Client Alerts Congress Passes 2012 Payroll Tax Holiday Extension

Publication
02.24.12

On Wednesday, President Barack Obama signed the Middle Class Tax Relief and Job Creation Act of 2012, which extends the reduced 4.2% Social Security tax rate through the end of the year.

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On Wednesday, President Barack Obama signed the Middle Class Tax Relief and Job Creation Act of 2012, which extends the reduced 4.2% Social Security tax rate through the end of the year.

Background
The employee portion of the Social Security tax was reduced from 6.2% of the first $106,800 of wages to 4.2% for 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The employer portion remains at 6.2%. Under the Temporary Payroll Tax Cut Continuation Act of 2011, enacted Dec. 23, 2011, the 4.2% rate was extended through Feb. 29, 2012. For 2012, that rate applies to the first $110,100 of wages.

The Act also extends certain unemployment benefits and blocks a cut in Medicare payments to doctors. Lawmakers agreed not to require the $93.2 billion estimated cost for the payroll tax cut extension to be offset by revenue-raising provisions.

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