Net Pay Will Decrease Approximately 2%
Employees will notice a decrease in net pay by about 2% of gross pay. For example, if gross pay is $1000, net pay would decrease by $20. An adjustment must be made for items that reduce social security taxable wages such as §125 cafeteria plans.
Employers Social Security Tax Rate Had Not Decreased
There will be no change in the tax rate on employers as there had not been a provision to reduce it. The rate on employers remained at 6.2% throughout 2011 and 2012.
2010 Tax Act Had Temporarily Reduced the Rate To 4.2%
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act) reduced the social security tax withholding rate from 6.2% to 4.2 % effective with payments made after December 31, 2010. Although initially effective only for 2011, it was later extended to include 2012.
Contact Vision Payroll for Further Information
Contact Vision Payroll if you have any further questions on the social security tax rate.