Daily Tax Update - February 24, 2012: Payroll Tax Cut Enacted

PAYROLL TAX CUT ENACTED:  The Internal Revenue Service has released revised Form 941, which allows employers to report the newly-extended payroll tax cut benefiting nearly 160 million workers.  According to the IRS, "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."  The IRS added, "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  As a result, the now repealed recapture tax does not apply."

MISCELLANEOUS GUIDANCE RELEASED:

Revenue Ruling 2012-8 announcing the rates of interest. Revenue Ruling 2012-8 will be in IRB 2012-13, dated March 26, 2012

Notice 2012-22 modifies Notice 2006-52, 2006-1 C.B. 1175, and Notice 2008-40, 2008-1 C.B. 725, by providing an additional set of energy savings percentages that taxpayers may use to qualify for a partial section 179D deduction under the permanent rule for property placed in service on or after the effective date of the notice.  Specifically, the applicable energy savings percentages provided under this notice are 25 percent for the interior lighting system, 15 percent for the HVAC and hot water systems, and 10 percent for the building envelope.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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