Dormant Taxes From 2016: They’re Back…

January 13, 2017

Category: Payroll

Much like a villain in a slasher movie, some taxes just won’t die. It’s when you think you’re safe, when you’ve forgotten about them, that they pop up again. So, don’t be surprised when you see dormant taxes appear on your first paychecks of 2017.

Social Security

If you made over $118,500, your last checks of 2016 would not have social security taxes included. You will see this 6.2% tax reappear on your first check with a 2017 check date. You will not be taxed on earnings exceeding $127,200, so the maximum social security tax you will pay in 2017 is $7,886.40.  

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State Disability

Some states, such as California, have a State Disability Insurance (SDI) tax. The SDI was taxed on the first $106,742 of earnings in 2016. This 0.9% tax will start over again in 2017 and be taxed for up to $110,902 of wages, a maximum tax of $988.12 in 2017.

Other Changes in 2017

The IRS made annual cost of living and inflation adjustments to their tax rate schedules and tables. This means that the Federal Income Tax Withholding calculated in 2017 will not match your withholding for 2016.

This is also true of state income tax withholding. Do not expect your 2017 state withholding amount to match what was withheld in 2016.

Employer Payroll Taxes

Employees will not be the only ones seeing taxes reappear. In addition to the social security tax that the employer matches, there are some employer-only taxes that will start over for 2017:

Federal Unemployment Taxes

The annual wage limit for Federal Unemployment is $7,000. The rate can vary by employer, but expect to see at least an additional $42 tax per employee for the year.  Most of those taxes are calculated on the first paychecks of 2017.

State Unemployment Taxes

The annual wage limit varies by state, and the state unemployment rate varies by employer. The American Payroll Association has a great page showing the wage limits by state. With the new wage limit starting all over again, expect to see state unemployment taxes reappear.

As the year was coming to a close, you might not have noticed that some taxes were disappearing from your paycheck, providing more disposable income for the holidays. With the new year, expect to see some dormant taxes like social security and California SDI re-appear. Also, expect to see some minor changes in your 2017 withholding amounts. While they may be unwelcome, these taxes aren’t anything we can’t handle.


Matthew Keller is a Senior Payroll Specialist at Zenefits who authors our "Money Matters" column. With 20+ years of experience in payroll and accounting, Matt wants to help customers navigate frequent law changes, taxes, and more.

Category: Payroll

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