December 28, 2011
Authored by: benefitsbclp
On Friday, President Obama signed a bill (H.R. 3765) that will temporarily extend the payroll tax holiday. The 4.2% Social Security payroll tax rate for individuals (historically 6.2%), which was set to expire on December 31, 2011, will continue though February 29, 2012. The IRS encouraged employers to implement the tax rate cut as soon as possible, but no later than January 31, 2012. For any Social Security tax over-withheld in January, employers should adjust employees’ pay no later than March 31, 2012.
The legislation also extends unemployment insurance benefits without imposing any new qualifications and prevents reimbursement cuts to Medicare providers, which were scheduled to be cut by 27%. A joint conference committee with House and Senate members was established to negotiate further extensions of the tax cut, unemployment insurance benefits, and Medicare reimbursement provisions. The bill will be paid for by raising the guarantee fee charged by Fannie Mae and Freddie Mac to loan originators.