The 2 percent payroll tax cut has officially been extended through 2012, now that President Obama has signed the Tax Relief Act of 2012 into law. The payroll tax cut, which has been extended several times, was due to expire February 29.
The payroll tax cut will continue to give workers an extra $40 per paycheck on average. Employees contribute 4.2 percent toward Social Security from their payroll, while employers contribute 6.2 percent.
The law also scraps a measure that would have affected high-wage earners. Under the “recapture tax,” employees earning more than $18,350 in January and February would have been assessed an additional 2 percent payroll tax, collected at the end of the year.
Law Continues Unemployment Benefits, Tightens Rules
Under the new law, more workers will be eligible to receive unemployment benefits. Individuals who are self-employed may also be eligible to receive some form of unemployment compensation. More funds will be spent on programs such as career counseling and job training, as well as a measure to promote part-time work as an alternative to layoffs.
The law will gradually decrease the maximum 99 weeks of unemployment previously offered to many out-of-work Americans. In states with high unemployment, unemployed workers will receive benefits for a maximum of 73 weeks. In most other states, the maximum will be 63 weeks.
Another provision will allow states to conduct drug-testing of workers applying for unemployment benefits in certain cases: if a worker lost a job due to a failed drug test, or if their job search includes positions that will most likely require a drug test.
For more information on the law, visit www.whitehouse.gov.