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February 21, 2012

Congress Extends Payroll Tax Holiday Through 2012

Churches must verify employee withholdings are correct.

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Congress on Friday voted to extend the payroll tax holiday through December 31, 2012, adding an extra $20 per week on average to paychecks for 160 million workers.

President Obama previously pledged to sign any extension into law once it was passed.

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 on December 31, 2011, a temporary extension through February 29, 2012, was passed.

With the extension now approved for the remainder of 2012, employers, including churches, need to make certain they're meeting withholding requirements. Employees who are eligible for Social Security should have 4.2 percent withheld, as well as 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.

The national deficit will grow by another $126 billion over five years as a result of the extension. Supporters of the extension said employees will not see lowered Social Security benefits in the future as a result of the reductions, although in recent weeks, debate about that has grown.

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

Comments

The comment about the deficit was out of place in this article. You could have just reported on the extension without last paragraph. If you wanted to, you could have addressed the deficit issue in a different piece.

taxes taxes taxes... yeesh.

A very informative article, although I have to agree with the first comment from Sam. The deficit issue did not need to be mentioned here.

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