One week ago, President Barack Obama signed a two-month extension of the payroll tax cut following a protracted battle on Capitol Hill that left many wondering if a deal would be done in time for the holidays.
As the smoke clears, millions of Americans are now taking note of the impact brought by the extension.
Although the employer Social Security tax rate remains unchanged at 6.2%, the two-month extension prolongs the 2% payroll tax cut for employees, which continues the reduction of their Social Security tax withholding rate from 6.2% to 4.2% of wages paid through the end of February, when the latest extension is set to expire.
Had the higher rate returned, approximately 160 million Americans would have seen an average tax increase amounting to a $40 deduction every pay period.
Intuit Payroll Updated
For employers using Intuit Payroll, the passage of the tax cut won’t cause any headaches. Intuit Payroll has been updated to reflect the outcome of Washington’s high drama before the holidays.
QuickBooks Payroll and Assisted Payroll users can download Payroll Update 21202, which will include modifications to the Social Security withholding tax rate to 4.2% (the employee portion). Assuming you have Internet access, simply download and install the payroll update.
QuickBooks software will download and install the update for you, but only if you have Automatic Updates turned on and have selected all updates to download automatically.
If you subscribe to the Disk Delivery service, the next disk delivery is scheduled for delivery in late January. It will include this update and more.
If you’re waiting to see the Payroll Item for the Social Security Employee rate in QuickBooks change to 4.2%, as long as you’ve downloaded Payroll Update 21202, the Payroll Item for the Social Security Employee rate will be updated once the date on your computer reaches January 1, 2012.
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