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December 27, 2011 at 05:02 AM
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).
