PAYROLL TAX CUT EXTENDED! Well at least for now…

The US Congress just recently passed a two-month extension of the payroll tax cut on the employee side starting at the first of the year.  This cut lowered the employee portion of the payroll tax from 6.2% down to 4.2%.  The temporary extension was passed eight days before it was set to expire.  Additionally, the extension also keeps in place expanded unemployment benefits and it suspends a reduction in Medicare payments to doctors through the end of February.

With the 2012 elections coming up, neither side wants to take the blame for lowering the net pay of voters everywhere.  That would be political disaster.  We can only hope in the next couple months when Congress reconvenes that they will be able to work out a longer solution or reorganization.  Good ole bipartisanship at its best!

Arizona is one of more than 30 states that borrowed money from the federal government after our states’ unemployment trust funds were sucked dry during the economic recession. This enabled us to keep paying unemployment benefits to those that qualified as required by federal law.  What does this mean?

MORE TAXES – unfortunately.

A House Bill passed on July 20 of this year retroactively imposing a “Special Assessment” tax on all taxable wages paid in 2011 and 2012.  The first three calendar quarters of 2011 is now due by October 31, 2011.  The agency that will be collecting it is the DES Unemployment Insurance Tax Section from which you should be receiving a letter or notice shortly (if you haven’t already).  Here are the details:

• All employers subject to Arizona UI Tax in 2011 and 2012 are also subject to the Special Assessment
• “Taxable Wages” are the first $7,000 of gross wages paid to each employee in the calendar year
• For 2011, it is .4% of taxable wages (max of $28 per employee)
• For 2012, it is estimated to be around .6% – .8% ($42 – $56 max per employee)

You already know the bad news… The small amount of good news? It is tax deductible as a cost of doing business.

We will continue to post updates so stay tuned for more info on how to not get like the little guy in the picture…