Yesterday President Barack Obama signed into law the Middle Class Tax Relief and Job Creation Act of 2012 (2012 Tax Relief Act). The act extends through Dec. 31, 2012, a decrease of the employee portion of the Social Security payroll tax that was due to expire Feb. 29, 2012.
The 2012 Tax Relief Act reduces from 6.2 percent to 4.2 percent the amount of Social Security tax required to be withheld from wages through Dec. 31, 2012. The rate reduction applies to employees and self-employed individuals but has no impact on the employer portion of the Social Security payroll tax liability. The act also repeals a provision that imposed a 2 percent income tax on individuals receiving more than $18,350 during the first two months of 2012.