Payroll Tax

Update as of February 22, 2012

Payroll Tax Cut Extended to the End of 2012

Under the Middle Class Tax Relief and Job Creation Act of 2012 enacted February 22, 2012, 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.

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12/23/2011

Many faculty and staff have kept an ear tuned to the current debate in Washington D.C. about the payroll tax.

Last year's Tax Relief Act of 2010 reduced the employee OASDI rate for 2011 from 6.2% to 4.2%. As of Dec 21, the rate was scheduled to go back to 6.2% starting January 1, 2012.

While Congress took action this morning, to keep the employee share of the OASDI at the 4.2% for two months, our antiquated payroll system cannot make the change in time for January payroll.

The January payroll has been processed using the 6.2% employee contribution rate.

We plan to have the changes in the system ASAP after the New Year, and the withholding will automatically be corrected in their next check.

As many of you are aware, there is a system wide effort underway to replace the payroll system which will help to address such items in a more timely fashion in the future.

If you have any questions, please email AVCCFO@Berkeley.edu.