As part of an economic stimulus effort, the withholding rate in 2011 for the employee’s share of the Social Security tax was reduced from the usual 6.2% to 4.2%. That lower rate is scheduled to reset to 6.2% on Jan. 1, 2012, which means higher taxes and a smaller paycheck for employees—and questions for HR. This may change if Congress agrees to extend the 4.2% rate through 2012. The odds of that happening? More than 50-50.
Note: For 2012, the Social Security tax will be applied to employees’ first $106,800 in wages. Read more at www.theHRSpecialist.com/2012rates.