BSI has already updated BSI TaxFactory™ for our customers, responding quickly to Congress approving the extension of the reduced Employee Social Security Tax Rate through February 2012.
The two-month extension of the payroll tax cut was signed by the President on Friday, December 23, and made available to BSI customers for implementation immediately after the holidays on Tuesday, December 27.
“We closely monitored the Congressional vote and remained on alert to implement the changes once the Temporary Payroll Tax Cut Continuation Act of 2011 was passed by Congress and signed by the President,” said Russell Rindik, BSI Vice President of Operations. “This is important to our customers, and we wanted to make the update available as soon as possible.”
Nearly 160 million workers will benefit from the extension of the reduced payroll tax rate that has been in effect for 2011. The Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extends the two percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through Feb. 29, 2012. This reduced Social Security withholding will have no effect on employees’ future Social Security benefits.
Employers should implement the new payroll tax rate as soon as possible in 2012 but no later than Jan. 31, 2012. For any Social Security tax over-withheld during January, BSI TaxFactory’s self-adjusting feature will automatically make the appropriate adjustments, relieving employers of having to make any manual adjustments in workers’ pay.
Under the terms negotiated by Congress, the law also includes a new “recapture” provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period (the Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount). This provision imposes an additional income tax on these higher-income employees in an amount equal to 2 percent of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100). Note that the recapture tax is payable in 2013 when the employee files his or her income tax return for the 2012 tax year.
If you have any questions, please contact us at support@bsi.com.