The House of Representatives agreed to pass the Senate version, with a slight modification, of the Bill to extend for two months (thru 2/29/12) the current 2% reduction in payroll taxes. The House and Senate will ratify it and the President is expected to sign it today.
The new House bill corrects the Senate provision by allowing employers to withhold employee payroll taxes at the 2% reduced rate of 4.2% on all compensation paid from 1/1/12 to 2/29/12, subject to the full Social Security tax wage base ($110,100). Consequently they can ignore the $18,350 cap (two-twelfths of the wage base of $110,100) on compensation eligible for the form 1/1/12 to 2/28/12 included in the Bill.
If an employee’s wages during the first two months of 2012 exceed $18,350, an amount equal to 2% of those excess wages would ultimately be recaptured on the worker’s individual tax return for 2012.
This rule would only apply if the payroll tax reduction is not extended to the end of 2012 in the upcoming conference committee sessions expected to convene soon in order to negotiate a full-year extension or other 2012 legislation.
In other words, they aren’t done yet. Can’t wait to watch it unfold.
Merry Christmas.
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