Alert: Payroll Tax Cut Extended to the End of 2012
After much Congressional deliberation, a new tax package has been passed that will extend the payroll tax cut which was slated to expire on February 29, 2012. The IRS estimates that nearly 160 million working Americans will benefit from this reduced payroll tax rate. This bill also extends unemployment benefits and Medicare reimbursements to physicians.
The Middle Class Tax Relief and Job Creation Act of 2012 extends the 2% payroll tax holiday until the end of 2012 and repeals the $18,350 cap on high income wage earners. This will relieve some administrative payroll tax burdens for employers since the tax cut will not end in the middle of a quarter and payroll software providers will not have to scurry around to change the rate yet again. Self-employed individuals will also benefit from the payroll tax holiday by only paying 10.4% social security tax on self-employment income up to the maximum wage limit. Total self-employment tax is 13.3% once the Medicare portion is factored in.
Also included in the new bill is the extension of emergency unemployment insurance for those Americans who have lost jobs. Depending on the state in which you live, the benefit period can range from 89 to 99 weeks through May, no more than 79 weeks through August and finally winding down to 73 weeks through the end of the year.
This new agreement is a temporary fix. With election-year politics, it is almost impossible to guess what will be next and when.
For more information, contact a member of Decosimo's tax team.