Looks like the Idiots in DC have extended the social security payroll tax cut for a period of two months! Thus employee’s social security tax rate will remain at 4.2% until Feb. 29, 2012. The employer’s share will remain at 6.2%.
The $33 billion package also provides extended federal unemployment benefits for two months, avoids a cut in payments to doctors who treat Medicare patients and compels the Obama administration to act within 60 days on a permit for the Canadian proposed Keystone XL pipeline expansion.
One difference in the final agreement is the elimination of a Senate-crafted plan that would have changed the way payroll taxes would have been deducted for higher-paid workers, a move that would have meant significantly changing payroll systems. The Senate proposed that any one earning over $110,100 (2012 max wage cap) would only be eligible for the payroll tax cut equaling 1/6 of the annual payroll tax cut (basically limiting the tax cut to the first $18,350 of earnings) … a payroll processing nightmare. Payroll departments are breathing a sigh of relief, at least for now.
The bill’s $33 billion cost is expected to be covered by an increase in fees charged to mortgage lenders by government housing agencies Fannie Mae and Freddie Mac. The fee increase, expected to raise about $35.7 billion in revenue over 10 years, likely would be passed on to new-home buyers, raising their monthly mortgage payments by as much as $15 on mortgages of $210,000.
Experts note that, as you read this, the IRS is allocating valuable resources to design a new 941 and 944 form that takes into account a two month payroll tax break, one that does not even occur for the entire first quarter. Payroll software engineers are also scrambling. The same prognosticators are also predicting that the efforts will be a waste a time (but what choice do they have) as eventually the Idiots in DC will extend the credit for the entire year.