Starting, Operating, or Closing a Business

Payroll Tax Cut Extended to the End of 2012

Payroll Tax Cut Extended to the End of 2012; Revised Payroll Tax Form Now Available to Employers

WASHINGTON — The Internal Revenue Service today released revised Form 941 enabling employers to properly report the newly-extended payroll tax cut benefiting nearly 160 million workers.

Under the Middle Class Tax Relief and Job Creation Act of 2012, enacted yesterday, workers will continue to receive larger paychecks for the rest of this year based on a lower social security tax withholding rate of 4.2 percent, which is two percentage points less than the 6.2 percent rate in effect prior to 2011. This reduced rate, originally in effect for all of 2011, was extended through the end of February by the Temporary Payroll Tax Cut Continuation Act of 2011, enacted Dec. 23.

No action is required by workers to continue receiving the payroll tax cut. As before, the lower rate will have no effect on workers’ future Social Security benefits.  The reduction in revenues to the Social Security Trust Fund will be made up by transfers from the General Fund.

Self-employed individuals will also benefit from a comparable rate reduction in the social security portion of the self-employment tax from 12.4 percent to 10.4 percent. For 2012, the social security tax applies to the first $110,100 of wages and net self-employment income received by an individual.

The new law also repeals the two-percent recapture tax included in the December legislation that effectively capped at $18,350 the amount of wages eligible for the payroll tax cut. As a result, the now repealed recapture tax does not apply.

The IRS will issue additional guidance, as needed, to implement the newly-extended payroll tax cut, and any further updates will be posted on IRS.gov. 

Webinar on Reporting Health Plan Coverage on Form W-2s

The Reporting of Employer-Sponsored Health Plan Coverage on Form W-2 (Affordable Care Act Provision 9002) webinar will explain what employers and employees need to know about the provision including:

• What changes employees will see in their Form W-2
• When employers must begin reporting the benefits on the Form W-2
• Transition relief for certain employers, plans, and situations
• Which employers need to include the benefits on the Form W-2
• How employers report the benefits on the Form W-2
• What valuation methods employers can use to determine the amounts to report on the Form W-2

Sign up for the IRS Webinar:  http://www.visualwebcaster.com/IRS/82090/reg.asp?id=82090

YouTube Video:  W-2 Health Insurance Reporting: English

Reporting is Voluntary for All Employers for 2011 and Small Employers for 2012: http://www.irs.gov/newsroom/article/0,,id=237870,00.html

Employer-Provided Health Coverage Informational Reporting Requirements: Questions and Answers:  http://www.irs.gov/newsroom/article/0,,id=237894,00.html

Florida's 2011 Back-to-School Sales Tax Holiday, August 12th-August 14th

2011 Back-to-School Sales Tax Holiday, August 12^th-August 14^th

Florida's back-to-school sales tax holiday will begin at 12:01 a.m., Friday, August 12, 2011, and end at midnight Sunday, August 14, 2011. During this period, no sales tax will be collected on sales of clothing, footwear, and certain accessories selling for $75 or less, or on certain school supplies selling for $15 or less. Find out more:

• 2011 Sales Tax Holiday Tax Information Publication
• List of tax-exempt and taxable items
• Frequently asked questions

FUTA Tax Rate Decrease Effective July 1, 2011

FUTA Tax Rate Decrease Effective July 1, 2011 

The Federal Unemployment Tax Act (FUTA) rate is currently 6.2% on the first $7000 of an employee’s wages.  This rate has remained constant for years. However, effective July 1, 2011 it will lower to 6.0% on the first $7000 of wages paid to an employee due to the expiration of a temporary 0.2 FUTA surtax which expires on Jun 30, 2011.

 For most employers, state unemployment taxes are deductible against FUTA taxes, effectively lowering the FUTA rate that the employer pays by as much as 5.4%. This lowers the FUTA tax rate to 0.8% for some employers, and as of July 1, 2011 will lower it to 0.6%. State unemployment taxes must have been paid in full, on time, and on the same wages for an employer to take the offset of state unemployment wages against their FUTA taxes. 

IRS Increases Mileage Rate to 55.5 Cents per Mile