On February 22, President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012 (HR 3630). The new law extends through December 2012 a reduction in employment tax rates from 6.2 percent to 4.2 percent for employees and the self-employed.
The employee OASDI tax rate was previously reduced from 6.2% to 4.2% by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), which was in effect for 2011. On December 23, 2011, President Obama signed into law HR 3765, the Temporary Payroll Tax Cut Continuation Act of 2011, extending the 4.2% employee OASDI tax rate paid after December 31, 2011 and before March 1, 2012.
The 4.2% employee OASDI rate will now be effective from January 1, 2012 through December 31, 2012. The maximum OASDI tax for employees will now be $4,624.20 for 2012. Medicare Tax and the Employer Portion of Social Security Tax remain unchanged.
Employees also currently pay a Medicare tax equal to 1.45% of all covered wages, with no taxable wage limit. The Medicare tax is unchanged by the Middle Class Tax Relief and Job Creation Act.
In addition, employers will continue to pay the OASDI tax of 6.2% up to the taxable wage limit for each worker ($110,100), as well as the 1.45% Medicare tax, with no limit. Only the employee portion of OASDI was decreased to 4.2%.
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