Payroll tax cut temporarily extended

Below is a quick update on the recent payroll tax legislation.  If you’re and Indiana business and need help with payroll or payroll taxes, please feel free to call my office.
– Tyler

Payroll tax cut temporarily extended. The Temporary Payroll Tax Cut Continuation Act of 2011 was enacted late last year. It extends the two percentage point payroll tax from 6.2% to 4.2% of wages paid through Feb. 29, 2012. The law also includes a “recapture” provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period (i.e., two-twelfths of the 2012 wage base of $110,100). This provision imposes an additional income tax on these higher-income employees in an amount equal to 2% of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100). In addition, under the new law, the social security tax rate for a self-employed individual remains at 10.4%, for self-employment income of up to $18,350 (reduced by wages subject to the lower rate for 2012). Congress is going to try to negotiate a deal to extend the payroll tax cut for all of 2012. If a deal is struck to extend it for the full year, the recapture provision for employees would not apply.
Excerpted from RIA/Thomson Reuters article January 10, 2012 – All rights reserved.