2012 Payroll Tax Rates & Limits
December 2011
As you have probably heard, both chambers of Congress passed an amended version of the two-month payroll tax cut this morning and have sent the measure to President Obama’s desk for signing later today. After the holiday break House and Senate members will resume negotiations on a year-long extension of the tax cut.
The agreement, however, calls for new language to be inserted into the tax relief bill to prevent a potential payroll tax problem for employers. According to information provided by the House Ways & Means Committee, the revision would allow employers to withhold employee payroll taxes at 4.2% (instead of 6.2%) on all wages paid during the two-month extension period, subject only to the full 2012 wage base ($110,100) and without regard to the $18,350 cap (two-twelfths of the wage base of $110,100) on wages earned through the end of February, 2012. If an employee’s wages during the first two months of 2012 exceed $18,350, and the payroll tax reduction is not extended for the remainder of 2012, an amount equal to 2% of those excess wages would ultimately be recaptured on the worker’s individual tax return for 2012. If you have any questions about any of the new provisions, contact us at 805.541.2500. We will be happy to help.
Also we want to take this opportunity to wish you a Happy New Year and to provide you with the attached information that we have compiled regarding payroll issues and rates for 2012 and hope it will help you manage the New Year.
Click the link to download the 2012 Payroll Tax Rates & Limits PDF.
Pursuant to IRS Circular 230, the Internal Revenue Service requires us to inform you that any tax advice included herein is not intended or written to be used, and it cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed by the IRS on the taxpayer. That said, please do not hesitate to contact us if you have any further questions regarding this matter.
Tags: Payroll
