Posts Tagged ‘Tax’
The Middle Class Tax Relief and Job Creation Act of 2012 (the “Act”) was signed into law on February 22, 2012. The legislation extends, through the end of 2012, the two percentage point payroll tax cut for employees and self-employed individuals that had been in place for 2011 and the first two months of 2012.
As part of an economic stimulus law, the Social Security payroll tax for 2011 was reduced by two percentage points, from 6.2% to 4.2%. A similar reduction was applied to the self-employment tax for self-employed individuals. At the end of last year, those payroll and self-employment tax cuts were extended for two months, through February 2012.
Payroll Tax Cut Extended Through 2012
For the balance of 2012 only, employees will continue to pay a 4.2% Social Security tax rate on wages up to $110,100 (the 2012 Social Security Wage Base). Similarly, the Act reduces the tax rate for the Social Security portion of self-employment tax on self-employment net earnings up to $110,100.
Therefore, the maximum savings for employees and self-employed individuals in 2012 will be $2,202 (i.e., 2% of $110,100). For spouses who both earn at least as much as the Social Security Wage Base in 2012, the maximum savings will be $4,404.
Note that employers continue to pay the full employer portion of Social Security taxes for their employees.
We can help you determine how the extension affects you or your business. Contact us at 800-269-6466.
In fact, you’ll want to update your tax tables as soon as possible – BEFORE you run your first payroll of 2011. Usually you have until January 31 to update the tables, but with the legislature’s reduction of the Social Security tax to 4.2%, if you don’t update the tax tables prior to running your first payroll; you’ll have a lot of manual work in the form of reimbursements to employees ahead of you.
If you are using Sage Abra or Sage MIP Fund Accounting Payroll all updates are available for download. Here is some information regarding the changes to these solutions:
Version 10.2.8 released 1/4/11 with the following tax table and other updates included:
- Employee social security withholding rate moves to 4.2% – no change to wage base
- Earned Income Credit no longer applicable
- Withholding tables updated to reflect the new 2011 federal rates
- HIRE Act expired effective 12/31/2010. All HIRE Act benefit codes should be changed to Discontinued.
- Clients must have installed V10.2.6 prior to upgrading to V10.2.8
There will be further updates as necessary for states whose rate changes rely on federal updates and have not as yet published their withholding tables for 2011.
All releases are available via the Support Knowledge Base
• Released the week of Dec 27 and includes:
- All tax rate changes to both Social Security, and Railroad Tier 1 wages, as well as federal withholding tax rate changes
- Other relevant changes as per the new legislation
- As well, as additional states provide their withholding tables, further updates will become available for download by the Support Plus Online
If, by chance, you have run a payroll already and need some help, please let us know.
Earning the trust of nonprofit organizations and human resource departments since 1994, Huckstep & Associates supports clients in Missouri, Michigan, Texas, Arkansas, Kansas, Colorado, Oklahoma, Texas, Minnesota, and throughout central United States.