Federal Government Extends Payroll Tax Reduction Through 2/29/2012

Congress has agreed to extend the Temporary Payroll Tax Cut Continuation Act of 2011 through February 29, 2012. This extension continues to reduce every employee’s Social Security withholding for employees from 6.2% to 4.2%. As has been the case since the enactment of the tax cut, the employer rate remains unchanged at 6.2%.  Both the Employee and Employer Medicare tax will continue to be 1.45% with no maximum cutoff.
Due to the fact that Congress just passed this extension, the IRS has given businesses until March 31, 2012 to comply with the 4.2% social security tax rate; however PEOs are already making the necessary changes to ensure that all of their client company employees receive benefit of the adjusted 4.2% tax rate starting at the first of the year.
Furthermore, Congress has included a new “recapture” provision, in which employees that are paid at least $18,350 during the period between January 1 and February 29, 2012 will be taxed at a higher rate. However this recapture tax will not affect these employee’s paychecks; instead these high wage earners will pay a tax adjustment when they file their income tax return in 2013.
As a service to employees, those needing assistance in determining W-4 withholdings can access the online IRS Tax Withholding Calculator by clicking HERE.
For more question regarding your company’s payroll administration and how a PEO can alleviate many of your employee administration headaches, contact an LL Roberts Group PEO Consultant (toll free) at 877.878.6463.
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