Tax Update

I am glad I am not a programmer for a payroll service.  This is quite a lot to change and test in a rather short period of time.  One wonders if this all will be extended at the last moment so enjoy your 2% tax decrease for at least another two months!

Payroll tax cut extended for two months

After weeks of partisan bickering, Congress finally approved a two-month extension of the payroll tax cut for American workers.  President Obama signed the “Temporary Payroll Tax Cut Continuation Act” on December 23, 2011. Though both Democrats and Republicans wanted a one-year extension of the tax cut, they could not agree on how to pay for a year-long extension and settled on a paid-for two-month extension.

The new law extends the 4.2% social security tax on wages through February 29, 2012. Without this extension, the employee tax rate would have gone to 6.2% on the first $110,100 of wages earned in 2012.

The law also extends benefits for the long-term unemployed for two months and prevents a scheduled cut in fees paid to Medicare providers from taking effect January 1, 2012.

These extensions will be paid for by an increase in fees charged by government-backed mortgage companies (Fannie Mae and Freddie Mac) for new home loans. 

Included in the agreement is a requirement that President Obama make a decision within 60 days on the construction of the 1,700 mile Keystone oil pipeline.

Finally, the law calls for a House-Senate conference committee to negotiate an agreement that would extend the payroll tax cut through the end of 2012, extend unemployment benefits, and prevent cuts in payments to Medicare doctors.

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