More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
As part of the two-month extension of the payroll tax cut negotiated by Congress that begins in January, higher-income wage earners will be subject to a new “recapture” provision, according to the IRS.
The Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extends the two-percentage-point payroll tax cut for employees, says the agency, continuing the reduction of the Social Security tax withholding rate from 6.2% to 4.2% of wages paid through February 29, 2012. This reduced Social Security withholding, it adds, will have no effect on employees’ future Social Security benefits.
Wage earners who receive more than $18,350 in wages during the two-month period will pay an additional income tax. The Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount. Those employees whose income tops this amount will be subject to an additional income tax, in an amount equal to 2% of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100).
This additional recapture tax is an add-on to income tax liability that the employee would otherwise pay for 2012, and is not subject to reduction by credits or deductions. The recapture tax would be payable in 2013 when the employee files his or her income tax return for the 2012 tax year. With the possibility of a full-year extension of the payroll tax cut being discussed for 2012, the IRS says it will closely monitor the situation in case future legislation changes the recapture provision.
The IRS also said employers should implement the new payroll tax rate as soon as possible in 2012, but not later than Jan. 31. For any Social Security tax over-withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31.