On February 22nd, President Obama signed into law a much anticipated extension of the employee side payroll tax cut through the end of 2012. After weeks of uncertainty over whether an agreement could be reached, the House passed the Middle Class Tax Relief and Job Creation Act of 2012 and then the Senate approval quickly followed.
Employees will pay only 4.2% Social Security tax on wages up to $110,100 (wage base for 2012) and self-employed individuals will pay only 10.4% Social Security self-employment taxes on self-employment income up to $110,100. The maximum savings for 2012 will be $2,202 per taxpayer. If both spouses earn at least as much as the wage base, the maximum savings will be $4,404. The Internal Revenue Service has released an updated Form 941 for employers to use that reflects the extension of the lower rate.
The Joint Committee on Taxation has estimated that approximately 170 million wage earners and self-employed individuals will benefit from the payroll tax deduction in 2012. The White House figures that taxpayers on average will see a $1,000 increase in take home pay in 2012. The extension benefits both employees and those self employed.
For complete details about the Middle Class Tax Relief and Job Creation Act of 2012, click on the article below. Special Report: Middle Class Tax Relief and Job Creation Act of 2012
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