Tax Relief Act of 2012

Updated: 2/21/2012
The Tax Relief Act of 2012 has been extended throughout the remainder of the year.

The Tax Relief Act of 2012 temporarily extends the two percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through December 31, 2012. This reduced Social Security withholding will have no effect on employees' future Social Security benefits.

As part of the extension of the legislation throughout 2012, the number of weeks an individual may receive unemployment benefits was reduced from 99 weeks to 73 weeks for those living in states with an unemployment rate higher than the 8.3 percent national average. For those in states with an unemployment rate under the national average, an individual may receive unemployment benefits for as few as 40 weeks.

The legislation also includes provisions allowing states to drug-test unemployment beneficiaries and to prevent reductions in Medicare reimbursements for doctors.

Employers should implement the new payroll tax rate as soon as possible in 2012. For any Social Security tax over-withheld during January, employers should make an offsetting adjustment in workers' pay as soon as possible but no later than March 31, 2012.

Recapture Provision

Under the terms negotiated by Congress, the law had included a "recapture" provision. This provision was repealed when the legislation was extended through the end of 2012.

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