The Internal Revenue Service released a revised
President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012 into law on Wednesday (see
The law also extends emergency unemployment benefits through the rest of the year, along with the so-called "doc fix" to prevent the Medicare physician reimbursement rate from plummeting.
The IRS noted that no action is required by workers to continue receiving the payroll tax cut, and the lower rate will have no effect on workers’ future Social Security benefits. The reduction in revenues to the Social Security trust fund will be made up by transfers from general revenues.
Self-employed individuals will also benefit from a comparable rate reduction in the Social Security portion of the self-employment tax from 12.4 percent to 10.4 percent. For 2012, the Social Security tax applies to the first $110,100 of wages and net self-employment income received by an individual.
The new law also repeals the 2 percent recapture tax included in the December legislation that effectively capped at $18,350 the amount of wages eligible for the payroll tax cut. As a result, the now-repealed recapture tax does not apply.
The IRS said it would issue additional guidance, as needed, to implement the newly-extended payroll tax cut, and any further updates will be posted on