If you've been following the fiscal cliff news on every media outlet, you would have been relieved to hear that 99% of Americans were protected from a federal income tax increase in 2013. However, another fact you may not have realized is that taxes will still go up for the vast majority of Americans.
So if income taxes didn't go up for 99% of Americans, how can their taxes still increase? The answer is the FICA or payroll tax. FICA is a 6.2% tax that the vast majority of employees in the country pay towards the Federal Social Security fund. In 2011, the Obama administration negotiated with Congress to cut the employee contribution to this tax to 4.2% (the "payroll tax holiday"), which saved the average worker earning $50,000 over $1,000 a year.
Unfortunately for 2013, the government was unwilling to extend the tax cut. Effectively, the holiday is now over, and it's back to paying 6.2% in FICA tax again. While it's not really a tax increase - more like the end of a discount - the net effect on your wallet makes it feel like one, so if your first check of 2013 feels a little lighter, now you know why. Check the FICA entry on your paystub's list of deductions to see if it has changed compared to 2012 - typically it;s located just below your tax deduction entries.