Blickle, president of local McDonald’s franchisee Rubber City McDonald’s, who uses an outside company to process about 1,400 paychecks every two weeks, said it’s a frustrating situation for employers, as well as workers.
“Everybody hates uncertainty,” said Blickle, whose company operates 20 McDonald’s restaurants.“I would much rather know what my obligations are going to be.”
President Barack Obama met with congressional leaders Friday to avert the fiscal cliff of big tax hikes and spending cuts scheduled to take effect in the new year.
Diane Miller-Dawson, finance director for the city of Akron, said Friday that if employers don’t end up withholding enough taxes in January, employees likely would be required to make up the difference when they file their 2013 taxes. The city employs about 1,700 full-time workers.
Gialamas agreed. However, he said it is possible that employers will be asked to withhold even more taxes later in the year to make up the difference.
“We don’t really know,” which route the federal government will choose, Gialamas said.
Blickle said that adding to the confusion is the looming end of the 2-percentage point reduction in the Social Security payroll tax.
Gialamas said that workers will immediately see a bite out of their paycheck because federal law calls for the so-called payroll tax holiday to expire Dec. 31, and paychecks already have been processed.
This effective tax increase will cost a typical worker about $1,000 a year, and a two-earner family with six-figure incomes as much as $4,500.
Gialamas said his “gut feeling” is that negotiations about the pending fiscal cliff will not result in an extension of the reduction in the payroll tax. Congressional leaders have said they are unlikely to approve an extension.
Katie Byard can be reached at 330-996-3781 or email@example.com. The Associated Press and Beacon Journal reporter Jim Mackinnon contributed to this report.