UPDATE: Congress, eight days before its scheduled expiration, passed a two-month extension of the payroll tax-cut. Lawmakers on both sides of the debate will once again pick up the negotiations for a longer-term deal early in 2012.
The two percentage point payroll tax-cut on employees’ wages will continue through February 2012 at which time the temporary tax-cut would, once again, expire if no further action is taken.
The sticking point on the payroll tax-cut revolves around how the initiative should be funded. Democrats are supportive of an increase in the taxes on the wealthy while Republicans remain opposed to any tax increases.
As of the publication of this post, the United States Congress has failed to extend the 2011 temporary reduction in payroll taxes. If no agreement is reached by year end, approximately 160 million American workers will take home less money from their paychecks beginning in January.
Much like the harrowing tax negotiations that occurred at the end of 2010, the political wrangling of 2011 is continuing right through to the end of the year. In 2010, Congress passed a temporary reduction in employees’ payroll taxes, reducing the amount of social security that is withheld. This reduction resulted in about $20 of extra take home pay per week for an employee earning $50,000 per year. Without an extension of the payroll tax cut, that extra take home pay will be eliminated and a “tax increase” will occur.
There are many year end tax decisions that can save you and your family money. Call the lawyers at Kohler & Smith Co., LPA today to discuss what alternatives could be beneficial for you!