The Temporary Payroll Tax Cut Continuation Act of 2011 (HR 3765) was signed into law by President Obama on December 23, 2011.
The Law extends the 2% reduction on the employee portion of the Social Security Tax through the end of February 2012. Prior to this bill passing the tax rate was to revert to 6.2%. It will now remain at the reduced rate of 4.2% for this 2 month extension.
Also included is a commitment to go to conference in an effort to negotiate a full one-year extension of this payroll tax cut.
What this means for employees:
Taxpayers will continue to see the 2% tax reduction of their Social Security Tax for the first two months of 2012.
What this means for employers:
For January and February you should continue to withhold (as you did in 2011) your employees' portion of their social security tax at 4.2% of their taxable payroll.
It is important to note that the employer portion of this tax remains at 6.2% for Jan & Feb, just as it did in 2011.
Unless a full year extension is negotiated, the employee portion of the social security tax will revert to 6.2% on March 1, 2012.
Stay tuned for more updates in January and February of 2012 on negotiations for a full one-year extension of this important tax cut.
