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February 15, 2012

Extension of Payroll Tax Holiday Appears Likely

Churches will need to verify employee withholdings are correct.




Congress appeared close late Tuesday to passing an extension of the payroll tax holiday through December 31, 2012, for millions of workers. A bill may be finalized Wednesday and put before President Obama for signature by the end of the week, the Associated Press reported.

The payroll tax cut involves a 2-percent reduction in employee withholdings for Social Security. The holiday was originally passed toward the end of 2010 for the 2011 year; just before it expired, a temporary extension through February 29, 2012, was passed.

Employers, including churches, need to make certain they're meeting the requirements of the temporary extension, withholding 4.2 percent for employees who are eligible for Social Security and 1.45 percent for Medicare, for a combined 5.65 percent on each paycheck. Ministers are self-employed for Social Security with respect to their ministerial services, so their combined withholding rate for Social Security and Medicare is 13.3 percent.

With an extension, these rates will continue through December 31, 2012, putting $20 into an average worker's paycheck each week, the Associated Press reported. The national deficit will grow by another $100 billion, but lawmakers have previously said employees will not see lowered Social Security benefits in the future as a result of the reductions.

Check ManagingYourChurch.com and Church Finance Today for additional updates.

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Posted by Matt Branaugh on February 15, 2012 12:32 AM

Related Tags: finance, IRS, payroll, tax, treasurers

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