On Wednesday, President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012, which extends the 2 percent payroll tax cut through 2012. In response, the IRS has released a revised Form 941.
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No action is required by workers to continue receiving the payroll tax cut. As before, the lower rate will have no effect on workers’ future Social Security benefits.
Self-employed individuals will also benefit from a rate reduction in the social security portion of the self-employment tax from 12.4 percent to 10.4 percent. For 2012, the social security tax applies to the first $110,100 of wages and net self-employment income received by an individual.
The new law also repeals the 2 percent 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 As a result, the now repealed recapture tax does not apply.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 IRS will issue additional guidance, as needed, to implement the newly-extended payroll tax cut.