Congress Passes Full Year Extension of 2% Payroll Tax Cut
By Admin|2012-02-20T14:05:31+00:00February 20, 2012|Uncategorized|Comments Off on Congress Passes Full Year Extension of 2% Payroll Tax Cut
|Congress Passes Full Year Extension of 2% Payroll Tax Cut
On February 17, the U.S. Senate and House of Representatives passed H.R. 3630, the Middle Class Tax Relief and Job Creation Act of 2012 (Tax Relief Act of 2012). The bill now goes to President Obama for his signature, and he has indicated he is in favor of the legislation.
The Tax Relief Act of 2012 extends until the end of 2012 the reduction in the social security tax rate paid by employees from 6.2% to 4.2% that was first implemented for 2011 by the Tax Relief Act of 2010 (Pub. L. No. 111-312). With the reduction set to expire December 31, 2011, and the employee social security tax rate scheduled to reset to 6.2%, Congress passed the Temporary Payroll Tax Cut Continuation Act of 2011 (Pub. L. No. 112-78), which extended the reduction through the end of February 2012.
The Tax Relief Act of 2012 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 so they would not gain more of a benefit from the temporary payroll tax cut than employees who were not paid more than that amount during those two months.
Emergency Unemployment Benefits Continued and Modified
The Tax Relief Act of 2012 extends and revises unemployment benefits under the Emergency Unemployment Compensation (EUC) program, which had been set to expire February 29. EUC benefits are payable in four tiers, as under current law, but the payment thresholds are tightened for June through August, and again for September through December. The EUC program will not provide benefits after December 31, 2012, and there will be no phase-out of EUC benefits beyond that date. Other changes allow states greater flexibility in administering their unemployment insurance programs and implementing overpayment recovery measures.
Source: American Payroll Association