The Temporary Payroll Continuation Tax Cut of 2011, effectively reducing the Social Security tax withholding rate from 6.4% to 4.2%, has just been extended through February 29, 2012. What does this mean to employers and employees?
Employers:
The extension continues the 2% point reduction in the Social Security tax withholding rate.
Employers must implement the withholding rate reduction by January 31, 2012. If an employer fails to make the adjustment, they have until March 31, 2012 to make an offsetting adjustment in their employees’ pay.
Employers should be aware of the “Recapture Provision” which applies to employees with wages of $18,350 or more during the two-month period. There is an additional 2% income tax on the amount of wages an employee receives that exceeds the $18,350 (up to $110,100) during this period.
Employees:
The reduction in the withholding rate will have no bearing on Social Security benefits in the future. Employees do not need to take any action to enjoy the reduced tax extension.
For HR Knowledge’s Payroll Processing and Payroll Management clients, no further action is needed as the Temporary Payroll Continuation Tax Cut adjustment s automatically implemented by the HR Knowledge team.
For more comprehensive guidance on the Temporary Payroll Continuation Tax Cut or the Recapture Provision, contact HR Knowledge, Inc. at Sales@hrknowledge.com or call at 508-339-1300.
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