In “wacky fun with Congress” news, the 2-percent payroll tax cut for employees has been extended through the end of February. Employees will have their Social Security tax withholding rate reduced from 6.2 percent to 4.2 percent of wages paid through Feb. 29, 2012.
According to the IRS, “Employers should implement the new payroll tax rate as soon as possible in 2012 but not later than Jan. 31, 2012. For any Social Security tax over-withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2012.”
Ironically, both Democrats and Republicans—and the President—want to extend the tax cut through 2012. The reason for the two-month vote is because the two parties can’t agree on the source of funds to make up for the payroll tax shortfall. So it’s likely that the cut will be extended through the year and we won’t have to tear our hair out come W-2 time next year.
Rest assured that no matter what direction the payroll tax takes, COATS will keep you up-to-date and in compliance with the current tax structure. We’re just as frustrated as you are. 🙂