President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012 into law on Feb. 22, extending the payroll tax cut through the end of 2012.
The tax cut originated in 2011. It was temporarily extended only through February 2012 because Congress couldn’t agree on how to pay for a full year’s extension.
The tax cut will now be effective for the entire year of 2012. It reduces the employee share of the Social Security tax by 2 percent, which can mean an annual savings to a taxpayer of up to $2,202.
The previous two-month extension through February had a required recapture provision that would have applied to taxpayers with wages that exceeded $18,350 for January and February of 2012. That provision was repealed under the new act.