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Focus On Taxation: Payroll Tax Cut Extension Signed – Now Through 2012

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On February 22, President Obama signed legislation that extends the 2% payroll tax holiday that was enacted by the 2010 Tax Relief Act that was set to expire on March 1, 2012.
February 24, 2012

On February 22, President Obama signed legislation that extends the 2% payroll tax holiday that was enacted by the 2010 Tax Relief Act that was set to expire on March 1, 2012.

The legislation, which is titled the “Middle Class Tax Relief and Job Creation Act of 2012,” extends the 2-percentage-point payroll tax cut through the end of 2012.

2% Payroll Tax Cut

As a result, for 2012, employees will pay only 4.2% Social Security tax on wages up to $110,100 (wage base for 2012) and self-employed individuals will pay only 10.4% Social Security self-employment taxes on self-employment income up to $110,100.

The maximum savings for 2012 will be $2,202 (2% of $110,100) per taxpayer. If both spouses earn at least as much as the wage base, the maximum savings will be $4,404.

Additionally, the act repeals the recapture provisions applying to taxpayers with wages exceeding $18,350 over the first two months of 2012.

 

Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

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