The proposals relating to the reduction of payroll taxes were broad. Last year, a reduction in the employee portion of Social Security taxes from 6.2% to 4.2% was implemented for 2011. The President proposed extending this tax break through 2012, and reducing the employee’s portion even lower, to 3.1%. A similar reduction would likely apply to self-employment taxes.
Benefits for employers
The President’s proposal also provides two significant benefits for employers. First, the employer’s share of Social Security taxes would also be reduced to 3.1% for the first $5 million in wages. This translates to a potential benefit of $155,000 for the employer. In addition, there would be a complete elimination of the employer’s portion of the Social Security tax — from 6.2% to zero — on the amount of payroll that represents an increase from the prior year, up to a $50 million cap.
Employer tax credit
Finally, the President proposed providing businesses with a tax credit for hiring:
- Workers who have been unemployed for at least six months – $4,000
- Veterans who have been unemployed for at least six months – $5,600
- Veterans with disabilities – $9,600
As proposals, there are no detailed regulations available to determine the exact parameters of these benefits. What is clear is that the administration is focused on tax benefits that it believes will directly lead to increased employment opportunities. Furthermore, wealthy individuals and corporations that take advantage of other specific tax breaks will likely be the source of any required revenue offsets.
For more information, please contact:
Mark D. Klimek
or any of our tax attorneys by clicking on the Tax Practice link below:
Tax planning needs to be strategic. We consult with businesses at all stages of their development, from the initial choice of entity, through acquisition and other growth transactions, to business succession planning, and dispositions. Our tax advisors also work closely with clients on individual tax planning. Our attorneys provide businesses and individuals with comprehensive counseling in all areas of federal, state and local taxation.
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