On February 17th, Congress voted to extend the Tax Relief Act of 2012 through the end of 2012. The legislation extends the reduction of the social security tax rate paid by employees from 6.2% to 4.2%, providing a 2% overall tax break to employees. This reduction has been in effect since July 1, 2011.
This act includes a scheduled expiration of the reduction as of the end of this year, at which time the rate would increase to previous rate of 6.2% on January 1, 2013. The Tax Relief Act also repeals the 2% "recapture tax" that would have required individuals who are paid more than $18,350 in January and February 2012 to pay an extra 2% tax.
The bill was signed into law by President Obama and the tax cuts are effective until December 31, 2012.
SBS Payroll will keep you informed of any new developments with the Tax Relief Act of 2012. The payroll system is already properly capturing these taxes and will continue to do so. Please contact your Account Executive for additional information.