Extension of Payroll Tax Cut
President Obama will be signing an extension of the 2% payroll tax cut (Social Security tax) shortly, extending the employee’s payroll tax cut to December 31, 2012.
Background: Payroll or “FICA” tax withholding from employee paychecks is 6.2% of pay for Social Security funding and 1.45% for Medicare funding (total “FICA” of 7.65%). As an economic stimulus, federal legislation had temporarily reduced the Social Security portion from 6.2% to 4.2% for the 2011 year – thus giving employees another 2% in their net take-home pay. This was scheduled to expire on December 31, and the cut amount would be taken out of paychecks again. (As an example, 2% of pay is about $11.50 per week for someone making $30,000 per year.) This new legislation will extend the cut for another year, to December 31, 2012.
The compromise passed by Congress last week also extends long-term unemployment benefits and delays a steep reduction in reimbursement rates to physicians for treatments for Medicare recipients.
All three measures were otherwise scheduled to expire at the end of this month.
