Congress agreed on, and the President signed, a temporary extension of the payroll tax cut from 2011. This extension expires on February 29, 2012, unless extended again. This is still only for the employee portion of Social Security and it continues to be 4.2% of wages.
The law also includes a recapture provision that will add to the payroll record keeping process. If an employee receives wages of more than $18,350 during the two month period there is an additional tax of 2% on those wages. This additional tax will be an add-on to the 2012 income tax return the individual files in 2013. This amounts to making the Social Security rate for earners over the $110,100 Social Security limit to 6.2%.
Please contact our payroll experts at JMF if you need assistance with this new provision or any payroll items.