PRESIDENT SIGNS PAYROLL TAX-CUT BILL

On February 22, President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012 (HR 3630). This law extends the 2% reduction in employment taxes and a like adjustment in SE taxes through December 2012.

The new law also repeals the 2% recapture tax included in the December legislation that effectively capped at $18,350 the amount of wages eligible for the payroll tax cut. As a result, the now-repealed recapture tax does not apply.

The lower rate will have no effect on workers’ future Social Security benefits. The reduction in revenues to the Social Security Trust Fund will be made up by transfers from the General Fund.

The IRS has also released revised Form 941 enabling employers to properly report the newly extended payroll tax cut.

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