Payroll Tax Cut Extended to the End of 2012 and Revised Form 941
On February 23, 2012, the Internal Revenue Service released revised Form 941 enabling employers to properly report the newly-extended payroll tax cut benefiting nearly 160 million workers.
The IRS needed to revise Form 941 due to the Middle Class Tax Relief and Job Creation Act of 2012 (enacted on February 22, 2012). Under the new law, the social security tax cut was continued until the end of 2012. This means that employees 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 in December of 2011).
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 As a result, the now repealed recapture tax does not apply.
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 the tax year 2012, the social security tax applies to the first $110,100 of wages and net self-employment income received by an individual.
Revised Form 941 Will Need to Be Filed By Employers
The revised Form 941 is already available and will have to be filed by employers for every quarter of 2012. Failure to file Form 941 may lead to significant penalties.
Contact Sherayzen Law Office to Deal With Form 941 Penalties
If you are facing Form 941 penalties, contact Sherayzen Law Office NOW. Our experienced tax firm will rigorously and skillfully represent your interests in the IRS negotiations with respect to any Form 941 penalties.