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Saturday, February 25, 2012

Good News for Employess_Payroll Tax Holiday Extended

On February 17, 2012, Congress passed the Middle Class Tax Relief and Job Creation Act of 2012 (H.R. 3630). President Obama signed the bill February 22, 2012.

In addition to a number of other provisions, H.R. 3630 extended the payroll tax reduction which had previously been scheduled to expire at the end of February. Under the new law, for all of 2012, employees will pay the Old-Age, Survivors, and Disability Insurance (OASDI) portion of the payroll tax at a 4.2% rate (compared with 6.2%), on the first $110,100 in wages. Similarly, self-employed individuals will pay OASDI at a rate of 10.4% (rather than 12.4%) on the first $110,100 in self-employment income. The 2.0% reduction in OASDI does not apply to employers; an employer’s share of OASDI remains at 6.2%

The Medicare Hospital Insurance (HI) tax remains at 1.45% each for employers and employees, and at 2.90% for self-employed individuals, on all wages and earnings.

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