The House Passes the Payroll Tax Bill

On Tuesday, December 13, the House of Representatives passed the Middle Class Tax Relief and Job Creation Act of 2011, which extends the existing 2 point reduction (6.2% to 4.2%) in Social Security taxes that employees and the self-employed pay in payroll taxes.  The payroll tax holiday was set to expire December 31, 2011, but the new bill would extend the reduction through the end of 2012.

Payroll Tax Bill

Payroll Tax Bill

The tax break is said to put $1,000 in an average workers’ pocket and is thought to impact 160 million Americans.

What’s next?  The payroll tax package goes to the Senate, however the President has threatened to veto the bill as Democrats are opposed to the GOP non-tax related revenue raisers that they don’t think should be added to a payroll tax bill.  One of the priorities added, which is receiving opposition is one to accelerate the Keystone XL oil pipeline from Canada to the U.S.

Bipartisan lawmakers have also reached an agreement on the $1 trillion measure to finance government agencies through September 2012, which would also stop federal government shut down this week, however Democrats are refusing to proceed with the agreement until a final deal is made on the payroll tax measure.

Although, there are a number of additional tax related and non-tax related changes added to the payroll tax bill, no one knows the final tax implications of the additional tax law changes until the bill passes the Senate.

Check back soon to find out the additional tax implications of the payroll tax bill once the Senate reaches an agreement.

TurboTaxLisa

Lisa Lewis is a CPA and the TurboTax Blog Editor. Lisa has 15 years of experience in tax preparation. Her success is attributed to being able to interpret tax laws and help clients better understand them. Lisa also has been a TurboTax product user for many years and understands how the software program works. In addition to extensive tax experience, Lisa also has a very well-rounded professional background. She has held positions as a public auditor, controller, and operations manager. Prior to becoming the TurboTax Blog Editor, she was a Technical Writer for the TurboTax Consumer Group and worked on a project to write new FAQs to help customers better understand tax laws. She could also be seen helping TurboTax customers with tax questions during Lifeline. For Lisa, getting timely and accurate information out to customers to help them is paramount.

Comments (6) Leave your comment

  1. While I understand this info is meant to be a brief primer on the extension of the payroll tax break, unfortunately this article is woefully short on the underlying facts surrounding this needlessly divisive issue.

    The House GOP had opposed the extension since last summer claiming that they didn’t believe it helped the economy.

    But, due to political pressure House GOP leadership (Speaker Boehner, etc.) calculated that they needed to pass something/anything as a way of playing “me-too’ism” so they threw in some “red meat” for the Tea Party Congressmen including but not limited to the Keystone Pipeline issue. The Democratic Party has by and large opposed building the pipeline due to concerns over toxic leaks, etc.

    See here for a more complete timeline:
    http://thehill.com/homenews/house/201257-a-timeline-of-the-house-gop-cave-on-the-payroll-tax-holiday

    FYI, the Keystone Pipeline….
    (1) is opposed by the Republican states it would be built in like Nebraska due to the history of pipelines leaking toxic oil and sludge;

    (2) the actual language proposed by the House GOP would only require the White House to make a decision early in 2012 rather than in 2013 as the White House has already planned to do. Even under such a sped-up timeline the White House could decide against the permits to build it (ie, block it);

    (3) the Pipeline only passes through the US. The oil is not destined for the US. Rather, the oil would be sold on the world market and if recent history is a guide would likely go to China;

    and, (4) while it would create some jobs (estimates range from a few hundred to 1000 or so) the same House GOP that supports this pipeline project has also voted to cut jobs in the green energy sector so “jobs” do not appear to be their primary motivation behind adding the Pipeline issue into an unrelated tax bill

    For what it’s worth, politically this payroll tax break has become a hot potato and partisans are linking to this article claiming that it supports the Republican Party…

  2. It is really a good news for employee and self employed both, would be getting more saving, if it is passed in the senate. Keep us informed of the final decision to pass on the messages to the clients.

    Thanks
    Yeshwant Mehta(President)
    QuickBooks Expert

  3. Pingback: Tell Republicans to stop holding the payroll tax cut hostage | DCCC « The Practical Vegetarian Weblog

Leave your comment* = required field