On Monday, December 6, President Obama announced that a tentative agreement had been reached between his administration and Republican leaders on legislation that would break the impasse over the expiration of the Bush-era tax cuts that are set to expire on December 31. Under the plan announced by Obama, the current individual income tax rates of 10%, 15%, 25% 28%, 33% and 35% would continue in effect through the end of 2012.
If enacted, the plan would also reduce the employee’s share of social security tax in 2011 by 2% – from 6.2% to 4.2%. Therefore, the maximum an employee would pay in social security tax (if the employee is paid at least the wage base of $106,800) is $4,485.60, a decrease of $2,136 from the current law maximum of $6,621.60. Employers would continue to pay the full rate of 6.2%. No formal legislation has yet been introduced in either house of Congress, so it is unclear whether other provisions of interest to payroll professionals, including an extension of the educational assistance exclusion under IRC Sec. 127 or the parity between qualified transit and parking benefits under Sec. 132, will be included.
Source: American Payroll Association