Congress Passes Temporary Payroll Tax Cut Extension

The reduced 4.2% Social Security tax rate will remain in effect at least through February.

The Senate and the House of Representatives on December 23 both agreed by unanimous consent to extend the reduced rate, and President Barack Obama signed the bill—the Temporary Payroll Tax Cut Continuation Act of 2011 (IR-2011-124). The IRS also said that if an employer overwithholds during January, it should make an offsetting adjustment in workers’ pay as soon as possible, but not later than March 31, 2012. The IRS also said that it will issue more guidance on implementing the provisions of the two-month extension, including revised employment tax forms and information for employees who may be subject to the recapture provision.

The act also extends certain unemployment benefits and blocks a cut in Medicare payments to doctors.

Congress’ use of unanimous consent to approve the extension allowed it to send the bill to the president without requiring lawmakers who had left the capital to return to Washington.