Payroll Tax Cut Extended Temporarily
Late on Dec. 22, House and Senate leaders agreed to end their stalemate over extending the payroll tax break. Under the agreement, for the first two months of 2012, a 4.2 percent Social Security tax would continue to apply to workers’ pay. It will keep in place a salary boost of about $20 a week for an average worker making $50,000 a year.
According to information provided by the House Ways & Means Committee, the revision would allow employers to withhold employee payroll taxes at 4.2 percent (instead of 6.2) on all wages paid during the two-month extension period, subject only to the full 2012 wage base of $110,100. If an employee’s wages during the first two months of 2012 exceed $18,350 (2/12 of the $110,100), and the payroll tax reduction is not extended for the remainder of 2012, an amount equal to 2 percent of those excess wages would ultimately be recaptured on the worker’s individual tax return for 2012.
A few other provisions are included in the agreement, including:
- Jobless benefits extended: Emergency federal unemployment benefits, also scheduled to expire on Dec. 31, would be extended through February. This will prevent almost 2 million unemployed people from losing jobless benefits averaging $300 a week.
- Medicare physician payments cut prevented: The bill would prevent a scheduled 27 percent cut in payments to Medicare physicians for the first two months of 2012.
Both the Senate and House approved the bill on the morning of Dec. 23. It will now be sent to the President for his expected signature.
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For more information, please contact:
Robert M. Burak, CPA
Partner in Charge, Tax Department
330.255.2419
Email
Cindy Mitchell, CPA
Senior Manager, Tax Department
330-255-2454
Email