Tax Alert: Reduced Social Security Tax Extended for Remainder of 2012
2/17/2012
Congress has approved legislation extending the 4.2 percent employee portion of Social Security Tax for the remainder of 2012. The bill is expected to be signed by President Obama shortly.
In December 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 that contained a provision reducing the employee share of Social Security Tax from 6.2 percent to 4.2 percent for calendar year 2011. Then, in late December 2011, the president signed the Temporary Payroll Tax Cut Continuation Act of 2011 that further extended the 4.2 percent tax rate through the end of February 2012.
This legislation locks in the 4.2 percent employee Social Security Tax rate for all wages paid during calendar year 2012. The 2012 wage base, to which the 4.2 percent rate is applied, is $110,100 resulting in maximum employee Social Security Tax of $4,624.20. Self-Employment Tax for 2012 will also reflect the two-percentage-point rate reduction—10.4 percent Social Security Tax component imposed on the first $110,100 of self-employment income plus 2.9 percent Medicare Tax component imposed on all self-employment income.
No other changes to the tax code were included in this legislation. The Bush-era tax cuts remain set to expire after 2012 and numerous tax provisions such as the R&D tax credit, sales tax deduction, and increased individual AMT exemptions that expired at the end of 2011 await legislation reinstating them.
For further information about these or other tax filing requirements, please contact Neil Becourtney, CPA, J.H. Cohn partner, at nbecourtney@jhcohn.com or 973-364-6671, or your J.H. Cohn engagement partner at 877-704-3500.
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