In 2009, the Social Security Administration instituted a Social Security wage base increase to $106,800, up from $102,000 the previous year. That rate has remained the same for 2009, 2010 and 2011. However, for 2012 it is back on the rise, up to $110,100. This means that Social Security taxes will need to be withheld on an additional $3,300 of income for 2012, or an effective increase of $409.20 assuming rates return to 6.2% for employer and employee. More on that to follow as we monitor any more possible changes in the Social Security rate.
In 2011, a law was passed decreasing the employee portion of Social Security withholding to 4.2%. This special lower rate was intended to replace the Making Work Pay credit which expired after 2010. In 2012, as of right now, the employee rate is scheduled to return to 6.2%. There are currently plans on the table to extend the 4.2% rate, or to drop the employee rate to 3.2% and cut the employer rate to 3.1%. Judging from recent congressional action, we think the best bet is that in late December the 4.2% rate for employees will be extended in to 2012. We will keep you posted on any upcoming bills or pending legislation. One thing is for certain, change has been constant and is here to stay.
If you have any questions regarding the impact to your business, please don’t hesitate to give us a call.