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Welcome to Benefits, Inc.
Thank you for being part of Benefits, Inc. The landscape of the business world is changing every day. This newsletter is provided in order to inform you of up to date and accurate information regarding federal and state legislation, HR trends, compliance, and benefit strategies.
We appreciate your business and if you have any questions please feel free to contact us at 615-446-3303.
Sincerely, Tim White & Kevin Smith |
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Payroll Tax Cut Temporarily Extended into 2012
Employees will continue to see a reduction of their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through Feb. 29, 2012. The two percentage point payroll tax cut, in effect for 2011, was temporarily extended by the Temporary Payroll Tax Cut Continuation Act of 2011. This reduced Social Security withholding will have no effect on employees' future Social Security benefits.
According to the Internal Revenue Service (IRS), employers should implement the new payroll tax rate as soon as possible in 2012 but not later than Jan. 31, 2012. For any Social Security tax over-withheld during January, employers should make an offsetting adjustment in workers' pay as soon as possible but not later than March 31, 2012.
Additional Income Tax May Apply to Certain Higher Income Employees
Employers should note that the law includes a new "recapture" provision, which applies only to those employees who receive more than $18,350 in wages during the two-month extension period (the Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount).
- This provision imposes an additional income tax on these higher-income employees in an amount equal to 2 percent of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100).
- This additional recapture tax is an add-on to income tax liability that the employee would otherwise pay for 2012 and is not subject to reduction by credits or deductions. The recapture tax would be payable in 2013 when the employee files his or her income tax return for the 2012 tax year.
- With the possibility of a full-year extension of the payroll tax cut being discussed for 2012, the IRS will closely monitor the situation in case future legislation changes the recapture provision.
The IRS will issue additional guidance as needed to implement the provisions of this new two-month extension, including revised employment tax forms and instructions and information for employees who may be subject to the new "recapture" provision. For most employers, the quarterly employment tax return for the quarter ending March 31, 2012, is due April 30, 2012.
To read more about the Social Security and Medicare payroll taxes, please visit our section on the Federal Insurance Contributions Act (FICA). |
| IRS Announces 2012 Standard Mileage Rates
The Internal Revenue Service has issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
2012 Standard Mileage Rates
Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 55.5 cents per mile for business miles driven;
- 23 cents per mile driven for medical or moving purposes; and
- 14 cents per mile driven in service of charitable organizations.
The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Limitations on Use of Standard Mileage Rates
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.
For Additional Information
Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan. For more on employer-provided transportation benefits, please see our section on Fringe Benefits.
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Retirement Planning
It's a brand new year and it's never too early to start taking advantage of the benefits of retirement planning. As a business owner, a retirement plan allows you to invest now for financial security when you and your employees retire. As a bonus, you and your employees can receive significant tax advantages and other incentives.
Contact us today to learn more about how we can help you plan for the future. |
About Benefits, Inc.
Benefits, Inc. is a full service employee benefits agency. However we also offer Business Insurance, Work Comp, and Risk Analysis. Contact us today at 615-446-3303 for more information. |
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