Monday, December 26, 2011
A NEW “RECAPTURE” TAX
The IRS has pointed out a special new tax of the recently-passed Act that temporarily extended the payroll tax reduction.
“Under the terms negotiated by Congress, the law also includes a new ‘recapture’ provision, which applies only to those employees who receive more than $18,350 in wages during the two-month 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.”
Of course if the idiots in Congress decide next February to extend the payroll tax reduction through the end of 2012 this “recapture tax” will disappear.