Maybe you missed it or didn't bother giving it much consideration, but during the holidays our ever diligent and harmonious Congress agreed to extend the payroll tax cuts before they were set to expire on Dec. 31, 2011.
In short, the deal delivers a two-month extension of the Social Security tax cut of 4.2% from the original rate of 6.2%. The extension continues the tax cut for more than 160 million workers and saves roughly $1,000 per household. Possibly noteworthy for some of you installing security firm operators, the extension also allows small businesses to maintain the same payroll processing structure so you would not have to upgrade your accounting systems.
I checked in with Mitch Reitman, managing principal of Fort Worth, Texas-based SIC Consulting, to inquire what else the Temporary Payroll Tax Cut Continuation Act of 2011 may hold in significance for you. Reitman says this development should be good news to your employees since it equates to a 2% tax break. And there's more:
"For 2012, the maximum taxable wage base for Social Security taxes is $110,100 — up from $106,800 in 2011 — which means that the maximum tax savings from this break will be $2,202 for a high income individual, such as a business owner," Reitman says. "Remember that the reduction is only through Feb. 29, and there are maximum salary caps and recapture provisions if Congress does not extend the tax relief."
Reitman advises that you address this with your payroll department or your payroll service to ensure that you are withholding the proper amounts. For more tax season advice and insights, don't miss Reitman's "Building Your Business" contribution in the January issue. You'll learn which tax breaks are (and are not) available to installing security contractors in 2012, plus other valuable tax season nuts and bolts.
Rodney Bosch | Managing Editor
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