The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.
The information at the end of this article is VERBATIM from an e-mail which I regularly receive from the Internal Revenue Service as a tax practitioner. Please read it and make your own interpretations. There are two tax issues which are addressed:
1. Payroll Tax Extension (Employee Only) – for many years the combined (total) payroll taxes which are paid by both the employee (and matched in an equal amount) and employer has been 15.3% of your gross taxable earnings (usually total earnings less your retirement plan contributions and your medical premiums deductions). The breakdown is as follows: Social Security taxes – 6.2% for each contributor. The total Social Security tax rate is 12.4%. Your “taxable social security salary or wage base” is set an an annual maximum ($106,800.00 for 2011; $110,100.00 for 2012).   The Medicare tax rate is 1.45% for each contributor with no maximum annual earnings limitation. The total is 2.9%.  12.4% plus 2.9% = 15.3%.
In 2011 the employee payroll tax rate was temporarily reduced from 6.2% to 4.2%. The employer Social Security payroll tax rate has remained at 6.2%. The media have bantered the stipulation that if the average annual income rate for an American employee is $50,000.00, then this 2% reduction in employee Social Security payroll taxes would provide about $1,000.00 less in payroll taxes and an equivalent amount to boost our economy. The Medicare tax rates have always remained at the same 2.90% total tax rate. This temporary employee payroll tax rate reduction was to expire on December 31, 2011. In the past ten days the U.S. Congress has extended the employee Social Security rate reduction expiration date until February 29, 2012. The current mindset (again as reported by the media) is to extend the payroll tax rate for the entire year. Stay tuned.
2. NEW Income Tax “Recapture” – it is generally acknowledged that the current administration is very passionate regarding taxing those Americans who are considered to be “high income earners.” If you earn more than $18,350.00 during the above two month period (equals two months earnings at  the above $110,100.00 annual maximum amount), in 2013 when you file your 2012 income tax return you will be required to pay an additional income tax of 2% x your gross earnings in excess of $18,350.00 which were earned during the first two months of 2012.
Please remember that 2012 is an election year!
The entire text from the IRS follows:
Payroll Tax Cut Temporarily Extended into 2012 |
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