Congress gave all wage earners a short-lived 2012 reprieve by temporarily extending the 2% payroll tax cut though February of 2012.
The payroll tax, frequently referred to as FICA or OASDI on your paycheck, has historically been 6.2%. This is the tax that funds the Social Security Administration. For 2011, as an economic stimulus measure, Congress temporarily reduced the rate to 4.2%. They also provided self-employed individuals with a corresponding two percentage point reduction by lowering the Social Security portion of the SE tax from 12.4% to 10.4%.
Congress had previously extended this 2% tax cut and now has decided to continue this reduction in payroll tax through the end of 2012.
Steve Trojan, CPA is owner of Complete Payroll, Inc. (www.completepayrollinc.com), a Crystal Lake payroll company, and SMT & Associates, Inc. (www.smt-associates.com), a Crystal Lake tax and accounting firm. Complete Payroll offers a full range of payroll services to Illinois and Wisconsin small businesses.