Payroll Tax “Holiday” Update – Ceridian

Posted on January 9, 2012


Our Payroll Department stumbled across this article, which was found from our payroll system, Ceridian’s newsletter.

On Friday, December 23, 2011, President Barack Obama signed H.R. 3765, the Temporary Payroll Tax Cut Continuation Act of 2011, into law. The Act extended the reduced 4.2% employee social security tax rate that applied in 2011 through February 29, 2012. The employee rate cut is often referred to as the payroll tax “holiday”.

The 2012 employee social security rate in HR/Payroll is set to remain at 4.2% until further guidance is issued. The employer social security tax rate is not affected by the Act and will continue to be calculated at 6.2%in 2012.

Under the Act, the continued 4.2% employee rate applies on the first $18,350 of subject wages paid in January and February of 2012, and an additional 2% tax applies on wages in excess of $18,350 but not exceeding the annual wage base of $110,100. However, the language of the law is not clear on whether employers are expected to withhold the additional tax or if affected employees will be required to pay it when they file their income tax returns in 2013. The Act directs the Secretary of the Treasury to issue applicable guidance.

Senate and House lawmakers plan to resume conversations in the near future to approve a longer term extension of the ““holiday”.

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