Q. How can money taken out of a payroll check for Social Security benefits be a payroll tax reduction? Doesn’t this reduce the funds for my Social Security benefit plan? H.W.P., CPA, Las Vegas
A. No. The “payroll tax holiday” for 2012 reduces the current payroll tax due on your earnings as an employee. But the amount of Social Security benefits you will eventually receive is based on your earnings records, not the amount of tax you paid into the system. In theory, the funds should be available to you upon retirement.
Tip: Any proposal to extend the payroll tax holiday past 2012 is sure to spark political debate this election.