Under current law, the employee-side Social Security tax equals 6.2% of the first $110,100 of wages, and the self-employment side equals 12.4% of such self-employment income. In December 2010, however, Congress reduced these tax rates by two percentage points during 2011. This meant that employees paid only 4.2% on wages and self-employed individuals paid only 10.4% on self-employment income.
The recently enacted Temporary Payroll Tax Cut Continuation Act of 2011 extended this tax cut through February 2012.
Congress passed legislation Friday extending the payroll tax cut through the remainder of the year. President Obama is expected to sign it into law before the current two-month extension expires at the end of this month. As a result, for 2012, employees will pay only 4.2% Social Security tax on wages up to $110,100 (wage base for 2012) and self-employed individuals will pay only 10.4% Social Security self-employment taxes on self-employment income up to $110,100.
Every year, McFadyen & Sumner continuously monitors changes in local, state, and federal laws that affect our clients. You can be assured that we will continue to take care of the administrative details – so you can focus on running your business.