The two percent payroll tax cut for employees that was in effect for 2011 has temporarily been extended until the end of February 2012. Under this measure, employees pay a reduced 4.2 percent of Social Security tax withholding on wages instead of the usual 6.2 percent. It has no impact on employees’ future Social Security benefits.
Employers must make the change to the reduced payroll tax rate by January 31, 2012 at the latest. If any employee’s Social Security tax is withheld at the higher rate in January, the employer has until March 31, 2012 to adjust that employee’s withholding so that the total withholding amount is correct for that period.
For more information, see the IRS website at http://www.irs.gov/newsroom/article/0,,id=251650,00.html.