The extension of the Bush-era tax cuts signed by President Obama on December 17 is keeping employers busy in the New Year as they adjust their policies and systems to the new law.
The $801 billion tax package (The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, for those keeping score at home) includes a provision to reduce Social Security payroll taxes for most U.S. workers for one year from 6.2 percent to 4.2 percent on wages up to $106,800. Employers must make changes to their payroll systems to accommodate the new tax rate by January 31. The employer tax rate for Social Security remains unchanged at 6.2 percent.
The act also includes a two-year extension of the tax exclusion for employer-provided tuition assistance. Section 127, which allows employees to exclude up to $5,250 a year in employer-provided tuition assistance for undergraduate and graduate-level courses, has been a popular tax provision.
The legislation also extends unemployment benefits for many Americans through 2011. The unemployment benefit extension will not apply to unemployed workers who have exhausted the maximum combined state and federal assistance of 99 weeks. The provision will ensure that long-term unemployed people in the states hardest hit by the recession will receive up to 99 weeks of unemployment benefits, rather than the 26 weeks normally available.